# Petition for Writ of Certiorari — Summit Health, Ltd. v. Pinhas

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1991
- **Citation:** 500 U.S. 322

## Text

OF THE
United States

OCTOBER T&RM 1989

SumMit Heautu, Lrp., Mipway HosprraL MEDICAL
CENTER, THE MEDICAL STAFF OF Mipway Hospita.L
MEDICAL CENTER, MITCHELL FELDMAN, AUGUST
READER, M.D., ARTHUR N. LurRvEy, M. D.,
JONATHAN I. Macy, M.D., James J. Sauz, M. D.,
GILBERT PERLMAN, M.D., MARK KADZIELSKI
and WEISSBURG and ARONSON, INC.,
Petitioners,

Vs.

SIMON J. PINHAS, M.D.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
NINTH CIRCUIT

J. MARK WAXMAN
Counsel of Record
TAMI S. SMASON
WEISSBURG AND ARONSON, INC.
2049 Century Park East
Suite 3200
Los Angeles, California 90067
(213) 277-2223
Attorneys for Petitioners
Summit Health, Lid., Midway Hospital
Medical Center, the Medical Staff of
Midway Hospital Medical Center,
Mitchell Feldman, August Reader, M. D.
Arthur N. Lurvey, M. D., Jonathan 1.
Macy, M. D., James J. Salz, M. D., Gilbert
Perlman, V. U., Mark Kadzielski and
Wrissburg and Aronson, Inc.
April 24, 1990

Bowne of Los Angeles, Inc., Law Printers. (213) 742-6600 57

CO

QUESTIONS PRESENTED FOR REVIEW

1. Whether a claim under Section 1 of the Sherman

Act which fails to allege any nexus between the
allegedly anticompetitive activity and interstate
commerce nevertheless meets the jurisdictional re-
quirements of the Sherman Act, as interpreted by
this Court in McLain v. Real Estate Board of New
Orleans, 444 U.S. 232 (1980)?

2. Whether allegations that an attorney provided legal
assistance to a client are sufficient to assert that the
attorney and client are co-conspirators under the
Sherman Act?

ee

il iii

LIST OF PARTIES TABLE OF CONTENTS

The parties before the Court of Appeals included Simon Page
J. Pinhas, M.D., Summit Health, Ltd., Midway Hospital

. . a VIEW .....
Medical Center, the Medical Staff of Midway Hospital QUESTIONS PRESENTED FOR REVIEW N
Medical Center, Mitchell Feldman, August Reader, M. D., LIST OF PARTIES 66 %%% „ „„ „ „4% ll
Arthur N. Lurvey, M.D., Richard E. Posell, Jonathan I. TABLE OF AUTHORITIES ...........cccccces, v
Macy, M. D., James J. Salz, M. D., Gilbert Perlman, M. D., r ᷑ . „„ „6 2
Peggy Farber, Mark Kadzielski and Weissburg and Aron- „„ „„ 2

1

son, Ine. CONSTITUTIONAL PROVISIONS AND STAT-
r ̃ te ccccces 2
STATEMENT OF THE CASE .................. 2
REASONS FOR GRANTING REVIEW 3

I. -

THERE IS A CLEAR CONFLICT AMONG THE

JUDICIAL CIRCUITS, MANIFESTED BY

THIS DECISION, AS TO THE SHERMAN

ACT’S INTERSTATE COMMERCE JURISDIC-
TIONAL REQUIREMENTS.................. 3
es ccc 00 3
EEE EEE 66 4
C. The Split Among The Circuits............... 6
D. The Importance of the Issue ................ 8

II.

THE CIRCUIT COURT HOLDING IMPINGES

ON THE EFFECTIVE ASSISTANCE OF

COUNSEL TO THOSE CONDUCTING PEER

REVIEW, AND WILL CREATE A CHILLING

. EFFECT ON THE PEER REVIEW PROCESS
Summit Health, Ltd. is the parent corporation of Midway Hospi- AND ITS PARTICIPANTS 9

tal Medical Center. There are no parent or non-wholly owned subsidi- ee
aries to be listed for Summit Health, Ltd. or Weissburg and Aronson, A. Introduction. 9

Ine.

—

iv

TABLE OF CONTENTS

Page

B. The Underlying Allegations ................. 10

C. The Importance of the Issue ................ 12

JJC occ cc evecdebteteccoccnceseenes 13

APPENDIX

Opinion of the Court of Appeals and Denial of

Petitions for Rehearing ..............+00055 A-1
District Court Order Dismissing Underlying Ac-

c A-28

Judgment on Petition For Writ of Mandate Filed
By Respondent, Los Angeles Superior Court
na%. A-30

Minute Order in re Petition For Writ of Mandate
Filed By Respondent, Los Angeles Superior

Court Case No. C6990 G. A-32
First Amended Complaint in the Pending Action
LL A-36

V

TABLE OF AUTHORITIES
Cases

Page

Ashley Meadows Farm v. American Horse Shows Asso-
ciation, 1983-2 Trade Cases § 65,653 (S.D.N.Y.
SS PTT eee er eee rere 11, 12

Bolt v. Halifax, 891 F.2d 810 (11th Cir. 1990) peti-
tion for cert. filed, 58 U.S.L.W. 3598 (U.S. Mar. 9,

R 10
Cardio-Medical Associates v. Croger- Chester Medical

Center, 721 F. 2d 68 (3rd Cir. 1983) ............ 7
Copperweld Corp. v. Independence Tube Corp., 467

L 10, 11
Cordova d Simonpietri Ins. Agency v. Chase Manhat-

tan Bank, 649 F.2d 36 (Ist Cir. 1981777) 6
Crane v. Intermountain Health Care, Inc., 637 F.2d

Va Cee ey EE Ok bec cei nies<ddéccusedaes 6
Doe v. St. Joseph's Hospital of Fort Wayne, 788 F.2d

GEE SH EE Se cede de cewitencediseetess 6
Furlong v. Long Island College Hospital, 710 F.2d

e ⅛ ͤ K: ˙— 11 6

Hayden v. Bracy, 744 F.2d 1338 (8th Cir. 1984) 6

McLain v. Real Estate Board of New Orleans, 444 U.S.
„ i, 3, 5, 6, 13

Mitchell v. Frank R. Howard Memorial Hospital, 853
F.2d 762 (9th Cir. 1988) cert. denied, 109 S.Ct.

eee leek 5, 6
Potters Medical Center v. City Hospital Ass’n, 800
eo . fg |. | rare 11

Sarin v. Samaritan Health Center, 813 F.2d 755 (6th
b W oe 6. 8

vi

TABLE OF AUTHORITIES | No.

CASES

In the Supreme Court

OF THE
United States

Page
Seglin v. Esau, 769 F.2d 1274 (7th Cir. 1985) .. 4, 6, 7. 8
Shahawy v. Harrison, 778 F.2d 636 (11th Cir. 1985)

amended, 790 F.2d 75 (19860))))))) 7 OCTOBER TERM 1989
Stone v. William Beaumont Hospital, 782 F.2d 609 Sumit HEALTH, Ltp., Mipway HosprtaL MEDICAL
(Gis COP. BSG) ccc cece ...... „„ 6,9 CENTER, THE MEDICAL STAFF OF Mipway Hosprral.
Thompson v. Wise General Hospital, 707 F. Supp. 849 MEDICAL CENTER, MITCHELL FELDMAN, AUGUST
(W.D. Va. 1989) aff'd, 896 F.2d 547 (4th Cir. READER, M. D., ARTHUR N. LuRvEy, M. D.,
„...... „ 66 6 0 LTT 6 JONATHAN I. Macy, M. D., JAMES J. SALzZ, M.D.,
Weiss v. York Hospital, 745 F.2d 786 (3rd Cir. 1984) GILBERT PERLMAN, M.D., MARK KADZIELSKI
cert. denied, 470 U.S. 1060 (1985) ............. 11 and WEISSBURG and ARONSON, ING.,
Western Waste Service Systems v. Universal Waste Petitioners,
Control, 616 F.2d 1094 (9th Cir.) cert. denied, 449 vs.
. rrr ere er Tee ere ee 5 SIMON J. PINHAS, M. D.,
Respondent.
Statutes
Cal. Civ. Code PETITION FOR A WRIT OF CERTIORARI TO THE
§ 1714.10 (West Supp. 199õ: 0.0.60 e eee 12 UNITED STATES COURT OF APPEALS FOR THE
r ̃˙ ne 2. 4

eee)
Gere. ..

— to

Summit Health, Ltd., Midway Hospital Medical
Center, the Medical Staff of Midway Hospital Medical
Center, Mitchell Feldman, August Reader, M.D., Arthur
P. Areeda, ANTITRUST LAW § 232.1 (Supp. 1989) 6 N. Lurvey, M.D., Jonathan I. Macy, M.D., James J. Salz,
M.D., Gilbert Perlman, M.D., Mark Kadzielski and
Weissburg and Aronson, Inc., petition for a writ of certio-
rari to review the decision of the United States Court of
Appeals for the Ninth Cireuit in this case.

Treatises

2

OPINIONS BELOW

The opinion of the court of appeals (Appendix, infra) is
reported at 894 F.2d 1024 (9th Cir. 1989).

JURISDICTION

The opinion of the court of appeals issued on July 26,
1989, and was amended and superseded on January 25,
1990. Petitions for rehearing were filed by all parties, and
were denied on January 25, 1990. (Appendix, infra at
A-1.) The jurisdiction of this Court is invoked under 28
U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS AND STATUTES
INVOLVED

Sherman Act § 1, 15 U.S.C. § 1:

Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or com-
meree among the several States, or with foreign nations,
is declared to be illegal

STATEMENT OF THE CASE

In this case, a surgeon contends that a peer review
action taken against his medical staff privileges at Mid-
way Hospital Medical Center, an acute care hospital
located in Los Angeles, California, was based on false
charges of deficient quality of care, which were the prod-
uct of an antitrust conspiracy. Although the peer review
action was determined to have been based on substantial
evidence by a Superior Court of the State of California
ruling upon the surgeon's petition for a writ of mandate
(Appendix, infra), the physician contends, inter alia, that
the Hospital, its parent corporation, the physicians in-

3

volved in the peer review process, and the Hospital's
attorneys “conspired” against him in violation of See-
tion 1 of the Sherman Act. On October 9, 1987, the
District Court entered its order granting defendants’
motion to dismiss the first amended compiaint without
leave to amend (Appendix, infra).

The Ninth Cireuit reversed the antitrust holding of the
district court. The cireuit court held that general allega-
tions that the plaintiff and each of the defendants are
“engaged in interstate commerce” are sufficient to invoke
jurisdiction under Section 1 of the Sherman Act, notwith-
standing the fact that the plaintiff did not allege any
nexus between the alleged conspiracy and interstate com-
mere. The circuit court also held that the first amended
complaint, which does not allege that the Hospital's
attorneys did anything other than provide legal advice
requested of them, was nevertheless sufficient to state a
claim against the Hospital’s counsel, Mr. Kadzielski and
Weissburg and Aronson, Ine, for conspiring with their
clients in violation of Section 1 of the Sherman Act.

REASONS FOR GRANTING REVIEW

THERE IS A CLEAR CONFLICT AMONG THE
JUDICIAL CIRCUITS, MANIFESTED BY THIS
DECISION, AS TO THE SHERMAN ACT'S
INTERSTATE COMMERCE JURISDICTIONAL
REQUIREMENTS.

A. Introduction

At issue in this action is the appropriate interpretation
of this Court’s opinion in McLain v. Real Estate Board of
New Orleans, 444 U.S. 232 (1980), setting the standard

4

for the interstate commerce requirement for Sherman Act
jurisdiction. The position adopted by the First, Second,
Sixth, Seventh, Eighth, and Tenth Cireuit Courts of
Appeal is that the allegedly anticompetitive activity, if it
is local in nature, must affect interstate commerce. The
minority position, expressed by the Ninth Cireuit Court of
Appeals in this case, is that the allegedly anticompetitive
activity need not affect interstate commerce. instead, the
minority holds that Sherman Act jurisdiction ean be
invoked if the general business activities of the defend-
ants are alleged to have a not insubstantial effect on
interstate commerce.

The Court should resolve this conflict because its im-
portance to hospitals, physicians, and the public, which
benefits from effective medical staff peer review, is grow-
ing as an inereasing number of disciplined physicians who
are the subject of peer review proceedings have been
asserting Sherman Act claims against those involved in
the process. As at least one cireuit has recognized, the
minority position would allow “virtually every physician
who is ever temporarily denied hospital privileges for
whatever reason [to] drag the hospital and members of
its staff into costly antitrust litigation... .” Seglin „.
Esau, 769 F.2d 1274, 1283-1289 (7th Cir. 1985).

B. The Decision Below

Section 1 of the Sherman Act prohibits contracts,
combinations or conspiracies “in restraint of trade or
commerce among the several States....” 15 U.S.C. § 1.

( The Health Care Quality Improvement Act of 1986, 42 U.S.C.
§ 11101 (“The Congress finds... (4) The threat of private money
damage liability under Federal laws, including treble damage liabil-
ity under Federal antitrust law, unreasonably discourages physicians
from participating in effective professional peer review.” )

— —

5

To invoke Sherman Act jurisdiction, a plaintiff must
allege that “the defendants’ activity is itself in interstate
commereé, or, if it is local in nature, that it has an effect
on some other appreciable activity demonstrably in inter-
state commerce.” McLain v. Real Estate Board of New
Orleans, 444 U.S. 232, 242 (1980). The issue raised by the
opinion below is whether the alleged nexus with interstate
commerce must be with the general business activity of
the defendants or with the alleged conspiracy in restraint
of trade.

In his first amended complaint, the plaintiff asserted
only in the most general terms that he “has” engaged in
interstate commerce and that tae defendants were “en-
gaged in interstate commerce.” (Appendix, infra,
paragraphs 5-17 of the first amended complaint.) He
failed to allege any nexus between the alleged unlawful
conduet itself and interstate commerce.

The cireuit court rejected the contention of petitioners
that a Sherman Act plaintiff is required to allege a nexus
between the alleged conspiracy and interstate commerce.
Recognizing that this Court’s decision in McLain requires
a Sherman Act plaintiff tc show that as a matter of
practical economies the “activities” of Sherman Act de-
fendants have a not insubstantial effect on the interstate
commerce involved,” the cireuit court in this ease held
that the “activities” in question are “the peer review
process in general,” and not the alleged conspiracy. 894
F.2d at 1032. The opinion in this case illustrates the
Ninth Cireuit’s interpretation that the “activities” this
Court referred to in McLain are the defendants’ general
business activities, independent of the alleged violation.
See Western Waste Service Systems v. Universal Waste
Control, 616 F.2d 1094, 1097 (9th Cir.) cert. denied, 449
U.S. 869 (1980); Mitchell v. Frank R. Howard Memorial

—

6

Hospital, 853 F.2d 762 (9th Cir. 1988) cert. denied, 109
S.Ct. 1123 (1989). This interpretation has been roundly
criticized and rejected by a majority of the Cireuit Courts
of Appeal.”

C. The Split Among The Circuits

The Ninth Cireuit’s interpretation of McLain has been
criticized and rejected by a majority of circuits. The
Tenth Cireuit, en banc, evaluated McLain in detail and
concluded that “we do not believe McLain signals a shift
in analytical focus away from the challenged activity and
towards the defendant's general or overall business. The
analytical focus continues to be on the nexus, assessed in
practical terms, between interstate commerce and the
challenged activity.“ Crane v. Intermountain Health Care,
Inc., 637 F.2d 715, 724 (10th Cir. 1980) (en banc).

The Tenth Cireuit’s analysis of McLain has been ac-
cepted by the First, Second, Sixth, Seventh, and Eighth
eireuits. Cordova d Simonpietri Ins. Agency v. Chase
Manhattan Bank, 649 F.2d 36, 44-45 (Ist Cir. 1981);
Furlong v. Long Island College Hospital, 710 F.2d 922,
925-926 (2nd Cir. 1983); Hayden v. Bracy, 744 F.2d 1338,
1342-1343 (8th Cir. 1984); Seglin v. Esau, 769 F.2d 1274,
1280 (7th Cir. 1985); Stone v. William Beaumont Hospital,
782 F.2d 609, 613-614 (6th Cir. 1986); Doe v. St. Josep =
Hospital of Fort Wayne, 788 F. 2d 411, 417 (7th Cir. 1986);
Sarin v. Samaritan Health Center, 813 F.2d 755, 758 (6th
Cir. 1987); see also Thompson v. Wise General Hospital,
707 F. Supp. 849, 855 (W.D. Va. 1989) (“in the absence
of any Fourth Cireuit ruling on this issue, the court

The minority interpretation has also been eriticized by commenta-
tors. See, ¢.g., P. Areeda, ANTITRUST LAW € 232.1, at 238-239 (Supp.
1989)

7

adopts the approach of the majority of the circuits”) aff'd,
896 F.2d 547 (4th Cir. 1990).*

Representative of such holdings, and perhaps most
analogous to this case, is the decision of the Seventh
Cireuit in Seglin v. Esau. In Seglin, the Seventh Circuit
found that the allegations of purchase of equipment and
supplies in interstate commerce, the provision of services
to patients who traveled in interstate commerce and the
receipt of payments in interstate commerce coupled with
an allegation of suspension from a medical staff for
approximately sixteen months were insufficient to meet
the interstate commerce pleading requirements of the
Sherman Act. While the Seventh Cireuit did not say that
the suspension or denial of one physician’s hospital privi-
leges could never state an antitrust claim, it was “ineum-
bent” upon the plaintiff to plead additional facts from
which it could be inferred that the alleged unlawful
conduct itself somehow affected interstate commerce.

Notwithstanding the complete lack of sufficient plead-
ing allegations in the present case, the Ninth Circuit
concluded that the plaintiff “need only prove that peer-
review proceedings have an effect on interstate commerce,
a fact that can hardly be disputed. The proceedings affect
the entire staff at Midway and thus affect the hospital's
interstate commerce.” 894 F.2d at 1032.“ No case so

‘Two circuits apparently join the Ninth Cireuit in the minority
opinion. See Cardio-Medical Assocs. H Crozer-Chester Med. Ctr., 721
F.2d 68, 74-75 (3rd Cir. 1983); Shahawy v. Harrison, 778 F.2d 636,
639-640 (11th Cir. 1985) amended, 790 F.2d 75 (1986).

This conclusion is unsupported by any factual record or pleading
allegation, The plaintiff in this case did not allege that the mere
existence of a peer review proceeding, as a matter of “practical
economics,” had a not insubstantial effect on interstate commerce.
The only interstate commerce allegations are that the various parties

8

holds, and the overwhelming weight of opinion is to the
contrary. See, e.g., Sarin v. Samaritan Health Center, 813
F.2d at 758; Seglin v. Esau, 769 F.2d at 1280. Moreover,
whether or not peer review proceedings have an effect on
interstate commerce, there is no allegation that the spe-
cifie conduct alleged in this case, i. e., the creation of false
charges of deficient quality of care, has any nexus with
interstate commerce. Accordingly, the circuit court’s in-
terstate commerce holding is inconsistent with the hold-
ings of a majority of circuit courts of appeals.

D. The Importance of the Issue

The decision below is the most recent in the minority
line of cases failing to require any nexus between the
alleged anticompetitive conduct and interstate commerce.
The Seventh Cireuit recognized the adverse policy and
practical consequences of applying the minority jurisdic-
tional rule in a medical staff peer review case:

Failure to uphold the dismissal of the instant com-
plaint on the ground of lack of any allegations re-
garding a plausible nexus with interstate commerce
would mean that virtually every physician who is ever
temporarily denied hospital privileges for whatever
reason could drag the hospital and members of its
staff into costly antitrust litigation merely by alleg-
ing that the defendant receives payments, goods, or
equipment in interstate commerce. We decline to
encourage this procedure.

Seglin, 769 F.2d at 1283-1284.

It has been recognized that the minority approach
“would in essence eliminate the interstate commerce test

are or have been engaged in interstate commerce. (Appendix, infra,
€€ 5-17 of the first amended complaint.)

9

from antitrust law, since the total activities of virtually
any defendant, no matter how local its business, are likely
to have some effects upon interstate commerce. [cita-
tion]” Stone, 782 F.2d at 618, n. 3 (Holschuh, D. J.,
concurring).

The inconsistent jurisdictional findings spawned by the
split among the circuits are contrary to the national
purpose of the Sherman Act, which is to promote uniform
antitrust treatment of interstate commerce. This purpose
will not be promoted if the invocation of Sherman Act
jurisdiction varies according to the precedential bounda-
ries of circuit courts of appeal rather than uniform stan-
dards of enforcement.

10

THE CIRCUIT COURT HOLDING IMPINGES ON
THE EFFECTIVE ASSISTANCE OF COUNSEL TO
THOSE CONDUCTING PEER REVIEW, AND
WILL CREATE A CHILLING EFFECT ON THE
PEER REVIEW PROCESS AND ITS PAR-
TICIPANTS.

A. Introduction

This Court has not addressed the prerequisites to a
finding of conspiracy between an attorney and his client.
In this ease, there are no allegations that the attorneys
had any independent economic interest in the outcome of
the peer review proceedings, or were themselves in compe-
tition with the plaintiff. The allegations consist of asser-
tions that the lawyers acted as lawyers, providing the
legal advice requested of them. This is a far ery from the
allegations necessary to overcome this Court's holding
that two people or entities which “are not separate eco-
nomie actors pursuing separate economic interests... do
not provide the plurality of actors imperative for a § 1
conspiracy.” Copperweld Corp. v. Independence Tube
Corp., 467 U.S. 752, 769 (1984). K

The cireuit court in this case nevertheless held that the
pleading, which alleged that the lawyers provided legal
advice to their clients, was sufficient to state a claim
against Mr. Kadzielski and Weissburg and Aronson, Inc.,
the Hospital's attorneys. If this decision is allowed to
stand, it will have a devastating effect on the peer review
process. The participants in any peer review process
legitimately will be concerned that antitrust claims will
be created solely by the fact that counsel was retained to
provide assistance, even without an allegation that the

11

lawyers had a separate economic interest.“ This will ere-
ate a chilling effect on: (a) the retention of legal counsel,
who might provide objective advice regarding the poten-
tial antitrust or tort implications of the conduct at issue;
and (b) reasoned communication with legal counsel, be-
cause such communications may become targets of discov-
ery in subsequent antitrust proceedings.

B. The Underlying Allegations

The salient Sherman Act conspiracy allegations are set
forth in paragraph 124 of the first amended complaint
which alleges:

in late March, 1987 [defendants] Summit Health,
Midway Hospital, Medical Staff, Mr. Feldman, Dr.
Reader, Dr. Lurvey, Dr. Macy, Dr. Salz and Dr.
Perlman entered into a combination and a conspiracy
to retaliate against Dr. Pinhas and to preclude him
from continued competition in the market place...
[ijn furtherance of the conspiracy of defendants
Summit Health, Midway Hospital, Medical Staff, Mr.
Feldman, Dr. Reader, Dr. Lurvey, Dr. Maey, Dr.
Salz and Dr. Perlman, defendants enlisted the assis-
tance and received the assistance of [the hearing of-
ficer], Mr. Kadzielski and [Weissburg and Aronson]
to create unjustified charges, to secure adverse deter-
minations against plaintiff, Dr. Pinhas, to cause a
summary suspension and termination of his privi-

“Cf. Petition For a Writ of Certiorari to the United States Court of
Appeals for the Eleventh Cireuit, in Bolt v. Halifax, 981 F.2d 810
(11th Cir, 1990) petition for cert. filed, 58 U.S. L. W. 3598 (U.S. Mar. 9,
1990) (No. 89-1419), which presents for review the question whether,
in the context of state-mandated peer review, a hospital can be
considered as separate from its own medical staff, for purposes of
antitrust conspiracy analysis.

12

leges at Midway Hospital and report that summary
suspension and termination to the defendant BMQA,
and causing dissemination of that adverse determi-
nation to hospitals in which Dr. Pinhas is a member,
and to all hospitals to which he may apply so as to
secure similar actions by those hospitals, thus effee-
tuating a boycott of Dr. Pinhas.

First amended complaint, paragraph 124 (Appendix,
infra.)

There is no allegation that the attorneys provided any-
thing other than the legal assistance requested, or had
any economic interest independent of that of their clients.
See Copperweld, 467 U.S. at 769 (Section 1 conspiracy
requires separate economic actors pursuing separate eco-
nomie interests); Potters Medical Center v. City Hospital
Ass M., 800 F.2d 568 (6th Cir. 1986) (agent without
independent personal stake not capable of conspiring
with hospital); see also Weiss v. York Hospital, 745 F.2d
786 (3rd Cir. 1984) cert. denied, 470 U.S. 1060 (1985). In
short, there is no allegation that the role of counsel was
anything other than that of a legal adviser assisting
clients with their statutory obligations in the peer review
process. See Ashley Meadows Farm v. American Horse
Shows Association, 1983-2 Trade Cases J 65,653, at 69353-
69354 (S.D.N.Y. Sep. 29, 1983) (“Zealous” participation
of counsel in disciplinary proceedings insufficient for
antitrust liability.)

"While it is recognized that the generalized allegation is made that
counsel “caused” the commencement and prosecution of peer review
proceedings, that allegation must be read in light of the specific
factual claims asserted in the antitrust claim made by the plaintiff.
Compare first amended complaint, % 18 and 124 (Appendix, im/fra).

13

C. The Importance of the Issue

If the cireuit eourt's decision is allowed to stand, it will
have a devastating effect on those who would consult with
counsel in the pursuit of an appropriate peer review
process. Plaintiffs will make antitrust defendants of coun-
sel who assist at any stage of the peer review process.
This will create a tremendously chilling effect on the peer
review process and its non-attorney participants because
they will have a legitimate concern that the mere consul-
tation with legal counsel will subject them to Sherman
Act liability, and that any attorney-client communications
will be discoverable in subsequent antitrust proceedings.
Thus, attorneys who might otherwise counsel against
antitrust violations may not even be consulted.

By virtue of the strong public policy favoring the ability
of counsel to provide legal advice to their clients, courts
should require a particularized allegation that counsel
had a separate economic interest, and were separate
economic actors, and find that assertions that counsel
were enlisted to provide assistance are inadequate to
state a viable antitrust claim.”

The particularized pleading requirement has been recognized by
the California Legislature as reflecting an important public policy.
This policy is now embodied in Cal. Civ. Code § 1714.10 (West Supp.
1990) requiring preliminary court review prior to acceptance for
prosecution of a pleading asserting causes of action against attorneys
based on a civil conspiracy with their clients.

14

CONCLUSION

The circuit court’s opinion will perpetuate the inconsis-
tent interpretation of this Court’s opinion in McLain,
resulting in arbitrary and unpredictable invocation of
Sherman Act jurisdiction. The circuit court’s holding that
an attorney and his client are co-conspirators under the
Sherman Act, based solely on an allegation that an attor-
ney provided requested legal advice, is contrary to the
Sherman Act conspiracy requirements, is contrary to
publie policy and creates a chilling effect on the peer
review process. For these reasons, petitioners request
that the Court accept review and reverse the decision

below.
Respectfully submitted,

J. MARK WAXMAN

TAMI S. SMASON

WEISSBURG AND ARONSON, INC.
2049 Century Park East
Suite 3200
Los Angeles, California 90067
(213) 277-2223

Attorneys for petitioners
Summit Health, Litd., Midway Hos pi
tal Medical Center, the Medical Staff
of Midway Hospital Medical Center,
Mitchell Feldman, August Reader,
M. D., Arthur N. Lurvey, M. D.
Jonathan I. Macy, M. D., James J.
Salz, M. D., Gilbert Perlman, M. D.
Mark Kadzielski and Weissburg and
Aronson, Ine.

ee

A-1

Simon J. PINHAS, Plaintiff-Appellant,
v.

SuMMIT HEALTH, LTp.; Mipway Hosprral MEDICAL
CENTER; THE MEDICAL STAFF OF Mipway HospI!ItaL
MEDICAL CENTER; MITCHELL FELDMAN, ET Al.,
Defendants-A ppellees.

No. 87-6530.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Feb. 7, 1989.
Decided July 26, 1989.

As Amended on Denial of Rehearing and
Rehearing En Bane Jan. 25, 1990.

Physician whose hospital staff privileges were revoked
brought antitrust action. United States District Court for
the Central District of California, Ferdinand F. Fernan-
dez, J., dismissed complaint, and appeal was taken. The
Court of Appeals, Wiggins, Circuit Judge, held that:
(1) state action doctrine did not protect peer-review
proceedings from application of antitrust laws, and
(2) peer-review proceeding did not deprive physician of
due process absent showing of state action.

Affirmed in part, reversed in part, and remanded.
Opinion, 880 F.2d 1108, superseded.

1. Federal Courts — 776

Dismissal for failure to state claim pursuant to Federal
Rule of Civil Procedure 12 (b) (6) is ruling on question of
law that Court of Appeals reviews de novo; review is
limited to contents of complaint. Fed. Rules Civ. Proc. Rule
12(b) (6), 28 U.S. C. A.

A-2

2. Declaratory Judgment — 393

Customery deference for district court is not applicable
to its determination to grant declaratory judgment; Court
of Appeals must exercise its own sound diseretion to
determine propriety of district court's grant or denial of
declaratory relief.

3. Monopolies — 12(15.5)

State action doctrine did not shield California hospi-
tal's peer-review proceedings from antitrust challenge
absent showing that proceedings were actively supervised
by state; state agencies did not actively supervise peer-
review procedures and judicial review was insufficient to
constitute active supervision.

4. Federal Courts — 13

Physician's antitrust suit against hospital, challenging
peer-review procedure, was ripe, though peer-review pro-
ceedings were not yet completed when suit was filed, in
that physician had already lost staff privileges and report
of such loss had already been filed with state. West's Ann.
Cal.Bus. & Prof.Code § 805.

5. Administrative Law and Procedure — 229
Monopolies — 24(1)

Physician challenging hospital peer-review process on
antitrust grounds was not required to first exhaust ad-
ministrative remedies; where there was no statutory re-
quirement of exhaustion of administrative remedies,
application of exhaustion doctrine lay within diseretion of
trial court.

A-

6. Administrative Law and Procedure — 228
Monopolies — 28(3)

Doetrine of primary jurisdiction did not preclude re-
view of physician's antitrust suit against hospital, though
physician was currently seeking review by state of hospi-
tal's peer-review decision; proceedings at state level, de-
signed to determine whether physician had received fair
— would not help clarify and narrow his antitrust
claims.

7. Federal Courts — 47

Burford abstention was not appropriate in physician's
antitrust suit against hospital; application of federal anti-
trust law did not involve difficult questions of state law.

. Commerce — 62.14

Physician alleging that peer-review proceedings which
deprived him of staff privileges violated antitrust laws
sufficiently alleged required nexus with interstate com-
merece; hospital was engaged in interstate commerce and
peer-review proceedings affected hospital's entire staff.

9. Monopolies — 12(11)

Physician alleging that hospital's denial of his staff
privileges violated antitrust laws sufficiently alleged ad-
verse effect on competition; physician alleged that he
provided services to patients at lower prices, and thus his
exclusion from market would injure competition by al-
lowing other similar doetors to charge higher prices for
their services.

A-4

10. Attorney and Client — 26

Attorney is not immune from antitrust liability if he
becomes active participant in formulating policy decisions
with his elient to restrain competition.

11. Conspiracy — 18

Physician's complaint, alleging that hospital's denial of
his staff privileges violated antitrust laws, sufficiently
alleged antitrust conspiracy; complaint alleged that hos-
pital and its parent corporation conspired with their
attorneys and medical staff to exclude him. Sherman
Anti-Trust Act, § 1, 15 U.S.C.A. § 1.

12. Constitutional Law — 296(1)
Hospitals — 6

Hospital's peer-review process did not violate physi-
cian’s due process rights absent showing of state action;
though peer-review process was statutorily mandated,
decision to remove physician's staff privileges was made
by private parties according to professional standards
that were not established by state. U.S.C.A. Const.
Amend. 14.

13. Declaratory Judgment — 300

Defendants in physician's antitrust suit against hospi-
tal which removed his staff privileges were not appropri-
ate parties to defend physician's additional constitutional
challenge to state and federa! statutes requiring hospital
to report its actions to government agencies. Health Care
Quality Improvement Act of 1986, §§ 423, 425, 42
U.S.C.A. §§ 11133, 11135; West's Ann.Cal.Bus. &
Prof.Code § 805.

— —

A-5

Lawrence Silver, Beverly Hills, Cal., for plaintiff-
appellant.

J. Mark Waxman, Weissburg and Aronson, Ine., Los
Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the
Central District of California.

Before CANBY, WIGGINS and O’SCANNLAIN, Cir-
cuit Judges.
WIGGINS, Circuit Judge:

Appellant Dr. Simon J. Pinhas appeals the dismissal of
his action challenging the removal of his staff privileges at
Midway Hospital Medical Center (Midway) in Los Ange-
les. Pinhas alleges claims under section 1 of the Sherman
Antitrust Act, 15 U.S.C. § 1 (1982) and 42 U.S.C. 66 1983,
1985 (3) (1982). Pinhas also seeks a declaratory judgment
that Cal.Bus. & Prof Code §§ 805, 805.5 (West
Supp.1989), and the Health Care Quality Improvement
Act of 1986, 42 U.S.C. § 11101-11152 (Supp. IV 1986), are
unconstitutional under the fourteenth amendment. The
district court granted appellees’ motion to dismiss all
four claims. We reverse the dismissal of the antitrust
claim, and affirm the dismissal of the section 1983 claim
and request for declaratory judgment.“

I
BACKGROUND

Dr. Pinhas is an eye physician and ophthalmological
surgeon. He became a member of the medical staff at
Midway in October 1981. Reimbursement under Medicare

'Pinhas does not challenge the dismissal of the section 1985 (3)
claim on appeal.

A-6

for the charges of an assistant surgeon in the perform-
ance of eye surgery became unavailable in February 1986.
Pinhas alleges that most hospitals in Los Angeles subse-
quently eliminated their requirement that assistant sur-
geons be utilized during eye surgeries. Pinhas, together
with several other ophthalmic surgeons at Midway, peti-
tioned the medical staff at Midway to eliminate its assis-
tant surgeon requirement. The medial staff refused to do
so. Pinhas advised the hospital administration that the
medical staff's refusal to eliminate the assistant surgeon
requirement would cost him approximately $60,000 per
year. Pinhas allegedly told the hospital that although he
wished to keep the majority of his practice at Midway, he
would nevertheless move his practice if the assistant
surgeon requirement was not abolished. Pinhas alleges
that rather than abolish the assistant surgeon require-
ment, Midway offered him what he characterizes as a
“sham” contract in which he was to be paid the sum of
$36,000 per year (later raised to $60,000 per year) for
consulting services he contends he would not have been
expected to perform. Pinhas refused to sign the contract.
Despite repeated requests by appellees Dr. Lurvey, the
Chief of Staff at Midway, and Mitchell Feldman, regional
vice-president of Summit Health Ltd. (Summit), the
parent corporation of Midway, Pinhas refused to return
the contract.

Pinhas contends that as a result of his refusal to return
the contract, Lurvey and Feldman conspired to initiate
disciplinary proceedings against him. By letter dated
April 13, 1987, Pinhas was advised by Summit Health and
Midway, through Lurvey and Feldman, that he was sum-
marily suspended as of that date. The letter stated that he
was being suspended based on a “medical staff review of
Dr. Pinhas’s medical records with consideration as to the
questions raised regarding: indications for surgery; ap-

A-7

propriateness of surgical procedures in light of patient's
medical condition; adequacy of documentation in medical
records; and ongoing pattern of identified problems.” The
letter also indicated that the Midway Executive Commit-
tee (MEC) would convene within ten days to review and
consider the action. The MEC met on April 20, 1987, and
permitted Pinhas to make a statement. The MEC upheld
the summary suspension with the recommendation to
terminate his staff privileges at Midway. Midway's board
of direetors concurred with the MEC's recommendation.

In accordance with the medical staff by-laws, Pinhas
requested a hearing by the Midway Judicial Review Com-
mittee (JRC). He was granted the hearing and received
notice of seven charges against him. In accordance with
the bylaws, Lurvey appointed seven members of the medi-
cal staff to serve on the JRC. Attorney Richard Posell was
selected by Midway's attorney Mark Kadzielski of Weiss-
burg & Aronson to serve as the hearing officer. The peer-
review hearings began on May 26 and proceeded for six
hearing sessions, concluding on June 12, 1987. Both
parties were permitted to call witnesses and introduce
evidence. Pinhas was not permitted representation by
legal counsel prior to or during the proceedings. The JRC
issued its report on June 12, 1987, upholding only one of
the seven charges against Pinhas. It reeommended that
Pinhas be reinstated subject to Pinhas’s agreement to
several special conditions relating to the conduct of his

operations and to be placed on a six-month probationary
period.

The MEC and Pinhas both appealed the JRC“ decision
to the Governing Board of the hospital in July 1987. On
February 2, 1988, the Governing Board affirmed the
decision of the JRC, but imposed more stringent condi-
tions upon Pinhas’s six-month probationary period. Fi-

A-8

nally, sometime in October 1988, Pinhas filed a petition
for writ of mandate pursuant to Cal.Civ.Proe.Code
§ 1094.5 (West Supp.1989). No decisions has yet been
reached in that matter.

On May 21, 1987, following his suspension, but before
the hearing before the JRC, Pinhas filed this suit in
federal court. Named as defendants are Summit Health;
Midway; the Midway medical staff; Dr. Lurvey; Feldman;
Drs. Reader, Macy, Salz, and Perlman, each of whom are
ophthalmologists and competitors of Pinhas; Peggy Far-
ber, an employee in the risk management section with
Summit Health/Midway; Kadzielski; Weissburg & Aron-
son; and Posell (collectively “appellees”).? Pinhas alleges
in his complaint that as a result of his refusal to sign the
“sham” contract, appellees entered into a conspiracy to
preclude him from practicing at Midway or any other
hospital in California or the rest of the United States in
violation of section one of the Sherman Act, 15 U.S.C. § 1
(1982). The thrust of Pinhas’s antitrust claim is that
appellees conspired summarily to suspend and terminate
his medical staff privileges at Midway, and to have the
report of his termination disseminated to hospitals in
California pursuant to Cal. Bus & Prof. Code 55 805, 805.1
(West Supp. 1989), and to hospitals throughout the entire
country pursuant to 42 U.S.C. 56 11133, 11135 (Supp. IV
1986) in order to preclude him from practicing elsewhere.
Section 805 of the California Business and Professions
Code requires a health care facility to report actions
adversely affecting a doctor's clinical privileges to the
California Board of Medical Quality Assurance (BMQA).
Before granting or renewing a staff privilege for a physi-

“Also named as a defendant was the Califorma Board of Medica
Quality Assurance (BMQA). BMQA, however, was disminsed by
stipulation.

A-9

cian or surgeon, a health care facility is also required
under section 805.5 to request a report from BMQA to
determine whether the applying doctor has been denied
staff privileges by another hospital.’ Similar reporting
requirements are mandated by federal law under 42
U.S.C. $§ 11133, 11135. Pinhas contends that as a result
of his termination and the dissemination of the reports,
appellees have effectively boycotted his practice and pre-
eluded him from continued competition in the
marketplace.

Pinhas also alleges under sections 1983 and 1985(3)
that the peer-review proceedings did not comport with the
due process guarantee of the fourteenth amendment. In
support of his due process claim, Pinhas contends he did
not receive adequate notice of the charges against him, he
was not permitted legal counsel at the hearing, the hear-
ing officer Posell was biased, he was not permitted to
cross-examine the MEC’s witnesses and was precluded
from calling several of his own. In addition to his anti-
trust and civil rights claims, Pinhas requests a declara-
tory judgment that Cal. Bus. & Prof. Code 66 805, 805.1
and 42 U.S.C. §§ 11133, 11135 violate the equal protection
and due process clauses of the fourteenth amendment.

Appellees filed a motion to dismiss on August 4, 1987,
and the court dismissed the case on September 21, 1987.
The distriet court coneluded that the appellees were
protected from antitrust liability under the state action
doctrine pursuant to Patrick v. Burget, 800 F.2d 1498 (9th
Cir.1986), rev'd, 486 U.S. 94, 108 S.Ct. 1658, 100 L.Ed.2d
53 (1988). The court dismissed the civil rights

Failure to file a report under section 405, or to request one under
section 805.1, constitutes a misdemeanor. Cal Rus & Prof. Code
§§ 805 (, 805.5(e).

A-10

claims because of a lack of state action under the four-
teenth amendment. It dismissed the claim for declaratory
relief as not ripe, and also because the appellees were not
the right parties to defend either the state or federal
statute. Pinhas s request for reconsideration by the court
based on the filing of certiorari with the Supreme Court in
Patrick was denied. Pinhas appeals dismissal of his anti-
trust and section 1983 claims, as well as his request for
declaratory relief. He does not appeal the dismissal of his
section 1985(3) claim. We have jurisdiction under 28
U.S.C. § 1291 (1982).

II
STANDARD OF REVIEW

[1] A dismissal for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b) (6) is a ruling on a question of law
that we review de novo. See Fort Vancouver Plywood Co. v.
United States, 747 F.2d 547, 552 (9th Cir.1984). Review is
limited to the contents of the complaint, see id., and the
complaint should not be dismissed under the rule “unless
it appears beyond doubt that the plaintiff can prove no set
of faets in support of his claim which would entitle him to
relief,” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99,
101-02, 2 L.Ed.2d 80 (1957); see also Gibson v. United
States, 781 F.2d 1334, 1337 (9th Cir.1986), cert. denied.
479 U.S. 1054, 107 S.Ct. 928, 93 L.Ed.2d 979 (1987).

[2] “The customary deference for the district court is
not applicable to its determination to grant a declaratory
judgment. The court of appeals must exercise its own
sound diseretion to determine the propriety of the district
court's grant or denial of declaratory relief.” United States
v. Washington, 759 F.2d 1353, 1356-57 (9th Cir.) (en
hance) (citations omitted), cert. denied, 474 U.S. 994, 106
S.Ct. 407, * L.Ed.2d 358 (1985); aecord Guerra v.

A-11

Sutton, 783 F. 2d 1371, 1376 (9th Cir. 1986) (the court
reviews the denial of declaratory relief de novo).

III
ANALYSIS

A. Antitrust Claim

Pinhas contends on appeal that the district court's
dismissal of his antitrust claim based on the state action
doctrine must be reversed in light of the Supreme Court's
recent decision reversing our decision in Patrick. Patrick
v. Burget, 486 U.S. 94, 108 S.Ct. 1658, 100 L.Ed.2d 83
(1988). Appellees contend that the Supreme Court's deci-
sion in Patrick does not alter the district court’s holding,
but that even if the state action doctrine does not apply,
Pinhas’s amended complaint does not state a viable anti-
trust claim because Pinhas’s claim was not ripe for
determination and the complaint fails to demonstrate the
required nexus with interstate commerce, plead sufficient
facts to establish injury to competition, and adequately
plead an antitrust conspiracy.

1. State Action
a. Patrick

In Patrick we considered whether the state action
doctrine protected physicians in Oregon from federal
antitrust liability for their involvement with hospital peer-
review proceedings. The facts in Patrick are similar to
those of this case. The plaintiff, a general and vascular
surgeon, was subjected to a review of his staff privileges
at a hospital in Astoria, Oregon, whereupon it was recom-
mended that his privileges be terminated. 800 F.2d at
1502. The doctor brought suit in federal court while the
hospital’s peer-review proceedings were still being con-

A-12

ducted, alleging claims under sections 1 and 2 of the
Sherman Act. /d. at 1504. He alleged that the members of
his former elinie initiated the hospital peer-review pro-
ceedings to preclude him from competing against them.
Id. at 1502-04. We held that the doctors’ conduct in the
peer-review proceedings was immune from antitrust seru-
tiny under the state action doctrine because Oregon had
articluated a policy in favor of peer review and actively
supervised the peer-review process. 800 F. 2d at 1505-07.
The Supreme Court reversed our decision, holding that
the state action doctrine did not shield the hospital peer-
review proceedings from an antitrust challenge. 108 S.Ct.
at 1665-66.

In considering the state action doctrine, the Court
applied the rigorous two-prong test first devised in Cali-
fornia Retail Liquor Dealers Ass u v. Midcal Aluminum,
Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980).
Patrick, 108 S.Ct. at 1662-63. Under the Midcal test, ‘the
challenged restraint must be “one clearly articulated and
affirmatively expressed as state policy,” ’” and “the anti-
competitive conduct ‘must be “actively supervised” by the
State itself.) Jd. 108 S.Ct. at 1663 (quoting Midcal, 445
U.S. at 105, 100 S.Ct. at 943). The Court found it
unnecessary to consider the “clear articulation” prong of
the Midcal test, finding that the second prong was not
satisfied. Id.

The Court stated that the “active supervision’ or sec-
ond requirement, “mandates that the State exercise ulti-
mate control over the challenged anticompetitive
conduet,” and “requires that state officials have and
exercise power to review particular anticompetitive acts
of private parties and disapprove those that fail to accord
with state policy.” Id. The defendants argued that the
state of Oregon actively supervised the peer-review pro-

A-13

cess through (1) the state Health Division; (2) the Board
of Medical Examiners (BOME); (3) and the state judi-
cial system. Id. The Court had little difficulty in conelud-
ing that neither the Health Division nor the BOME
actively supervised the peer-review decisions. Jd. 108
S.Ct. at 1663-64. The Health Division had general super-
visory powers over such matters as licensing hospitals
and the endorsement of health laws. Although the statute
authorizes the Health Division to compel a hospital to
meet its obligation to establish and review peer-review
procedures, the Court concluded that this authority was
insufficient because the Health Division had no power to
review actual peer-review decisions and overturn a deci-
sion that failed to accord with state policy. Jd. at 1664.
Similarly, the BOME, whose principal function was to
regulate the licensing of physicians, also lacked the au-
thority to disapprove individual peer-review decisions. Id.

With respect to the state judiciary, the Court declined
to decide whether judicial review of private conduct can
ever satisfy the active supervision requirement. “This
case, however, does not require us to decide the broad
question whether judicial review of private conduct ever
can constitute active supervision, because judicial review
of privilege-termination decisions in Oregon, if such re-
view exists at all, falls far short of satisfying the active
supervision requirement.” Id. at 1664-65. The Court noted
that there was no statute in Oregon, or any holding by a
state court, which provided a physician whose privilege
had been revoked by à hospital a means of judicial review
of private peer-review decisions. Id. at 1665. The Court
emphasized that any judicial reivew that did exist was
insufficient to constitute “active supervision,” because the
review would not involve a review of the merits of a
privilege termination decision. Id. (citing Straube v.
Emanuel Lutheran Charity Bd., 287 Or. 375, 384, 600 P.2d

A-14

381, 386 (1979), cert. denied, 445 U.S. 966, 100 S.Ct. 1657,
64 L.Ed. 2d 242 (1980)). The Court thus coneluded that
no state actor in Oregon actively supervised hospital peer-
review decisions and that the state action doctrine was
inapplicable. Id.

b. Application of Patrick

3] Because we conclude that the second prong of the
Midcal test is not satisfied, we have no need to address its
“clear articulation” prong. Patrick, 108 S.Ct. at 1663.
Appellees’ arguments in support of their contention that
California actively supervises the peer-review process
mirror those made in Patrick. Appellees contend that the
State Department of Health Services (SDHS), California
Board of Medical Quality Assurance (BMA), and the
state judiciary all actively supervise the peer-review
system.

The SDHS has substantively the same role in Califor-
nia as the Oregon State Health Division has in Oregon:
the licensure and review of hospital procedures, including
procedures for the review of staff decisions.’ Also like the
Oregon State Health Division, it has no authority to
review privilege decisions and therefore does not actively
supervise these procedures.

Similarly, the BMQA serves relatively the same role in
California as the BOME in Oregon. Its primary function
is the regulation and disciplining of physicians. See
Cal.Bus. & Prof.Code §§ 2001-2006 (West Supp.1989).
And, as in Oregon, any adverse action taken by a hospital
agreement against a member physician must be reported

pursuant to its rule-making authority under Cal. Health & Safety
Code § 1275, the SDHS has promulgated extensive regulations
governing the operation of an acute care facility. See Cal.Admin.Code
tit. 22, § 70701 et seq. (1982).

A-15

to the BMQA. See Cal.Bus. & Prof. Code § 805 (West
Supp.1989). Also like the BOME, the BMQA has no
authority to review the outcome of a peer review proceed-
ing. Although it may not disseminate a report it finds to
be without merit, this restriction does not constitute the
type of active supervision necessary under Patrick.

We join the Supreme Court in avoiding the broad
question whether state courts, acting in their judicial
capacity, ever can adequately supervise private conduct
for purposes of the state action doctrine. See Patrick, 108
S.Ct. at 1664-65. The judicial review that does exist in
California does not satisfy the active supervision
requirement.

Unlike Oregon, California is actively engaged in review-
ing peer-review decisions. Such review is created by
statute under Cal.Civil Proe.Code § 1094.5 (West Supp.
1989) (reviewing quasi-judicial decisions) and
Cal.Civ.Proe.Code § 1085 (West 1980) (reviewing quasi-
legislative administrative proceedings). The plethora of
cases cited by appellees demonstrate the willingness of
California courts to entertain challenges to the peer-
review process. The function of the trial and appellate

California law recognizes two types of mandamus review of the
decisions made by hospitals with regard to physician medical staff
privileges. Where a physician's medical staff privileges have been
denied, suspended or terminated on the ground the physician has not
demonstrated an ability to comply with established standards, that
administrative decision is classified as “quasi-judicial” and review is
by administrative mandamus. However, where the physician has had
privileges denied or curtailed because of the implementation of a
“policy” of the hospital, the administrative action is classified as
‘“quasi-legislative” and reviewable by traditional mandamus.

Hay v. Scripps Memorial Hosp.-La Jolla, 183 Cal.App.3d 753, 758, 228
Cal.Rptr. 413, 417 (1986) (citations omitted).

A-16

courts, however, is limited under both types of
proceedings.

[Under Section 1094.5,] if the decision was substan-
tively rational, lawful, not contrary to established
publie policy and the proceedings were fair, a court
may not substitute a judgment for that of the gov-
erning board even if it disagrees with the board’s
decision. The scope of review in traditional manda-
mus proceedings [under section 1085] is limited to
an examination of the record of the hospital proceed-
ings to determine whether the action taken was
substantively irrational, unlawful or contrary to es-
tablished publie policy or procedurally unfair.

Hay v. Scripps Memorial Hosp.-La Jolla, 183 Cal.App.3d
753, 758, 228 Cal Rptr. 413, 417 (1986) (citations omit-
ted). This limited form of review is similar to the stan-
dards applied by the Oregon courts that the Supreme
Court found insufficient to constitute active supervision.
Patrick, 108 S.Ct. at 1665. “Such constricted review does
not convert the action of a private party in terminating a
physician’s privileges into the action of the State for
purposes of the state action doctrine.” Id.

We therefore find that the California judiciary does not
actively supervise the peer-review process. Accordingly,
the state action doctrine does not protect peer-review
proceedings in California from application of the anti-
trust laws.

2. Reviewability

[4] Appellees raise several arguments in support of
the contention that we should decline to review the case at
this time. The argument that the case is not ripe is
frivolous because Pinhas has already been removed from
Midway and an “805 Report” has been filed against him.

A-17

Regardless of the outcome of the writ of mandamus
action, Pinhas still has a viable antitrust claim. As is clear
from the Supreme Court’s decision in Patrick, that the
peer-review proceedings were not yet complete when this
suit was filed does not bar review of Pinhas’s action. See
id. at 1661 (stating that case was filed during course of
peer-review proceedings).

[5] Appellees also appear to contend that Pinhas
failed to exhaust his available administrative remedies.
Initially, we are not convineed that the requirement of
exhaustion of administrative remedies is applicable in
this ease because an administrative agency is not in-
volved. The peer-review process is conducted by a private
entity and is judicially reviewable in the California state
courts. The reasons for giving deference to an agency, see
e.g., Morrison-Knudsen Co. v. CHG Int'l, Inc., 811 F.2d
1209, 1223 (9th Cir.1987), simply are not applicable here.
In any event, where, as here, there is no statutory require-
ment of exhaustion of administrative remedies, applica-
tion of the exhaustion doctrine lies within the diseretion
of the trial court. See id. The district court did not abuse
its diseretion by entertaining Pinhas's suit.

[6] Appellees next argue that the doctrine of primary
jurisdiction precludes review of Pinhas's suit while the
peer-review proceedings remain ongoing. The primary
jurisdiction doctrine “is applicable whenever the enforce-
ment of a claim subject to a specific regulatory scheme
requires resolution of issues that are ‘within the special
competence of an administrative body,. Farley Transp.
Co. v. Santa Fe Trail Transp. Co., 778 F.2d 1365, 1370
(9th Cir. 1985) (quoting United States v. Western Pacific
H. R., 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126
(1956) ). Again, we doubt the application of this argument
where no agency action is directly involved. Nevertheless,

A-18

the doctrine does not apply here because the proceedings
at the state level, designed to determine whether Pinhas
received a fair hearing, will not help clarify and narrow
Pinhas’s antitrust claims. See 6 J. Von Kalinowski, Anti-
trust Laws d Trade Regulation § 44A.01[2][b], at 44A-14
(1989) (“The doctrine of primary jurisdiction will not be
invoked if it is clear that the agency's decision will have
no bearing on the antitrust issues.)

7] Abstention under Burford v. Sun 0 Co., 319 U.S.
315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), is also inappro-
priate. Burferd abstention is appropriate when a federal
court is presented with “difficult questions of state law
bearing on policy problems of substantial publie import
‘whose importance transcends the result in the case then
at bar. Newberry v. Pacific Racing Ass'n, 854 F.2d 1142,
1151 (9th Cir.1988) (quoting Colorado River Water Con-
serv. Dist. v. United States, 424 U.S. 800, 814, 96 S.Ct.
1236, 1244, 47 L.Ed.2d 483 (1976)). Application of the
Sherman Act, ia this ease, does not involve difficult
questions of state law.

Finally, appellees rely on Mir v. Little Co., 844 F.2d 646
(9th Cir.1988), for the proposition that the court should
abstain under principles of federalism and comity. In Mir.
however, we concluded that a doctor's common-law claims
against a hospital were precluded under California state
law beeause the doctor had failed to sueceed in his action
against the hospital for a writ of mandate. Id. at 650-51.
The holding in Mir is thus inapposite to Pinhas’s claim
under the Sherman Act.

3. Nexus with Interstate Commerce

[8] Appellees contend that Pinhas’s amended com-
plaint fails to establish jurisdiction under the Sherman
Act because it does not sufficiently allege “a required

A-19

nexus with interstate commerce.” Appellees’ primary con-
tention is that interstate commerce will not be affected by
the removal of Pinhas from the hospital staff.

In order to establish jurisdiction under the Sherman
Act, a plaintiff must “identify a relevant aspect of inter-
state commerce and then show ‘as a matter of practical
economics’ that the Hospital's activities have a ‘not insub-
stantial effect on the interstate commerce involved.“
Mitchell v. Frank R. Howard Memorial Hosp., 853 F.2d
762, 764 (9th Cir.1988) (summarizing this eireuit's inter-
pretation of McLain v. Real Estate Bd., 444 U.S. 232, 100
S.Ct. 502, 62 L.Ed.2d 441 (1980); quoting Palmer v.
Roosevelt Lake Log Owners Ass'n, 651 F.2d 1289, 1291 (9th
Cir. 1981)) cert. denied — U.S. —, 109 S.Ct. 1123, 103
L.Ed.2d 1986 (1989).

Appellees do not contend that Pinhas has failed to
identify any relevant aspect of interstate commerce. In-
stead, their argument is directed at the second considera-
tion, the effeet on the relevant interstate commerce.
Under the second requirement, Pinhas must show that
“as a matter of practical economics” the activities of the
appellees — the peer review process in general — have a
“not insubstantial effect on the interstate commerce in-
volved.” McLain, 444 U.S. at 246; 100 S.Ct. at 511. Pinhas
need not, as appellees apparently believe, make the more
particularized showing of the effect on interstate com-
meree caused by the alleged conspiracy to keep him from

“They argue that any medieal payments received by the hospital
will not be materially affected by Pinhas s removal from the staff at
Midway. Appellees contend that alt most, the extent of interstate
commeree affected by such a removal, would be the number of out-of-
state patients currently served and/or the amount of out-of-state
revenues currently received by appellee for services specifically re-
lated to eye care and ophthalmic surgery.” Appellant's Brief at 25.

A-20

working. Id. at 242-43, 100 S.Ct. at 509. He need only
prove that peer-review proceedings have an effect on
interstate commerce, a fact that can hardly be disputed.
The proceedings affect the entire staff at Midway and
thus affect the hospital's interstate commerce. Appellees’
contention that Pinhas failed to allege a nexus with
interstate commerce because the absence of Pinhas's
services will not drastically affect the interstate com-
merece of Midway therefore misses the mark and must be
rejected.

4. Injury to Competition

{9} Appellees argue that Pinhas’s complaint was prop-
erly dismissed because it fails to allege an adverse effect
on competition; appellees contend that the entire thrust of
Pinhas’s allegation of antitrust damages in his complaint
is that his own private medical practice was injured and
that unfair procedures in the administrative hearings will
restrict his ability to gain income from a hospital-based
practice at Midway.

To maintain a successful antitrust action, Pinhas must
show that the alleged conspiracy among the appellees did
more than injure him; he must prove an injury to the
competition in the relevant market. See Brunswick Corp.
v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690,
697, 50 L.Ed.2d 701 (1977); Christofferson Dairy, Inc. v.
MMM Sales, Inc., 849 F.2d 1168, 1172 (9th Cir.1988).
Although the emphasis in determining whether an injury
has occurred is properly on the injury to competition and
not to the competitor, see Ralph C. Wilson Indus. v.
Chronicle Broadcasting Co., 794 F.2d 1359, 1363 (¢ h Cir.
1986) (quoting Brown Shoe Co. v. United States, 370 U.S.
294, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)), “injury to
competitors may be probative of harm to competition,”
Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1040 (9th

A-21

Cir.1988) cert. granted, — U.S. —, 109 S.Ct. 3154, 104
L. Ed. 2d 1018 (1989); accord USA Petroleum Co. v Atlantic
Richfield Co., 859 F.2d 687, 696 (9th Cir.1988) (quoting
Hasbrouck), cert. granted, — U.S. — , 109 8. Ct. 2446, 104
L.Ed.2d 1001 (1989).

Finhas alleges in his complaint that the conspiracy was
intended to boyeott his attempts at providing patients
with lower prices as a result of his ability to perform
operations at a rate quicker than that of his competitors.
Assuming Pinhas’s allegation that he provides his ser-
vices at a rate cheaper than that of his competitors to be
true, the preclusion of Pinhas from practicing could
conev.vably injure competition by allowing other similar
doe’ rs to charge higher prices for their services. Or
Pinuas may show that his preclusion otherwise substan-
tially reduced total competition in the market. We there-

fore conclude that Pinhas has adequately pleaded injury
to competition.

5. Conspiracy

Finally, appellees contend that the amended complaint
fails adequately to plead an antitrust conspiracy. See-
tion 1 of the Sherman Act is direeted at prohibiting
unreasonable restraint of trade effected by a “contract,
combination ...or conspiracy” among separate entities.
See Copperweld Corp. v. Independence Tube Corp., 467
U.S. 752, 768, 104 S.Ct. 2731, 2740, 81 L.Ed.2d 628
(1984). “The phrase ‘contract, combination, or conspir-
acy’ limits application of the Sherman Act to concerted
conduct by more than one person or single entity.” Oltz v.

St. Peter's Community Hosp., 861 F.2d 1440, 1449 (9th
Cir.1988).

10] Appellees contend that the dismissal of Weiss-
burg & Aronson, and its principal, Mr. Kadzielski, should

A-22

be affirmed because they were only acting as agents of
Summit Health. An attorney is not immune from anti-
trust liability if he becomes an active participant in
formulating policy decisions with his elient to restrain
competition. See Tillamook Cheese and Dairy Ass'n v.
Tillamook County Creamery Ass'n, 358 F.2d 115, 118 (9th
Cir.1966); Brown v. Donco Enter., Inc., 783 F.2d 644, 647
(6th Cir.1986) (per curiam). Pinhas sufficiently alleges in
his complaint that Kadzielski, Weissburg & Aronson, and
Posell exerted their influence over Summit Health and
Midway so as to direct them to engage in the complained
of acts for an anticompetitive purpose.

11] Drs. Lurvey, Reader, Macy, Salz and Perlman are
members of the medical staff at Midway. Any action taken
by a medical staff satisfies the “contract, combination or
conspiracy” requirement. Weiss v. York Hosp. 745 F.2d
786, 814-17 (1984), cert. denied, 470 U.S. 1060, 105 S.Ct.
1777, 84 L.Ed.2d 836 (1985).

Appellees apparently argue that Summit Health, as a
parent of Midway, cannot “conspire” with Midway, and
that Midway cannot “conspire” with the medical staff. See
Oltz, 861 F.2d at 1449-50 (recognizing that a hospital and
member of its medical staff may under certain cireum-
stances constitute separate entities for purposes of ade-
quately pleading a section 1 conspiracy); but see Weiss,
745 F.2d at 814-815. Pinhas alleges, however, that both
entities conspired with Kadzielski, Weissburg & Aronson,
and Posell, all outside agents of both Midway and Sum-
mit Health. Accordingly, Midway and Summit Health are
not properly dismissed.

Finally, Feldman and Farber, as employees of Midway
and/or Summit Health, cannot “conspire” with their
employer corporations. Id. at 1450 (quoting Copperweld,
467 U.S. at 769, 104 S.Ct. at 2740). Again, however,

A-23

Pinhas’s complaint, read in the light most favorable to
him, alleges that Feldman and Farber entered into an
agreement with the other appellees. We therefore find the
“eonspiracy” requirement of section 1 of the Sherman Act
satisfied as to each of the defendants. For the foregoing

a" we reverse the dismissal of Pinhas’s antitrust
claim.

B. Procedural Due Process Claim

12] Pinhas alleges that the peer-review proceedings
before the JRC violated his right to due process under the
fourteenth amendment. The district court dismissed
Pinhas’s due process claim concluding that it did not
meet the “state action” requirement.

The central inquiry in determining whether a private
party's actions constitute “state action” under the four-
teenth amendment is whether the party's actions may be
“fairly attributable to the State”. Lugar v. Edmondson Oil
Co., 457 U.S. 922, 937, 102 S.Ct. 2744, 2753, 73 L.Ed.2d
482 (1982). To this end, the Court has followed a two-part
analysis: “First, the deprivation must be caused by the
exercise of some right or privilege created by the State or
by a rule of conduct imposed by the State or by a person
for whom the State is responsible. ... Second, the party
charged with the deprivation must be a person who may
fairly be said to be a state actor.” Id.

There is little doubt that the first prong under Lugar
has been satisfied. Midway is required under California
state law to include in its bylaws a mechanism by which a
physician may appeal a hospital's decision to remove him
from its staff. See Cal. Admin. Code tit. 22, § 70703(b).
Additionally, the SDHS, in reviewing hospitals during
the licensing process, looks to determine whether a fune-
tional, operating peer-review process is in place. The peer-

A-24

review process is thus a rule of conduct imposed by the
state of California within the meaning of Lugar.

Under the second prong in Lugar, Pinhas argues that
the actions of those involved in the peer-review process
should be construed as that of the state because of the
statutorily created system of peer-review, which Pinhas
argues, actively seeks to integrate private and public
systems of review. State regulation of a private entity,
however, is not enough to support a finding of state
action. See Jackson v. Metropolitan Edison Co., 419 U.S.
345, 350, 95 S.Ct. 449, 453, 42 L.Ed.2d 477 (1974); Blum
v. Yaretsky, 457 U.S. 991, 1004, 102 S.Ct. 2777, 2785, 73
L.Ed.2d 534 (1982). Pinhas must show that “there is a
sufficiently close nexus between the State and the chal-
lenged action of the regulated entity so that the action of
the latter may be fairly treated as that of the State itself.”
Jackson, 419 U.S. at 351, 95 S.Ct. at 453; see also Blum,
457 U.S. at 1004, 102 S.Ct. at 2785. Additionally, a state
may be held responsible for the action of a private party
only when it “has exereised coercive power or has pro-
vided such significant encouragement, either overt or
covert, that the choice must in law be deemed to be that of
the State.” Id.

The challenged action here, the removal of Pinhas s
staff privileges at Midway, cannot be attributed to the
state of California. Only private actors were responsible
for the decision to remove Pinhas. That the decision was
made pursuant to a review process that has been ap-
proved by the state is of no consequence: the decision
ultimately turned on the “judgments made by private
parties according to professional standards that are not
established by the State.” Blum, 457 U.S. at 1008, 102
S.Ct. at 2788. Additionally, the fact that a hospital must
forward to the BMQA an “#05 report” whenever any

A-25

adverse action is taken against a doctor is irrelevant in
determining whether the state took an active role in
removing Pinhas's privileges. See id. at 1009-10, 102 S.Ct.
at 2788 (penalties imposed for violating regulation re-
quiring nursing home officials to conduct periodic review
of type of care necessary for each resident adds nothing
to claim of state action). In short, Pinhas has failed to
demonstrate that the state exercised coercive power or
encouraged his removal in any way.

Pinhas also attempts to characterize the appellees as
state actors by arguing that the “integration of publie and
private systems of peer review” meets the “symbiotic
relationship” test set forth in Burton v. Wilmington Park-
ing Auth., 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961).
Pinhas appears to argue that the state of California acts
with those involved in the review proceedings as a “joint
participant” in deciding whether a physician has been
properly removed.

The relationship which exists between the state of
California and those involved in the peer-review proceed-
ings is far different than that which existed between the
city of Wilmington and the lessee of the restaurant in the
publie parking garage in Burton. There is no financial
relationship between the two, nor is any real property
involved. This difference is sufficient to place this case out
of the ambit of Burton. See Jackson, 419 U.S. at 357-58, 95
S.Ct. at 456-57 (limiting reach of Burton); Blum, 457 U.S.
at 1010-11, 102 S.Ct. at 2789 (same).

Finally, we note that the Sixth and Seventh Cireuits
have also determined that a decision by a hospital to
terminate or restrict the staff privileges of one of its
physicians may not be attributed to the state for purpose
of establishing state action under the fourteenth amend-
ment. See Ezpeleta v. Sisters of Mercy Health Corp., 800

A-26

F.2d 119, 122-23 (7th Cir.1986); Crowder v. Conlan, 740
F.2d 447, 451 (6th Cir. 1984). Because Pinhas’s removal
was instrumented solely by private parties, state action is
absent and his due process claim was properly dismissed.

C. Declaratory Judgment

[13] The district court dismissed Pinhas's claim for a
declaratory judgment because it was not ripe and the
appellees had no interest in the enforcement of either the
state or federal regulation and therefore were not the
proper parties to defend the statutes.

We agree with the district court that the appellees are
not the appropriate parties to defend a constitutional
challenge to the relevant state and federal statutes. See
Jacobson v. Tahoe Regional Planning Agency, 566 F.2d
1353, 1361 (9th Cir.1977) (dismissing claim for declara-
tory judgment against counties because counties’ interest
in the ordinance challenged was purely ministerial),
affirmed in part, reversed in part, 440 U.S. 391, 99 S.Ct.
1171, 59 L.Ed.2d 401 (1979).

"In Jacobson, the plaintiffs requested a declaratory judgment to
preclude the enforcement of a land use ordinance enacted by the
Tahoe Regional Planning Authority (TRPA). The court dismissed
the claim for declaratory judgment against several counties in the
Lake Tahoe Basin:

[Tine action against the counties was properly dismissed because
the alleged infringement of constitutional rights arises from the
action of the TRPA. The Compact limits the involvement of the
counties to a sharing of the enforcement power with the cities, the
states and the TRPA. Their involvement is purely ministerial, and
thus peripheral to the allegations underlying this suit.

Jacobson, 566 F.2d at 1361.

A-27

IV
CONCLUSION

We reverse the dismissal of the antitrust claim and
affirm the dismissal of the section 1983 claim and request

for declaratory judgment. Each party shall bear its own
costs on appeal.

AFFIRMED in part, REVERSED in part, and
REMANDED

A-28

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

Simon J. Prnunas, M. D.,
Plaintiff,
v.

Summit HEALTH, LTD., a corporation; Mib wav
HospiTtaAL MEDICAL CENTER, a California general
hospital; THE MepicaL Starr OF Mipway Hospitat
MEDICAL CENTER, an unincorporated association;
MITCHELL FELDMAN; AUGUST READER; ARTHUR N.
LurRVEY, RicHarp E. Posklz JONATHAN I. Macy;
James J. SALZ; GILBERT PERLMAN; PEGGY FARBER;
MARK KADZIELSKI; WEISSBURG and ARONSON, INC.;
and STATE OF CALIFORNIA BOARD OF
MEDICAL QUALITY ASSURANCE,
Defendants.

Case No. 87 03292 FFF (GHKx)
ORDER DISMISSING ACTION

FILED: October 5, 1987
ENTERED: October 9, 1987

On September 21, 1987 the Motions of defendants
Summit Health, Ltd., Midway Hospital Medical Center,
The Medical Staff of Midway Hospital Medical Center,
Mitchell Feldman, August Reader, Arthur N. Lurvey,
Richard E. Posell, Jonathan I. Macy, James J. Salz.
Gilbert Perlman, Peggy Farber, Mark Kadzielski and
Weissburg and Aronson, Ine. to dismiss plaintiff's Com-
plaint and this action made pursuant to Federal Rules of
Civil Procedure 12(b)(1) and 12(b)(6), together with
defendants’ Motions for Sanctions pursuant to Rule 11! of
the Federal Rules of Civil Procedure came on for hearing
before Ferdinand F. Fernandez, United States District
Judge, Judge Presiding. The moving parties were repre-

A-29

sented by J. Mark Waxman, Esq. of Weissburg and
Aronson, Ine. Plaintiff was represented by Lawrence
Silver, Esq. and Alicia G. Rosenberg, Esq.

The Court, having considered all of the pleading, files,
memoranda and documents on file herein, determined to
grant the Motion for Dismissal filed by moving parties,

and to deny the Motion for Sanctions pursuant to Rule
11.

Accordingly, it is hereby ORDERED, ADJUDGED
AND DECREED that plaintiff's Complaint against Sum-
mit Health, Ltd., Midway Hospital Medical Center, The
Medical Staff of Midway Hospital Medial Center, Mitch—
ell Feldman, August Reader, Arthur N. Lurvey, Richard
E. Posell, Jonathan I. Macy, James J. Salz, Gilbert
Perlman, Peggy Farber, Mark Kadzielski and Weissburg
and Aronson, Ine. shall be and is hereby dismissed with-
out leave to amend.

Dated: October 2. 1987

FERDINAND F. FERNANDEZ
United States District Judge

Presented by:

J. MARK WAXMAN, Esd.
WEISSBURG AND ARONSON, INC.
Attorneys for Summit Health, Ltd. et al.

A-30

CASE NO. C 699 088

SUPERIOR COURT FOR THE STATE OF
CALIFORNIA
FOR THE COUNTY OF LOS ANGELES

Simon J. Pinnas, M. D.
Petitioner
v.
Mipway Hosprral MepicaL CENTER, a California cor-
poration, AND THE MEDICAL STAFF OF Mipway Hospt-.
TAL, an unineorporated association,

Respondents.

_ JUDGMENT DENYING PREEMPTORY
WRIT OF MANDATE AND AWARDING COSTS

This matter came on regularly for hearing before the
Honorable Dzintra Janavs in Department 86 of this court
on April 14, 1989. Lawrence Silver, Esq. appeared as
attorney for Petitioner and Weissburg and Aronson, Inc.,
by Kenneth M. Stern, Esq. appeared as attorneys for
Respondent. The Court having reviewed all pleadings,
records, evidence and papers filed herein and having
heard the oral argument of counsel,

IT IS HEREBY ORDERED, ADJUDGED AND DE-
CREED THAT:

(1) Judgment herein is entered in favor of Respondent

against the Petitioner denying the Petition for Writ of
Mandate;

(2) The action is hereby dismissed with prejudice;

A-31

(3) Respondent Midway Hospital Medical Center is
awarded its costs in the amount of $

Dated: May 17, 1989

DZINTRA JANAVS

Dzintra Janavs
Judge of the Superior Court

A-32

SUPERIOR COURT OF CALIFORNIA,
COUNTY OF LOS ANGELES
DEPT. 86

Date April 20, 1989. Honorable Dzintra Janavs, Judge,
C. Hudson, Deputy Clerk.

C 699 088
SIMON J. PINHAS, M.D.
vs.
MIDWAY HOSPITAL MEDICAL CENTER,
a California corporation, ete.

RULING ON SUBMITTED MATTER

On April 14, 1989, at the hearing on petitioner's motion
for a peremptory writ of mandate this Court admitted
into evidence by reference:

1. Transeript of hearing Vols. I-IV (5/26 — 6/12/87)

2. Transeript of hearing Vols. I-IV (10/29/87 —
1/25/88)

3. Exhibits, Vol. I

4. Petitioner's Exhibit List and Exhibits attached
thereto.

5. Declaration of Lawrence Silver dated 9/19/88 at-
tached to Trial Brief dated 9/19/88. Objections are over-
ruled as no objection is addressed to a specific statement.
Objections that the “entire declaration is filled with con-
clusions, opinions and hearsay” cannot be sustained.

6. Exhibits A, B, C attached to Request to Take
Judicial Notice, ete. will be judicially noticed.

After arguments, the matter was taken under
submission.

— —

A-33

The Court now rules:

Substantial judgment test is applicable herein. Anton,
19 Cal.3d 802, has disposed of petitioner's equal protec-
tion argument. However, even if the independent judg-
ment test applied, this Court's ruling would be the same.

The Motion for a Writ of Mandamus is denied.

I. The findings as to Charge le are supported by
substantial evidence. See generally Vol. I. pp. 96-118, Vol.
II. pp. 277, 297-308, 299-300, 491-492, Vol. V. pp. 768-769,
947-962. Specific charts are mentioned at pp. 99-116, 108-
118, 297-300, 947 et seq.

Il. Due Process Issues.

The Court has carefully reviewed all of the transeripts
and documentary evidence, including portions not rele-
vant to charges under le, to determine whether peti-
tioner's contentions of unfairness of the hearing are
substantiated by the record or whether or not the hearing
was fair and comported with the requirements of due
process. The Court concludes that the hearing was fair
and did not violate Dr. Pinhas due process rights.

With respect to the specific issues raised by the peti-
tioner in this regard, the Court holds as follows:

1. Failure to produce Dr. Lurvey and Dr. Feldman:

There is no indication that these witnesses were
pereipient witnesses as to any of the events at issue.
Petitioner's offer of proof shows why their non-appear-
ance does not violate due process and is not prejudicial.
The issue here is whether or not the charge on which
petitioner was found to be guilty is supported by the
evidence. These witnesses’ motives for signing the
charges are irrelevant.

A-34

2. Witness intimidation:

The record does not show that the nurse witnesses were
threatened by Ms. Farber. Rather she provided them with
the kind of advice that the hospital apparently provides to
all prospective witnesses who might testify in a case. The
record indicates that all four witnesses did proceed to
testify on Pinhas behalf. There are no declarations by
any of them that they, in fact, testified untruthfully or
that they would have offered different testimony except
for the “threats.” =

3. The burden of proof:

Petitioner contends that he was denied due process
because the burden of proof was imposed on him. Anton
disposes of petitioner's contention, this Court agreeing
with respondent's interpretation of the case. See also Gull,

4. Petitioner's contention of unfairness because two of
his competitors sat on the judicial review committee:

Presence on the committee by these individuals was in
accordance with respondent's bylaws. Under the case law
dealing with administrative hearings, no case holds that
due process is violated in the cireumstances here. Fur-
thermore, these “competitors” ruled in Pinhas favor on
six out of seven charges, though, based on the reeord, a
different result would not be surprising if indeed the
decision makers were acting with bias.

5. Ex parte contacts, quorum, right to counsel:

The record does not show improper ei parte contacts
tainting the proceedings. Because of the pend, ug federal
lawsuit by Dr. Pinhas, it would have been ‘mpo.uble to
avoid some ez parte contacts without the Hospital hiring
additional counsel. Although it would've been preferable

A-35

to avoid all ex parte contacts, there is no indication that
petitioner's case herein was prejudiced by such contacts
as did oceur.

Less than à full board hearing of the JRC appeal is
permissible under the bylaws, which allow a quorum of
five members out of the nine. Nor was Pinhas improperly
deprived of counsel. See Anton, Gill,

6. Hearing Officer Posell

With respect to the bias of Hearing Officer Powell, the
Court's review of the transeript does not indicate that Mr.
Posell was biased towards the defendants. In fact, he
admonished the petitioner and petitioner's witnesses as
much as the respondents’. Furthermore, Mr. Powell did
not take part in the decision making and there is no
indication that anything he did resulted in prejudice to
the petitioner.

Copies of this Minute Order are mailed this date to:

Lawrence Silver, Esq.

A Law Corporation

9100 Wilshire Bivd., Ste. 360
Beverly Hills, CA 90212

Robert J. Gerst, Eaq,

Kenneth M. Stern, Esq.

Mark A. Kadzielski, Enq.
WEISSBURG & ARONSON, INC.
And Fl., Two Century Plaza

2049 Century Park East

Los Angeles, CA 90067

A-36

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

Simon J. Pinnas, M. D.
Plaintiff,
v.

Sunn Hxalru, Lrb., a corporation: Mipway Hosprra.
Mepicat CentER, a California general hospital; THE
MepIcaL Starr oF Mipway HosprraL MepicaL CENTER,
an unineorporated association; MITCHELL FELDMAN; AUGUST
Reaper; Artuur N. Lurvey; Ricnarp E. Poser;
JONATHAN I. Macy; James J. SaLz; GILBERT PERLMAN;
Peaoy FARBER; MARK KADZIELSKI;
Weisserre & ARONSON; and STATE OF CALIFORNIA BoarkDp
OF MEDICAL QUALITY ASSURANCE,

Defendants.

Case No. 87-03292 FFF (GHKx)

FIRST AMENDED COMPLAINT FOR VIOLATION OF
CONSTITUTIONAL RIGHTS AND CIVIL RIGHTS
(42 U.S.C. § 1983 and § 1985(3)); DECLARATORY
JUDGMENT AND TREBLE DAMAGES FOR
VIOLATION OF SECTION 1 OF THE SHERMAN
ANTL-TRUST ACT AND INJUNCTIVE RELIEF

DEMAND FOR JURY TRIAL
STATEMENT AS TO JURISDICTION

1. This civil action arises under the Constitution of the
United States and 42 U.S.C. § 1983, § 1955, and § 195; 2s
U.S.C. § 2201 and § 2202, and 15 U.S.C. 6 1.

2. This court has jurisdiction of the action under 2*
U.S.C. § 1331, § 1337 and § 1343, and 15 U.S.C. §4 and
§ 15.

A-37

3. The matter in controversy exceeds Ten Thousand
Dollars ($10,000), exclusive of interest and costs.

VENUE
4. Venue is proper pursuant to 28 U.S.C. §§ 1391 and
1392.
PARTIES

5. Plaintiff, Simon J. Pinhas, M.D., (Dr. Pinhas”) is
a physician and surgeon duly licensed by the defendant,
State of California, Board of Medical Quality Assurance
and has limited his practice to that of eye physician and
ophthalmological surgeon. Plaintiff presently, and at all
times stated herein, was a Board certified surgeon, having
been certified in 1982. Plaintiff has been engaged in the
practice of medicine and surgery since 1977 and as such
has engaged in interstate commerce. Until the grievances
hereinafter complained of, plaintiff was a member, in good
standing, of the defendant Medical Staff of Midway Hos-
pital. Plaintiff is a citizen of the United States and a
resident of the State of California and this judicial
district.

6. Defendant Summit Health Lid. (“Summit Health”)
is corporation authorized to do business pursuant to the
laws of the State of California and is the parent of
Midway Hospital and Medical Center. Summit Health is
engaged in interstate commerce and owns and operates
approximately 19 hospitals and 49 nursing home facilities
in California, Arizona, Colorado, Oregon, lowa, Washing-
ton, Texas and Saudi Arabia.

7. Defendant Midway Hospital Medical Center (Mid.
way Hospital”) is engaged in interstate commerce and is
a general hospital organized and existing pursuant to the

A-38

laws of the State of California and conducts its business
by providing medical facilities and medical care in Los
Angeles, California.

„ Defendant Medical Staff of defendant Midway Hos-
pital (“Medical Staff is an unincorporated association
of physicians engaged in interstate commerce practicing
medicine at Midway Hospital with its principal place of
activity located at Los Angeles, California. Defendant
Medical Staff, in a conspiracy with other defendants, has
wrongfully summarily suspended plaintiff and has com-
stitutional peer review proceeding (“Peer Review
Proceeding’) against plaintiff.

9. Mitchell Feldman (“Mr. Feldman at all times
mentioned herein was the regional vice-president of de-
fendant Summit Health, a citizen of the State of Califor-
nia, and a resident of this judicial district, and he, along
with others yet unknown to the plaintiff, has caused,
directly or indireetly, the commencement and prosecution
of the Peer Review Proceeding against plaintiff in viola-
tion of plaintiff's rights.

10. Defendant August Reader, M.D. (Dr. Reader
is a physician and surgeon duly licensed by the defen-
dant, State of California, Board of Medical Quality As-
surance and has limited his practice to that of eye
physician and ophthalmological surgeon and is competi-
tion with plaintiff Dr. Pinhas. Dr. Reader is engaged in
interstate commerce and is a member of the defendant
Medical Staff, a citizen of the State of California, and a
resident of this judicial distmet, and he, along with others
yet unknown to the plaintiff, has caused, directly or
indirectly, the commencement and prosecution of the
Peer Review Proceeding against plaintiff in violation of
plaintiff's richts.

A-39

11. Defendant Arthur Lurvey, M.D. (Dr. Lurvey“) is
a physician and surgeon duly licensed by the defendant,
State of California, Board of Medical Quality Assurance
and at all times mentioned herein was the Chief of Staff of
Midway Hospital. Dr Lurvey is engaged in interstate
commerce, is a citizen of the United States, resident of
the State of California and a resident of this judicial
district, and he, along with others yet unknown to the
plaintiff, has caused, directly or indirectly, the eommence-
ment and prosecution of the Peer Review Proceeding
against plaintiff in violation of plaintiff's rights.

12. Defendant Richard E. Posell (“Mr. Posell“) is,
and at all times herein mentioned was engaged in inter-
state commerce and was, an attorney at law, duly admit-
ted and practicing law in the State of California and is a
eitizen of the United States, resident of the State of
California and a resident of this judicial district, and has
caused. directly or indirectly, the prosecution of the Peer
Review Proceeding against plaintiff in violation of plain-
tiff's rights.

13. Defendant Jonathan I. Macy, M.D. (Dr. Macy’)
is a physician and surgeon duly licensed by the defen-
dant, State of California, Board of Medical Quality As-
surance and has limited his practice to that of eye
physician and ophthalmological surgeon and is in compe-
tition with plaintiff Dr. Pinhas. Dr Macy is engaged in
interstate commerce and is a member of the_defendant
Medical Staff, a citizen of the State of California, and a
resident of this judicial district, and he, along with others
yet unknown to the plaintiff, has caused, directly or
indirectly, the commencement and prosecution of the
Peer Review Proceeding against plaintiff in violation of
plaintiff's rights.

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14. Defendant James J. Salz, M.D. (Dr. Salz“) is a
physician and surgeon duly licensed by the defendant,
State of California, Board of Medical Quality Assurance
and has limited his practice to that of eye physician and
ophthalmological surgeon and is in competition with
plaintiff Dr. Pinhas. Dr. Salz is engaged in interstate
commerce and is a member of the defendant Medical
Staff, a citizen of the State of California, and a resident of
this judicial district, and he, along with others yet un-
known to the plaintiff, has caused, directly or indirectly,
the commencement and prosecution of the Peer Review
Proceeding against plaintiff in violation of plaintiff's
rights.

15. Defendant Gilbert Perlman, M.D. (“Dr. Perl-
man”) is a physician and surgeon duly licensed by the
defendant, State of California, Board of Medical Quality
Assurance and has limited his practice to that of eye
physician and ophthalmological surgeon and is in compe-
tition with plaintiff Dr. Pinhas. Dr. Perlman is engaged in
interstate commerce and is a member of the defendant
Medical Staff, a citizen of the State of California, and a
resident of this judicial district, has caused, directly or
indirectly, the commencement and prosecution of the
Peer Review Proceeding against plaintiff in violation of
plaintiff's rights.

16. Defendant Peggy Farber (Ms. Farber”) is em-
ployed by defendants Summit Heath and Midway Hospi-
tal in their Risk Management Section. At the direction of
her employers and others, she was charged with
(a) securing the information which was placed in the
false charges brought against Dr. Pinhas and
(h) interfering with Dr. Pinhas defense against those
charges at the Peer Review Proceedings. Ms. Farber is a

A-41

citizen of the State of California, and a resident of this
judicial district.

17. Defendant Mark A. Kadzielski (“Mr. Kadzielski“)
is a principal of defendant Weissburg & Aronson Inc.,
and at all times herein mentioned was engaged in inter-
state commerce and was, an attorney at law, duly admit-
ted and practicing law in the State of California. Mr.
Kadzielski is a citizen of the State of California, and a
resident of this judicial district, and has caused, directly
or indirectly, the commencement and prosecution of the

Peer Review Proceeding against plaintiff in violation of
plaintiff's rights.

18. Defendant Weissburg & Aronson Ine. (“W&A") is
engaged in interstate commerce and is a professional
corporation engaged in the practice of law in the State of
California and this judicial district, and has caused,
directly or indirectly, the commencement and prosecution
of the Peer Review Proceeding against plaintiff in viola-
tion of plaintiff's rights.

19. Defendant State of California, Board of Medical
Quality Assurance (“BMQA") is an agency of the State
of California created by and existing pursuant to Busi-
ness and Professions Code, § 2000 et seq. Defendant
BMQA is charged with the responsibility of enforcing,
among others, Sections 805, 805.1 and 805.5 of the Cali-
fornia Business and Profession Code as well as Section
423 et. seq. of the Health Care Quality Improvements Act
of 1986, 42 U.S.C. § 11133, et. seq.

20. Relief is sought against each and all defendants,
as well as their agents, assistants, successors, employees,
attorneys, representatives and all persons acting in con—
cert or in cooperation with them or at their direction.

A-42

FACTUAL ALLEGATIONS

21. From October, 1981 through the present, plaintiff
Dr. Pinhas, a diplomat of the American Board of Ophthal-
molugy, has been a member of the defendant Medical
Staff. As such, he has had the right to cause the admis-
sion of his patients to defendant Midway Hospital and to
use defendant Midway Hospital's facilities for the care
and treatment of his patients, ircluding, but not limited
to, the facilities to perform eye surgery. :

22. By reason of his training, experience and skill, Dr.
Pinhas holds a national and international reputation as a
specialist in corneal eye problems. He performs general
eye surgery and specifically cornea transplants, cataract
removal, and interocular lens replacements. Because of
his training, experience and skill, Dr. Pinhas is able to
perform these surgeries with a high level of success and
with few, if any, complications. One of the reasons for his
suecess is the rapidity with which he, as distinguished
from his competitiors, ean perform such surgeries. The
speed with which such surgery can be completed benefits
the patient because the exposure of cut eye tissue is
drastically reduced. Some of Dr. Pinhas’ competitors
regularly require, on the average, six times the length of
surgical time to complete the same procedures as Dr.
Pinhas. Because of his reputation, skill and successes Dr.
Pinhas has performed more surgeries than any other
ophthalmic surgeon at Midway Hospital during the rele-
vant time period.

23. Prior to February, 1986, the common practice in
Los Angeles County was to have most eye surgeries,
especially cataract extractions, performed by a primary
surgeon and a second, assistant surgeon. This practice
required by the defendant Medical Staff, the (“assistant

A-43

surgeon requirement“), significantly increased the cost of
such eye surgeries.

24. In February 1986, the administrators of Medicare,
the federal health insurance program for the elderly,
determined that assistant surgeons were not necessary in
connection with the performance of such eye surgeries
and refused, henceforth, to provide reimbursement for the
charges of any such assistant.

25. Certain ophthalmic surgeons of staff at defendant
Midway Hospital, ineluding plaintiff Dr. Pinhas, re-
quested that the defendant Medical Staff modify its
assistant surgeon requirement. Nearly all hospitals in
Southern California, except defendant Midway Hospital
and Cedars-Sinai (whose Medical Staff overlaps with that
of defendant Midway Hospital), abolished the assistant
surgeon requirement at or about the time that Medicare
made its change. The request to eliminate the assistant
surgeon requirement at Midway Hospital was denied and
remains in effect at the time of the filing of this First
Amended Complaint.

26. The consequence of the failure to make the change
was that surgeons, such as the plaintiff, would have to
compensate their competitors to be their assistants dur-
ing surgery since Medicare would no longer compensate
such assistants. Plaintiff Dr. Pinhas advised the adminis-
tration of Midway Hospital that the additional costs to
him of the Medical Staff's refusal to eliminate the as
tant surgeon requirement would be about $60,000 per
year. Dr. Pinhas, expressing a desire to keep the bulk of
his practice at defendant Midway Hospital, nonetheless
stated that he would move his practice if the assistant
surgeon requirement was not abolished.

A-44

27. On or about January 26, 1987 defendants Summit
Health and Midway Hospital, seeking to resolve the
difficulty created by defendant Medical Staff's refusal to
abolish the assistant surgeon requirement and Medicare's
refusal to reimburse for assistant surgeons. Defendant
Summit Health and Midway Hospital offered a “sham”
contract to Dr. Pinhas, a true and correct copy of this
“sham” contract is attached hereto and made a part
hereof as Exhibit “A”. The scheme provided by this
“sham” contract was to “hire” Dr. Pinhas for $36,000 per
year (later raised orally to $60,000 per year) to perform
certain services, except, Dr. Pinhas would never be called
upon to do such work. The sham contract was a vehicle
by which defendants Summit Heath and Midway Hospital
would pay Dr. Pinhas for continuing to bring patients to
Midway Hospital. When the “sham” contract was ex-
plained to Dr. Pinhas, he was told that many of the
members of the defendant Medical Staff had similar
contracts, and that the Chief of the defendant Medical
Staff, defendant Dr. Lurvey, was aware of this proposed
contract and the other sham contracts.

28. Dr. Pinhas refused to in anyway participate in
such a scheme, refused to sign the contract, and refused
to return the contract, even after defendant Dy. Lurvey,
acting on behalf of himself, defendant Summit Health,
defendant Mr. Feldman, defendant Midway Hospital and
defendant Medical Staff threatened that plaintiff's failure
to do so would cause a review of his charts and possible
Peer Review Proceedings. Nevertheless, defendants Sum-
mit Health and Midway Hospital made one monthly
payment of $5000 to Dr. Pinhas. This payment was
“hidden” in a reimbursement check to Dr. Pinhas and was
promptly recorded by Dr. Pinhas as an overpayment and
a credit against the amount of defendants Midway Hospi-
tal and Summit Health otherwise owed Dr. Pinhas.

A-45

29. By letter dated April 13, 1987 (“April 13, 1987
letter). and without prior notice or an opportunity for a
hearing, Dr. Pinhas was advised by defendants Summit
Health and Midway Hospital, through defendants
Dr. Lurvey and Mr. Feldman, that he was summarily
suspended as of that immediate date. As such, Dr. Pinhas
was deprived of all medical staff privileges, including the
right to admit his patients and to perform surgical proce-
dures. The April 13, 1987 letter stated that such action
was the result of a “medical staff review of Dr. Pinhas
medical records, with consideration as to the questions
raised regarding: indications for surgery; appropriateness
of surgica! procedures in light of patient's medical condi-
tion; adequacy of documentation in medical records: and
ongoing pattern of identified problems.” (A true and
correct copy of the April 13, 1987 letter is attached hereto
as Exhibit B and made a part hereof.)

30. By the same April 13, 1987 letter, Dr. Pinhas was
advised that the Midway Hospital Medical Executive
Committee (“Midway Executive Committee”) would con-
vene to review and consider the action within 10 days.

31. On April 20, 1987 the Midway Executive Commit-
tee met. After an initial meeting from which Dr. Pinhas
was excluded, the Executive Committee invited him into
the meeting room and requested that Dr. Pinhas make a
statement. Lacking sufficient notice, unprepared, con-
fused and without benefit of legal or fellow staff advice, he
asked what the charges were, and was told that the letter
of April 13, 1987 was self-explanatory. Thereafter,
Dr. Pinhas attempted to reply briefly.

32. By letter dated April 20, 1987, the same date of
that meeting, defendants Midway Hospital and Summit
Health notified Dr. Pinhas that the Midway Executive
Committee had upheld the summary suspension with the

A-46

recommendation to terminate his staff privileges at Mid-
way Hospital. He was also informed that the Midway
Hospital Board of Directors had coneurred with the
Midway Executive Committees recommendation. (A true
and correct copy of the April 20, 1987 letter is attached
hereto as Exhibit “C” and made a part hereof.)

33. In accordance with the Midway Hospital Medical
Staff Bylaws ( Bylaus a true and correct copy of the
relevant portions of which are attached hereto as Exhibit
“D” and made a part hereof), Dr. Pinhas requested a
hearing by the Midway Hospital Judicial Review Commit-
tee (“Judicial Review Committee”) by letter dated
April 30, 1987. (A true and correct copy of the April 30,
1987 letter is attached hereto as Exhibit E and made a
part hereof.)

34. In his April 30, 1987 letter, Dr. Pinhas made

certain proeedural and discovery requests, including the

right to be represented by retained counsel, the right to
full diselosure with sufficient particularity of all charges
against him, the right te an impartial hearing officer, and
the mght to an unbiased, unprejudiced hearing panel.

35. On May 7, 1987 Dr. Pinhas received Midway Hos-
pital’s Notice of Hearing (“May 7, 1987 Notice”) from
defendants Midway Hospital and Summit Health,
through defendant Mr. Feldman, scheduling the Judicial
Review Committee's proceedings to commence on May 12,
1987. (A true and correct copy of the May 7, 1987 Notice
is attached hereto as Exhibit F and made a part
hereof.)

36. The May 7, 1987 Notice, according to the Bylaws,
is also meant to serve the function of notifying a Respon-
dent before the Judicial Review Committee of the charges
that are being made against him. Those charges as con-

A-47

tained in the May 7, 1987 Notice were rendered in broad,
general terms. The Notice listed “specific charts” that the
Hospital contended would support those charges. But the
charts identified were not made available to Respondent
as of the date of May 7, 1987 Notice. Approximately 128
charts were identified, though some appeared to be
duplicates.

37. The May 7, 1987 Notice announced the appoint-
ment, by defendant Dr. Lurvey, ‘of the members of the
Judicial Review Committee and the appointment of the
Hearing Officer, defendant Mr. Posell. All of the physi-
cians who are included as members of the Judicial Review
Committee are dependent upon the defendants Midway
Hospital and Summit Health for their economic livelihood
and professional activities. The members of the Judicial
Review Committee, members of the defendant Medical
Staff, together with defendants Summit Health, Midway
Hospital, Dr. Lurvey, Mr. Feldman and Mr. Posell are
represented by the same counsel, defendant W&A. W&A
has represented the other defendants in connection with
the preparation of the false and unjustified charges
brought against plaintiff Dr. Pinhas.

38. The Judicial Review Committee, over the objection
of Dr. Pinhas, ineluded physicians who were and are in
direet economic and professional competition with plain-
tiff Dr. Pinhas: John Hofbauer, M.D. and Stephen Seiff,
M.D.

39. The May 7, 1987 Notice, in a summary fashion
dismissed some of Dr. Pinhas procedural and discovery
requests, and stated that the Judicial Review Committee
had unanimously voted not to permit Dr. Pinhas to be
represented by an attorney at law at the hearing.

A-48

40. On May 9, 1987, Dr. Pinhas filed his Objections to
the Notice of Hearing (“Objections”). (A true and cor-
reet copy of Dr. Pinhas Objeections is attached hereto as
Exhibit “G" and made a part hereof.)

41. In his Objections, Dr. Pinhas contended that the
May 7, 1987 Notice did not provide a reasonable quantum
of time in which he could prepare, present, and have
decided the preliminary Motions that he believed had to
be resolved — with respect to procedure and substance —
prior to the hearing of his matter. Moreover, Dr. Pinhas
argued that without more specific information, and with-
out possession and sufficient review and analysis of docu-
mentary evidence, the Judicial Review Committee
hearing, as established and scheduled, contravened his
rights under the United States and California Constitu-
tions, the laws of the State of California, and the contrac-
tual obligations imposed upon defendant Midway
Hospital and the defendant Medical Staff to fair notice
and a rational and meaningful opportunity to be heard.

42. In his Objections, Dr. Pinhas requested that the
Judicial Review Committee sustain those objections and
dismiss the Notice of Hearing as totally defective.

43. On May 12, 1987, the administration of defendants
Midway Hospital and Summit Health did not act upon
the objection, but treated it as a request for a continuance
and granted Dr. Pinhas a two week continuance,
rescheduling the Judicial Review Committee hearing for
May 26 and 27, 1987.

44. Beeause the May 7, 1987 Notice of Hearing named
defendant Mr. Posell as the Hearing Officer, on May 8,
1987, Dr. Pinhas, through his counsel Lawrence Silver,
sent Mr. Posell a letter requesting that he respond to
certain questions in order that Dr. Pinhas could deter-

A-49

mine whether to file a challenge to Mr. Posell sitting as
the Hearing Officer. (A true and correct copy of the
May 8, 1987 letter is attached hereto as Exhibit H“ and
made a part hereof.)

45. By letter (“Posell letter”) dated May 11, 1987,
Mr. Posell refused to respond to Dr. Pinhas’ request. (A
true and correct copy of the Posell letter is attached
hereto as Exhibit I“ and made a part hereof.)

46. On May 14, 1987, Dr. Pinhas, through his counsel,
filed 15 Motions with respect to procedural and discovery
issues, including Motions regarding his request for repre-
sentation by tounsel and his request that Mr. Posell
respond to certain voir dire questions in order to ascer-
tain any bias, prejudice, or interest on Mr. Posell's part.
(True and correct copies of these Motions are attached
hereto as Exhibit “J” and made a part hereof.)

47. On information, knowledge and belief, plaintiff
alleges that defendant Mr. Posell is biased and
prejudiced sgainst he and his counsel, Lawrence Silver,
and that Mr. Posell and members of the law firm of which
he is a partner, Shapiro, Posell & Close, serve as hearing
officers at the request of defendant W&A in cases where
W&A represents the hospital. There is a unity of interest
between defendants W&A and Mr. Posell. Mr. Posell and
his law firm are retained and continue to be retained as
counsel to the Hospital because Mr. Posell ensures that
Judicial Review Committees achieve the results that
W&A and the clients of W&A desire. Mr. Posell and
Shapiro, Posell & Close have an economic interest in the
outeome of the Peer Review Proceeding and had such an
economic interest at the outset because his continued
employment by defendant Summit Health, defendant
Midway Hospital, defendant W&A and defendant
Kadzielski depends upon his continued rulings in favor of

A-50

the defendant Midway Hospital's position and against
physicians who are in the same position as Dr. Pinhas.

48. On May 18, 1987, Mr. Posell wrote to Dr. Pinhas’
counsel and reiterated that the May 7, 1987 Notice ad-
vised Dr. Pinhas that the Judicial Review Committee had
unanimously voted not to permit either Dr. Pinhas or the
Medical Staff to be represented by an attorney at law at
the hearing. Mr. Posell further stated that neither the
Hearing Officer nor the Judicial Review Committee may
consider Motions or requests made “in any phase of the
hearing or appeal procedure by an attorney at law unless
the Hearing Committee, in its diseretion, permits both
sides to be represented by legal counsel.” Mr. Posell cited
Bylaw Article VIII. Seetion 2(b), stating further that Dr.
Pinhas counsel's continued participation was a violation
of that Bylaw. (A true and correct copy of Mr. Posell’s
May 18, 1987 letter is attached hereto as Exhibit K and
made a part hereof.)

49. On May 19, 1987, Dr. Pinhas’ counsel asked defen-
dant Mr. Posell to recuse himself because of bias and
prejudice and to answer three questions related to his ex
parte communications with counsel for the defendant
Midway Hospital, and for clarification of his ruling. (A
true and correct copy of the letter to Mr. Posell dated
May 19, 1987 is attached hereto as Exhibit L. and made
a part hereof.) Mr. Posell has not responded to that
letter.

50. On May 19, 1987, Dr. Pinhas, appearing in propria
persona, refiled the same 15 Motions respecting procedu-
ral and diseovery matters, specifically including: the re-
quest to be represented by counsel; the request that the
Hearing Officer respond to the voir dire questions submit-
ted to him; the request for the full disclosure with partieu-
larity of the charges against him; and the request that Dr.

A-51

Pinhas’ motions be heard and decided at a reasonable
time prior to the commencement of the hearing.

51. On May 21, 1987, defendant Mr. Posell denied
nearly all of the Motions filed by Dr. Pinhas. (A true end
correct copy of the letter from Mr. Posell dated May 21.

1987 is attached hereto as Exhibit M' and made a part
hereof.)

52. The alleged peer review hearings concerning Dr.
Pinhas commenced on May 26 and proceeded for a total
3222 Ä on Sune £2,

53. During the course of the hearings, defendants
Summit Health, Midway Hospital, the Medical Staff, Mr.
Posell, Mr. Kadzielski, W&A, Dr. Periman, Mr. Feldman,
Dr. Lurvey and Ms. Farber, engaged in conduct to de-
prive plaintiff Dr. Pinhas of a fair hearing.

54. On information, knowledge and belief, plaintiff
alleges that defendants Mr. Kadzielski and WA, di-
reetly and indireetly, had improper ex parte communica-
tions with defendant Mr. Posell.

55. On information, knowledge and belief. plaintiff
alleges that defendants Mr. Kadzielski and W&A. di-
reetly and indirectly, had improper ex parte communica-
tions with members of the Judicial Review Committee.
alleges that defendant Dr. Perlman had improper ex
parte communications with members of the Judicial Re-
view Committee.

57. On information, knowledge and belief, plaintiff
alleges that defendants Dr. Lurvey, the Medical Staff.
Summit Health, Midway Hospital had improper ex parte

A-52

communications with members of the Judicial Review
Committee.

58. On information, knowledge and belief, plaintiff
alleges that defendant Mr. Posell had improper ex parte
communications with members of the Judicial Review
Committee.

59. Defendants Summit Health, Midway Hospital,
Medical Staff and others sought to, and did in fact,
intimidate witnesses Dr. Pinhas sought to call as wit-
nesses in his defense of the case, including the threat of
initiating Peer Renew Proceedings against physicians
who might testify on behalf of Dr. Pinhas.

60. Defendants Summit Health, Midway Hospital.
Medical Staff, Ms. Farber and others sought to, and did
in fact, intimidate witnesses Dr. Pinhas sought to call as
witnesses in his defense of the case.

61. On June 1, 1987, at approximately 6:30 pm. defen-
dant Ms. Farber of Midway Hospital's Risk Management
Section approached a table in the cafetema where Manna
Nine, Barbara Aviles, Rose Pierce and Suprani Watana,
all of whom were employed by defendants Summit Health
and Midway Hospital, were sitting while they were wait-
ing te be called inte the hearing regarding Dr. Pinhas’
privileges. Ms. Farber said the following:

a. “I want te prepare you for what you are getting
yourselves into.”

b. “You dont have te de this.”

ce. “You can leave if vou want te. You will not be
persecuted or harassed if you leave.”

d. “You are on your own, the hospital will not pay
for your time.”

A-53

e. “It is going to be like a court in there. There is a

court stenographer. Everything you say will be taken
down and under oath.”

f. “You will each be called, one by one, you will not
be allowed to go in as a group.”

g. “You will be questioned in there by doctors, you
will be cross-examined.”

62. Shortly thereafter, Kay Deol, an administrator of
defendant Midway Hospital and an employee of defend-
ants Summit Health, Midway Hospital and Mr. Feldman,
came over to the table and she and defendant Ms. Farber
stayed around and hovered around the cafeteria for the
rest of the evening. (True and correct copies of the
declarations dated June 9, 1987 of Marina Nino and
Barbara Aviles are attached hereto as Exhibit N“ and
made a part hereof.)

63. Defendants Summit Health, Midway Hospital,
Medical Staff, Mr. Kadzielski, W&A, Mr. Posell, Mr.
Feldman, and Dr. Lurvey, precluded plaintiff Dr. Pinhas
from examining two important witnesses, Mr. Feldman,
the person who signed the charges against Dr. Pinhas and
Ur. Lurvey, Chief of Staff who allegedly authorized the
charges against Dr. Pinhas. Said defendants refused to
produce Mr. Feldman and Dr. Lurvey as witnesses for
cross-examination even though,

a. Mr. Feldman signed the charges,

b. Dr. Lurvey was listed in Exhibit F“, the
charges, as a witness who would appear at the hear-
ing, and

e. Dr. Pinhas and his representative repeatedly
requested that they appear at the hearing and testify
truthfully. (A true and correct copy of Dr. Pinhas

A-54

request to Dr. Lurvey and Mr. Feldman to appear
are attached hereto as Exhibit 0“ and made a part

hereof.)

64. It is ustom and practice in California that during
the peer review proceeding, even if the Judicial Review
Committee does not permit counsel to be present at the
hearing, counsel is permitted to be on the grounds of the
hospital to confer with his client during appropriate
breaks in the proceeding.

65. Defendant Mr. Posell issued an order ordering
counsel for Dr. Pinhas, who had been listed as a witness,
excluded from the Hospital grounds during any portion
of the hearing, while permitting counsel for the Hospital,
Mr. Kadzielski and/or associates of W&A, not only to
utilize hospital facilities, but also to communicate with
the proseeutor, defendant Dr. Perlman.

66. Defendant Mr. Posell acted not only as Hearing
Officer but also as counsel for defendant Midway Hospi-
tal and the Medical Staff, and ruled and continued to
rule, without legal or factual justification, adversely to
Dr. Pinhas.

67. Defendant Mr. Posell, acting as counsel for the
Medical Staff, refused to allow Dr. Pinhas to have

_ counsel.

68. Defendant Mr. Posell made rulings during the
course of the entire proceeding to frustrate and interfere
with plaintiff Dr. Pinhas ability to defend against the
charges brought against him.

69. Defendant Mr. Posell ruled that Dr. Pinhas coun-
sel's correspondence would not be answered, and yet
complied with all requests of defendants Mr. Kadzielski
and W&A.

A-55

70. Defendant Mr. Posell intentionally ordered wit-
nesses not to testify to the fact that defendant Dr. Macy
and defendant Dr. Salz, who testified adversely to Dr.
Pinhas at the hearing, also engaged in the same similar
conduet with which Dr. Pinhas was charged. Mr. Posell
precluded them from being identified by witnesses who
were prepared to identify Dr. Macy and Dr. Salz to
establish what the “standard in the community” was.
Defendant Mr. Posell declined to permit Dr. Pinhas and
his physician representative to have breaks and time to
confer. In addition, Mr. Posell issued time requirements
which were inherently unfair, and substantially
prejudiced Dr. Pinhas. Mr. Posell, on the other hand,
always considered and granted whatever requests were
made by the prosecutor defendant Dr. Perlman.

71. Defendant Mr. Posell precluded testimony and
evidence from being presented by Dr. Pinhas, and made
hostile verbal comments to Dr. Pinhas, his physician
representative and witnesses who appeared on behalf of
Dr. Pinhas on and off the record made before the Judicial
Review Committees.

72. Defendant Mr. Kadzielski and W&A retained, as
they have done in the past, the services of Lacey Short-
hand Reporting Service (“Lacey Reporters“), over whom
they seek to exercise and do exercise control by reason of
the substantial business they place with Lacey Reporters.
Dr. Pinhas needed a copy of the transcript in order to
adequately examine witnesses and prepare cross-examina-
tion. Plaintiff Dr. Pinhas, through counsel, ordered a copy
of the transeript from Lacey Reporters on an expedited
basis. Notwithstanding the order, defendant Mr. Kadziel-
ski and W&A ordered Lacey Reporters not to produce the
transeript. On the same day as defendant Mr. Kadzielski
and W&A issued their instructions to Lacey Reporters,

A-56

counsel for Dr. Pinhas inquired how the preparation of
the transcript was coming and was advised that Lacey
Reporters could not produce a transcript in any timely
fashion by which Dr. Pinhas could be able to use it for
successive hearings. Upon information, knowledge and
belief, plaintiff alleges that Lacey Reporters did so at the
request of defendants Mr. Kadzielski and W&A. A day or
so later Lacey Reporters agreed to produce the tran-
seript, but not before the date that its utility for cross-
examination would have passed and at a page rate of

$12.00 per page.

73. Defendant Mr. Posell, after he heard from other
defendants that plaintiff Dr. Pinhas, through counsel, was
trying to secure a transcript, and while the hearing was
pending, called Dr. Pinhas on the telephone. During that
telephone conversation Mr. Posell called Dr. Pinhas a liar
and threatened him by saying that Dr. Pinhas’ attempts
to get a copy of the transcript would cause him problems
in the future.

74. On June 29, 1987 Dr. Pinhas received in the mail a
document entitled “Report and Decision of the Judicial
Review Committee (“Report and Decision’) (a copy of
the Report and Decision is attached hereto as Exhibit
.

75. Upon information, knowledge and belief, plaintiff
alleges that defendant Mr. Posell drafted the purported
Report and Decision in an effort to protect defendants
Summit Health, Midway Hospital, the Medical Staff, Dr.
Lurvey, Mr. Feldman and himself from liability, and that
such report was inconsistent with the findings and deter-
minations of the Judicial Review Committee.

76. Although the alleged Report and Decision pur-
ports to bear the signature of the Chairman of the Judi-

A-57

cial Review Committee, Ellis Berkowitz, M.D.; it does not.
Plaintiff on information knowledge and belief alleges that
this alleged Report and Decision is not reflective of the
determination of that tribunal. Plaintiff on information
knowledge and belief alleges that this alleged Report and
Decision was signed by an agent of defendants Summit
Health, Midway Hospital, the Medical Staff, Mr. Feldman
and Dr. Lurvey, without the authorization of each mem-
ber of the Judicial Review Committee.

77. On July 6, 1987 the defendant Medical Staff ap-
pealed the decision of the Judicial Review Committee to
the Governing Board of defendant Midway Hospital (a
copy of the appeal of Defendant Medical Staff is attached
hereto and made a part hereof as Exhibit “Q”).

78. On July 7, 1987 Plaintiff Dr. Pinhas appealed the
purported decision of the Judicial Review Committee to
the Governing Board of the Defendant Midway Hospital
(a copy of the appeal of plaintiff Dr. Pinhas is attached
hereto as Exhibit R).

FIRST CLAIM FOR RELIEF

(For Declaratory Relief Against Defendants Summit
Health, Midway Hospital, Medical Staff, Mr. Feldman,
Dr. Lurvey and BMQA Because They are Violating the
Constitution of the United States by Enforeing and
Participating in the Enforcement of Section 805 and
805.5 of the California Business and Professions Code
and Section 423, et seq of the Health Care Quality
Improvement Act of 1986, 42 U.S.C. § 11133)

79. Plaintiff incorporates Paragraphs 1 through 78,
inclusive, above by reference as though set forth in full
herein.

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80. Defendants, and each of them, are estopped from
denying, that the actions which the defendants have
taken, and the actions which are threatened by the de-
fendants, have been done and are being done pursuant to
and under authority of the laws of the State of California
and the laws of the United States.

81. Defendants, and each of them, are estopped from
denying that they have acted, claim to act, and threaten to
continue to act, pursuant to, under the authority of, and
within the protection of:

a. Section 70703, et seq., of the California Admin-
istrative Code;

b. Section 805 of the California Business and Pro-
fessions Code;

e. Section 805.5 of the California Bus ness and
Professions Code;

d. Section 805.1 of the California Business and
Professions Code

e. Section 1094.5 of the California Code of Civil
Procedure and the case law decided thereunder,

f. Sections 1156 and 1157 of the California Evi-
denee Code;
g. Section 43.7 of the California Civi) Code;

h. Other provisions of the laws of the State of
California and the case law deeided thereunder, and

i. Seetions 423 et seq. of the Health Care Quality
Improvements Act of 1986, 42 U.S.C. § 11133, et. seq.

82. To maintain licenses, health care facilities regu-
larly must review privilege termination and restriction
procedures to assure their conformity to applicable law.

— —

liaison, to participate in the development of all hospital
poliey. Id. at (8), (9).

83. When a health care facility terminates or restricts
the privileges of a physician, it must promptly report to
the defendant BMQA all facts and circumstances that
caused the termination or restraint pursuant to Section
805 of the California Business and Professions Code,
which reads as follows:

“Califorma Business and Professions Code $805
The chief executive officer and the chief of the
medical staff, where one exists, of any health facility
licensed pursuant to Division 2 (commencing with
Section 1200), or any medical, psychological, dental
— — —Ü— enestell
society deseribed in Section 43.7 of the Civil Code, or
any health care service plan or medical care founda-

trist, or dentist is denied staff privileges, removed

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from the medical staff of the institution or if his or
her staff or membership privileges are restricted for
a cumulative total of 45 days in any calendar year for
any medical disciplinary cause or reason. The reports
shall be made within 20 working days following such
removal or restriction, shall be certified as true and
correct by the chief executive officer and the chief of
the medical staff, where one exists, and shall contain
a statement detailing the nature of the action, its
date and all of the reasons for, and circumstances
surrounding, the action. If the removal or restric-
tions is by resignation or other voluntary action that
was requested or bargained for in lieu of medical
disciplinary action, the report shall so state.

The reporting required herein shall not act as a
waiver of confidentiality of medical records and com-
mittee reports. The information reported or disclosed
shall be kept confidential except as provided in sub-

[Text truncated at 120,000 characters. The full text is on the page linked above.]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0748%3A02. Public record. Not legal advice.