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Medical Staff of Avera Marshall Regional Medical Center v. Marshall

Supreme Court of Minnesota

December 31, 2014

Medical Staff of Avera Marshall Regional Medical Center on its Own behalf and in its Representative Capacity for its Members, et al., Appellants,
v.
Avera Marshall d/b/a Avera Marshall Regional Medical Center, et al., Respondents.

Court of Appeals Office of Appellate Courts

Kathy S. Kimmel, Margo S. Struthers, Oppenheimer Wolff & Donnelly, LLP, Minneapolis, Minnesota, for appellants.

David R. Crosby, Bryant D. Tchida, Stinson Leonard Street LLP, Minneapolis, Minnesota, for respondents.

Sam Hanson, Daniel J. Supalla, Briggs and Morgan, P.A., Minneapolis, Minnesota, for amici curiae American Medical Association, American Osteopathic Association, American Academy of Family Physicians, Minnesota Academy of Family Physicians, and the Minnesota Chapter of the American Academy of Pediatrics.

David F. Herr, Michael C. McCarthy, Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota, for amici curiae Minnesota Hospital Association and American Hospital Association.

SYLLABUS

1. A medical staff that meets the criteria of Minn. Stat. § 540.157 (2012) has the capacity to sue and be sued.

2. Medical staff bylaws may be an enforceable contract between members of the medical staff and a hospital.

Reversed and remanded.

OPINION

Page, Justice.

In 2012, the governing board of respondent Avera Marshall Regional Medical Center, a nonprofit hospital in Marshall, Minnesota, announced a plan to repeal the hospital's medical staff bylaws and replace them with revised bylaws. Avera Marshall's Medical Staff, its Chief of Staff, and Chief of Staff-elect eventually commenced an action seeking, as relevant here, a declaration that the Medical Staff has standing to sue Avera Marshall and that the medical staff bylaws are an enforceable contract between Avera Marshall and the Medical Staff. The district court entered judgment for Avera Marshall and dismissed the case after concluding both that the Medical Staff lacked the capacity to sue Avera Marshall and that the medical staff bylaws do not constitute an enforceable contract between Avera Marshall and the Medical Staff. The court of appeals affirmed the district court. For the reasons discussed below, we reverse the court of appeals and remand to the district court for further proceedings.

Avera Marshall is owned and operated by Avera Health and is incorporated under the Minnesota Nonprofit Corporation Act, Minn. Stat. ch. 317A (2012). Under Avera Marshall's articles of incorporation and corporate bylaws, Avera Marshall's board of directors (the board) is vested with the general responsibility for management of Avera Marshall. The corporate bylaws require the board to "organize the physicians and appropriate other persons granted practice privileges in the hospital . . . into a medical-dental staff under medical-dental staff bylaws approved by the [board]."

Appellants include two individual physicians and Avera Marshall's Medical Staff. The medical staff is composed of practitioners, primarily physicians with admitting and clinical privileges to care for patients at the hospital. The Medical Staff is subject to medical staff bylaws originally enacted by the board in 1995. When this case commenced, appellant Dr. Steven Meister was the Chief of Staff of the Medical Staff and appellant Dr. Jane Willett was the Medical Staff's Chief of Staff-elect. Dr. Meister was the chair of the Medical Executive Committee (the MEC), a medical staff committee that acts on the Medical Staff's behalf, and Dr. Willett was a member of the MEC.

Before May 1, 2012, the medical staff bylaws provided that, in order to admit patients, a practitioner was required to be a member of the medical staff. To serve on the medical staff, a physician was required to agree to be bound by the medical staff bylaws. One of the "enumerated purposes" for the medical staff set out in the bylaws was "[t]o initiate and maintain rules, regulations and policies for the internal governance of the Medical Staff." Another enumerated purpose was "[t]o provide a means whereby issues concerning the Medical Staff and the Medical Center [could] be directly discussed by the Medical Staff with the Board of Directors and the Administration, with the understanding that the Medical Staff [was] subject to the ultimate authority of the Board of Directors."

The bylaws also gave the Medical Staff authority, "[s]ubject to the authority and approval of [the board], " to "exercise such power as is reasonably necessary to discharge its responsibilities under these bylaws and under the corporate bylaws of the Medical Center." The Medical Staff was also afforded "prerogatives, " such as attending and voting on matters presented at medical staff and committee meetings and holding medical staff office. The bylaws described these prerogatives as "general in nature" and possibly "subject to limitations by special conditions . . ., by other sections of these Medical Staff Bylaws and by the Medical Staff Rules and Regulations, subject to approval by [the board]."

Under the bylaws, the Chief of Staff, the MEC, the board, or one-third of active medical staff members could propose amendments to or repeal of medical staff bylaws. The bylaws further provided for review of proposed amendments to the bylaws, either by the MEC itself or by special committee. Section 17.2 of the bylaws specifically provided that, "for the purposes of enacting a bylaws change, the change shall require an affirmative vote of . . . two-thirds of the Members eligible to vote." Bylaws changes recommended by the Medical Staff would not become effective until approved by the board. The bylaws were silent with respect to bylaws changes proposed by the board but not recommended for approval by the Medical Staff. However, the amendment and repeal process was "subject to approval by a majority vote of [the board]" and could not "supersede the general authority of [the board] as set forth in its corporate bylaws or applicable common law or statutes."

In January 2012, the board notified the Medical Staff that the board had approved the repeal of the medical staff bylaws and that a set of revised medical staff bylaws had been approved. The notice solicited the Medical Staff's input but explained that the revised bylaws would take effect on April 1, 2012. At a medical staff meeting on January 24, 2012, Avera Marshall's CEO and President announced that, while individual members of the Medical Staff could comment on the changes, the board would not accept comments from the Medical Staff as an organized body, and the proposed changes would not be submitted to the Medical Staff for a vote.

After review, the MEC concluded that the proposed revisions to the bylaws restricted the rights of the Medical Staff, the functioning of medical-staff committees, and the Medical Staff's ability to ensure the quality of patient care. On that basis, MEC recommended that the board reject the changes. Notwithstanding the board's decision that the repeal and revision of the bylaws would not be submitted to the Medical Staff for a vote, on March 20, 2012, relying on section 17.2 of the former bylaws, the Medical Staff voted on the proposed changes and rejected both the repeal of the former bylaws and the enactment of the revised bylaws. Ultimately, the revised bylaws took effect on May 1, 2012.

Appellants filed a nine-count action against Avera Marshall, seeking a declaration that, as relevant here, the Medical Staff had standing and the capacity to sue Avera Marshall and that the former medical staff bylaws constituted a contract between Avera Marshall and the Medical Staff. Appellants also sought to enjoin Avera Marshall from repealing the former bylaws and enforcing the revised bylaws. Avera Marshall moved to dismiss the action on the basis that the Medical Staff lacked standing and the capacity to sue. The district court converted Avera Marshall's motion to dismiss into a motion for summary judgment and then granted the motion, holding that the Medical Staff did not have the capacity to sue.

The parties then brought cross motions for summary judgment on the issue of whether the former bylaws constituted a contract between Avera Marshall and the Medical Staff or were otherwise enforceable against Avera Marshall. The district court again granted summary judgment to Avera Marshall, this time determining that the former bylaws did not constitute an enforceable contract between Avera Marshall and the Medical Staff or between Avera Marshall and any individual member of the Medical Staff. The district court further concluded that Avera Marshall had the authority to modify the bylaws without approval from the Medical Staff "if [Avera] substantially complies with the procedural prerequisites contained in the Medical Staff Bylaws." According to the district court, the undisputed factual record showed Avera Marshall substantially complied with the procedural prerequisites in the former medical staff bylaws when it repealed them and enacted the revised medical staff bylaws.

The court of appeals affirmed the district court. It agreed with the district court that the Medical Staff does not have the capacity to sue under Minnesota law because, among other reasons, it is not its own "ultimate creator, " owns no property, and can "contract no indebtedness and pay no bills." Med. Staff of Avera Marshall Reg'l Med. Ctr. v. Avera Marshall, 836 N.W.2d 549, 557 (Minn.App. 2013) (citation omitted) (internal quotation marks omitted). It also held that the medical staff bylaws do not constitute an enforceable contract. Id. at 562. Because the medical staff bylaws "are not contractual, " the court of appeals concluded that Avera Marshall "has the authority to unilaterally amend the bylaws." Id.

On appeal from a grant of summary judgment, we determine whether any genuine issues of material fact exist and whether the district court erred in its application of the law. Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013). We must also construe the facts in the light most favorable to the party against whom summary judgment was granted—in this case the Medical Staff, J.E.B. v. Danks, 785 N.W.2d 741, 746 (Minn. 2010).[1]

I.

This appeal presents two primary issues: (1) whether the Medical Staff has the legal capacity to sue; and (2) whether the medical staff bylaws constitute a contract between Avera Marshall and the Medical Staff. We begin our analysis with the first issue.

The common law rule in Minnesota, established in St. Paul Typothetae v. St. Paul Bookbinders' Union, is that, "in the absence of a statute otherwise providing, " unincorporated associations "have no legal entity distinct from that of their members" and therefore lack capacity to sue or be sued. 94 Minn. 351, 357, 102 N.W. 725, 726-27 (1905). In 1946, we held that Minnesota still followed the common law rule because the Legislature had not enacted a statute conferring legal capacity to sue upon unincorporated associations. Bloom v. Am. Express Co., 222 Minn. 249, 252-53, 23 N.W.2d 570, 573 (1946). The next year, the ...


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