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Sherr v. HealthEast Care System

United States District Court, D. Minnesota

June 30, 2017

Dr. Gregory Sherr, Plaintiff,
v.
HealthEast Care System, CentraCare Health, Dr. Margaret Wallenfriedman, Dr. Mary Beth Dun Dr. Richard Gregory, Dr. Stephen Kolar, Dr. Jerone D. Kennedy, and Archie Defillo, Defendants.

          Lawrence P. Schaefer, Esq., and Peter Christian, Esq., Schaefer Halleen, LLC, Minneapolis, MN, on behalf of Plaintiff.

          Daniel Falknor, Esq., and William R. Stoeri, Esq., Dorsey & Whitney LLP, Minneapolis, MN, on behalf of Defendants HealthEast Care System, Dr. Margaret Wallenfriedman, Dr. Mary Beth Dunn, Dr. Richard Gregory, and Dr. Stephen Kolar.

          John L. Greer, Esq., Hughes Mathews Greer, P.A., St. Cloud, MN, on behalf of Defendants CentraCare Health, Dr. Jerone D. Kennedy, and Archie Defillo.

          MEMORANDUM OPINION AND ORDER

          ANN D. MONTGOMERY, U.S. DISTRICT JUDGE

         I. INTRODUCTION

         On April 11, 2017, the undersigned United States District Judge heard oral argument on Defendants HealthEast Care System (“HealthEast”), Dr. Margaret Wallenfriedman (“Dr. Wallenfriedman”), Dr. Mary Beth Dunn (“Dr. Dunn”), Dr. Richard Gregory (“Dr. Gregory”), and Dr. Stephen Kolar's (“Dr. Kolar”) (collectively, the “HealthEast Defendants”) Motion for Partial Judgment on the Pleadings [Docket No. 24] and Defendants CentraCare Health (“CentraCare”), Dr. Jerone D. Kennedy (“Dr. Kennedy”), and Archie Defillo's (“Defillo”) (collectively, the “CentraCare Defendants”) Motion for Judgment on the Pleadings [Docket No. 28]. Plaintiff Dr. Gregory Sherr (“Dr. Sherr”) opposes the Motions. For the reasons discussed below, the Motions are granted.

         II. BACKGROUND[1]

         Dr. Sherr, a neurosurgeon, alleges that Defendants conspired to eliminate him as a competitor for neurosurgery patients in both the Minneapolis-St. Paul, Minnesota (“Twin Cities”) and the St. Cloud, Minnesota markets. First Am. Compl. (“FAC”) [Docket No. 15] ¶ 3. Dr. Sherr alleges that Defendants colluded to initiate complaints against him during HealthEast's physician peer review process and improperly secured a summary suspension of his privileges at St. Joseph's Hospital (“SJH”), a HealthEast hospital in St. Paul. Id. ¶¶ 3, 8, 47, 54, 68, 73. Within days of the summary suspension, Defendants allegedly spread word to the tight-knit neurosurgery community of Sherr's suspension, destroying his reputation in Minnesota and forcing him to move to another state to continue his career. Id. ¶¶ 4, 76, 77, 82-83.

         Dr. Sherr asserts the following claims: breach of peer review confidentiality under Minn. Stat. § 145.64; common law invasion of privacy; defamation; tortious interference with prospective economic advantage; tortious interference with contract; and violation of federal and state antitrust statutes. Defendants move for judgment on the pleadings as to the breach of peer review confidentiality claim, the invasion of privacy claim, and all antitrust claims. The remaining claims survive.

         A. Parties

         1. Plaintiff

         Dr. Sherr is a Florida resident and licensed neurosurgeon specializing in treating high-risk patients with poor self-care histories. FAC ¶¶ 19, 25.

         2. HealthEast Defendants

         HealthEast is a non-profit health care provider and hospital management company headquartered in St. Paul, Minnesota. Id. ¶ 8. HealthEast owns four hospitals including SJH. Id. Drs. Wallenfriedman, Dunn, and Gregory are Minnesota residents and licensed neurosurgeons employed at HealthEast. Id. ¶¶ 10-12. Dr. Kolar is a Minnesota resident and licensed internal medicine physician who served as HealthEast's Senior Vice President and Chief Medical Officer in 2015. Id. ¶ 13.

         3. CentraCare Defendants

         CentraCare is a non-profit health care provider headquartered in St. Cloud, Minnesota with locations throughout central Minnesota. Id. ¶ 9. CentraCare owns and operates six hospitals including Saint Cloud Hospital (“SCH”). Id. Dr. Kennedy is a Minnesota resident and licensed neurosurgeon employed at CentraCare. Id. ¶ 14. Defillo is Minnesota resident and an administrator at CentraCare. Id. ¶ 15. He serves as the Clinical Director of Neurosciences at SCH. Id.

         B. Factual Background

         1. Dr. Sherr Begins Neurosurgery Career

         Dr. Sherr graduated from medical school in 2004, completed a neurosurgery fellowship and residency in 2010, and joined Central Minnesota Neurosciences (“CMN”), an independent neurosurgery practice serving patients in the St. Cloud area, in 2011. Id. ¶¶ 19-20. He was granted privileges to practice as an attending physician SCH in St. Cloud and at SJH in St. Paul. Id. ¶ 20. Dr. Sherr remained with CMN until late December 2014, when CMN was purchased by CentraCare. Id. ¶¶ 23-24.

         2. Dr. Sherr Joins Minnesota Spine & Brain Institute and Opens St. Cloud Clinic

         In January 2015, Dr. Sherr joined the Midwest Spine & Brain Institute (“MSBI”), which was known as the Midwest Spine Institute until Dr. Sherr was hired and the practice was expanded to include cranial neurosurgery. Id. ¶¶ 26-27. At the time Dr. Sherr was hired, MSBI operated clinics in Apple Valley, Burnsville, Elk River, Golden Valley, Maple Grove, Maplewood, Minnetonka, Princeton, and St. Anthony, Minnesota as well as in New Richmond and St. Croix Falls, Wisconsin. Id. ¶ 28.

         Upon joining MSBI, Dr. Sherr opened a MSBI neurosurgery clinic in St. Cloud, two blocks away from SCH. Id. ¶ 37. He staffed the St. Cloud clinic with his former administrative team from CMN and added a neurosurgeon, Dr. David Chang. Id. ¶¶ 35, 37, 39. The group was well connected and familiar with the patient base and referral sources in the St. Cloud area, and the clinic was soon operating very successfully. Id. ¶ 37.

         During the 15 months that Dr. Sherr practiced with MSBI, he maintained privileges at numerous hospitals, including SCH in St. Cloud and SJH, Fairview Southdale, North Memorial Medical Center, and United Hospital in the Twin Cities. Id. ¶ 29. He performed approximately 500 surgical cases during this time period, including approximately 140 surgeries at SJH. Id. ¶ 30. The majority of the surgeries were complex reconstructive spine surgeries, often for low income, high-risk patients struggling with obesity, poor health habits, or other conditions such as diabetes. Id.

         3. Dr. Sherr and MSBI Compete with CentraCare, HealthEast

         Dr. Sherr alleges that the opening of the MSBI St. Cloud clinic posed a significant threat to CentraCare and its ability to attract neurosurgery patients at SCH. Id. ¶ 39. According to Dr. Sherr, Dr. Kennedy and Defillo were “deeply disturbed by the establishment of the successful MSBI Neurosurgery Clinic two blocks from SCH, which was dramatically affecting revenues for neurosurgery practice at SCH.” Id. ¶ 44. Dr. Sherr also alleges that MSBI's addition of Drs. Sherr and Chang to its neurosurgery staff threatened HealthEast's ability to attract and retain the majority of neurosurgery patients who were treated at SJH in St. Paul. Id. ¶ 39.

         In February 2015, Drs. Wallenfriedman, Dunn, and Gregory moved their neurosurgery practice from United Hospital, where they had practiced together for more than ten years, to HealthEast, where they became known as the “HealthEast Neuro Group.” Id. ¶¶ 33, 41-42. In negotiating this transition, the group initially stated that they would not move their practice to HealthEast unless HealthEast discontinued all use of MSBI physicians for neurosurgery and spine care and removed any MSBI clinic presence from HealthEast. Id. ¶ 42. HealthEast executives denied this request but asked MSBI to agree that MSBI physicians would no longer be “on call” in the SJH and St. Joseph's emergency rooms for neuro or spine cases. Id. ¶ 43. HealthEast also asked MSBI to agree that MSBI physicians would not perform “elective procedures” at HealthEast facilities, but MSBI refused. Id. Although Drs. Wallenfriedman, Dunn, and Gregory were unable to get HealthEast to agree to all of their demands, the group joined HealthEast based on assurances that HealthEast would not make neurosurgery referrals to MSBI. Id.

         4. Defendants Allegedly Conspire to Eliminate Dr. Sherr and MSBI as Competitors

         Soon after joining HealthEast, the HealthEast Neuro Group “began a concerted attack . . . to eliminate MSBI neurosurgeons from practicing at HealthEast.” Id. ¶ 44. Dr. Sherr alleges “[u]pon information and belief” that the HealthEast Neuro Group “enlisted the participation of [CentraCare's] Dr. Kennedy and Defillo in this plan, as these physicians shared the goal of eliminating Dr. Sherr and MSBI as competitors.” Id. “Upon information and belief, ” Dr. Sherr asserts that Dr. Kennedy and the physicians in the HealthEast Neuro Group were “close friends” because Dr. Kennedy had practiced at United Hospital with them for ten years until Dr. Kennedy's resignation from United Hospital in 2012. Id. ¶ 33.

         Dr. Sherr alleges that Dr. Kennedy and Defillo “made no attempt to hide their disdain for Dr. Sherr and MSBI, their anger over his clinic, or their intent to destroy his practice.” Id. ¶ 46. For example, shortly after MSBI's St. Cloud clinic opened, Dr. Sherr was informed by physicians in the St. Cloud area that Defillo had threatened them “by stating that if they continued to refer patients to Dr. Sherr at the MSBI clinic, Defillo would ensure their SCH practice would suffer. Defillo informed one such physician that he would be denied ‘block time' to follow up with his patients at SCH, which would essentially preclude him from practicing at SCH.” Id. ¶ 45. The HealthEast Neuro Group similarly expressed their disdain for Dr. Sherr by regularly complaining to SJH operating room nurses about the significant block time Dr. Sherr's surgery practice consumed on the SJH operating room calendar. Id. ¶ 48.

         Dr. Sherr alleges “[u]pon information and belief” that “Defillo and Dr. Kennedy began to communicate, orally and in writing, with the HealthEast Neuro Group and other individuals in the neurosurgeon [sic] community, specifically about the shared desire to force ...


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