*1 SD MAHAN, MacDougall, James Drs. John Mayo, Holte, Mat Chester
Michael Frisco, Reynen, In and Donald
thew Aberdeen,
dividuals, and Residents of Orthopedic Dakota, and Sur
South Ltd.,
gery Specialists, A Dakota Partnership, Plaintiffs
Medical
Appellees, LUKE’S, A South Dakota
AVERA ST. Community Hospital,
Non Profit Appellant.
Defendant and 21118,
Nos. 21135.
Supreme Court of South Dakota. 26, April 2000.
Argued 26,
Reassigned 2000. Oct.
Decided Jan. 2001.
Rehearing Denied Feb. *2 of the Blessed of the Presentation
Sisters Aberdeen, South Dakota. Virgin Mary of have the Presentation Sisters Since mission statement “to fulfilling been their min- respond calling healing for a to God’s *3 health ser- istry by providing quality ... community. to the Aberdeen ASL vices” beyond its mission the Aber- expanded has to become the full- community deen a 90-mile radius of hospital within service Aberdeen. 47-23-13, required As SDCL
[¶ 3.] by a Board of Trustees governed ASL is (Board), manages its affairs. The of 15 members from Aber- Board consists communities, surrounding includ- deen and four ing five Presentation duty of the Board “[t]o Sisters. It is the objectives implement purpose and of as determined the Members [ASL] Groseclose, A. of Richard- Chester Jr. and in accordance with the State- [ASL] Sauck, son, Groseclose, Ab- Wyly, Wise & Philosophy of the Presentation ment of SD, Braman, erdeen, and Richard G. By Laws of St. Luke’s Midland Sisters.” Plant, Gray, Mooty, Darling Thomas S. Regional (Corporate By- Medical Center Bennett, MN, At- Mooty, Minneapolis, & 14(b). laws), V, Membership in art ASL torneys plaintiffs appellees. for “religious is limited to Members of the Evans, Edwin E. Melissa C. Hinton Congregation of the Sisters of the Presen- Smith, Evans, Hurwitz & Sioux Davenport, Virgin Mary of Aber- tation of the Blessed Falls, SD, Attorneys for defendant deen, Dakota.” South appellant. I, § art 3. (on GILBERTSON, reassign- Justice mid-1996, In neurosur- [¶ 4.] ASL’s ment). departure, geon left Aberdeen. After his Orthopedic Surgery Specialists passed a recruit resolution to (OSS), corporation, a Dakota and its South neurosurgeons spine-trained two or two ac- physicians, individual commenced this Dur- orthopedic surgeons to fill the void. (ASL) alleg- against tion Avera St. Lukes ing process, recruitment ASL learned ing breach of contract. The trial court neurosurgeon applicants would that most granted summary judg- motion for OSS’ coming in to Aberdeen if not be interested mandatory permanent ment and entered a already orthopedic spine sur- there was injunction filed against ASL. ASL then This due geon practicing the area. was appeal. We reverse. community and the to the small size of the neurosurgeon for the probable need AND
FACTS PROCEDURE supplement practice by perform- his or her spine surgeries. Back and private, nonprofit, gen- ing a back and [¶ 2.] ASL is performed by are also or- spine surgeries eral care located in Aber- acute deen, Dakota, thopedic spine surgeons applicants and the organized under the nonprofit Dako- were doubtful whether Aberdeen could corporation laws of South Health, of both a neurosur- part region- support ta. Avera ASL is orthopedic spine surgeon. system sponsored by geon al health and an care recruiting sion to [¶ 5.] ASL successful close the staff. Plaintiffs claimed December, neurosurgeon who arrived that the action was a breach of the medi- time, (Staff Around this ASL learned that Bylaws) cal/dental OSS, orthopedic group of Aberdeen sur- sought a permanent writ of mandamus and day surgery had build a geons, decided to injunction ordering ASL consider Ma- directly compete center that would with application han’s for privileges. During ASL. first seven months parties Both submitted cross motions surgery open, OSS’ center was suf- ASL summary judgment. After a hearing, the fered a 1000 hour operating loss of room circuit court determined that ASL had usage. breached Bylaws by the Staff closing the decision, In making staff. the circuit response operat- the loss exclusively court relied on By- income, ing passed room ASL’s Board two *4 laws. The circuit court determined that 26, motions on June 1997. The first mo- delegated significant Board had a tion medical closed ASL’s staff with re- amount of its and con- spect physicians requesting privileges (1) cerning staff privileges to the spinal procedures: for medical spinal three fu- (2) sions, staff. The circuit court reasoned that spine closed be- fractures and (3) cause of delegation, the Board laminectomies. The second motion no longer had closed applicants ASL’s medical staff to for initiate actions orthopedic surgery privileges affected the privileges except for the medical general orthopedic surgeons two re- staff. The circuit court being concluded the cruited ASL. The “closing” effect of the Board had breached its contract with the preclude any physicians staff was to medical new staff when it closed the staff to the from applying hospital procedures for named use without first consulting procedures. facilities for the named the staff. request perma- The Plaintiffs’ for a Board’s decision physi- injunction did not affect those nent granted, requiring that had already granted hospi- cians been to consider application ASL Mahan’s tal privileges, including physician- privileges. appeals raising ASL the fol- decision, members of In making lowing OSS. issues: specifically determined that the 1. Whether physi- the individual OSS staff closures were in the best interests of standing challenge cians have the Aberdeen community and the sur- Board’s decision. rounding area. 2. Whether the Board’s decision 1998, In the [¶ 7.] summer of re- OSS breached its contract with the Staff. (Mahan), spine-fellow- cruited Dr. Mahan a ship orthopedic surgeon trained engaged ANALYSIS in the orthopedic surgery. 1. Whether the individual [¶ 9.] OSS Mahan,
While recruiting OSS was one physicians standing have to chal- the OSS advised Mahan that lenge the Board’s decision. the staff at had ASL been closed to ortho- pedic surgery privileges. Despite this It [¶ 10.] is well settled South Dako warning, began Mahan practicing with hospital’s bylaws ta that “a constitute a occasions, OSS. On at least two Mahan binding hospital contract between the officially requested application an for staff staff members.” v. Read privileges with requests ASL. These were ¶66, 14, Hospital, McKennan 2000 SD 610 denied due to the July Board’s decision on 782, (citing N.W.2d 785 St. Hospital John’s 26,1997. Regional Medical v. St. John Medi Staff 1998, Center, Inc., In September 674, 679, [¶ 8.] Mahan cal 90 S.D. 245 (Plaintiffs) (1976)). 472, and OSS commenced this action 474 is also well ASL, against challenging bylaws ap- the Board’s deci- settled that when such are 154 that the properly The circuit court found accepted by governing
proved standing bring enforceable contract doctors have OSS staff they board become physicians. and its of action for breach of contract. cause between Georgia Radiological As See Northeast deci- 2. Whether the Board’s (5th [¶ 13.] 507, Tidwell, 670 F.2d v.
soc. its contract with the sion breached Cir.1982); Community Madera Janda v. (E.D.Cal. 1181, Staff. F.Supp.2d Hosp., 16 Inc. 1998); Regional Hosp., Terre Haute relationship spe- The A. [¶ 14.] (Ind.Ct. El-Issa, 470 N.E.2d Bylaws . cific terms of the App.1984). a contract Only parties to noted, Dako As such, As in the contract. rights have ta, bylaws constitute a contract between are the ones parties to the contract Read, 2000 hospital and its medical staff. of the contract. ¶ can enforcement who seek 66, 14, such, at 610 N.W.2d 785. As SD Leonard, 529 N.W.2d Leonard v. See upon to construe this case we are called (S.D.1995). staff doctors are The OSS doing that are at issue. so of the medical staff currently members principles apply we the normal for con ASL; party to the contract they are interpretation of a contract. struction *5 How and the medical staff. between ASL John’s, 245 at 475. We review St. ever, to a contract is merely being party the of a contract under the de construction standing. enough to have Read, question novo standard as a of law. “ ¶66, 22, at 786. 2000 SD 610 N.W.2d for a liti ‘Generally, 12.] [¶ bring an action standing to have gant Dakota [¶ 16.] Under South court, litigant the must ‘show
before the law, [non-profit] corpora affairs of a “[t]he actu has suffered some personally that he by a board di managed tion shall be a of the injury al or threatened as result (emphasis 47-23-13 add rectors.” SDCL defen putatively illegal conduct the ” ed). specifically, More ARSD Lottery Dakota dant.’ Parsons (S.D. Commission, hospital states that a is re 595 44:04:04:02.01 504 N.W.2d 1993) Gladstone, organized to have “a medical staff quired Realtors v. Bell (quoting wood, 91, 99, 1601, 1608, approved by 99 S.Ct. under and rules the U.S. (1979)). body In regard governing responsible gov and the 60 L.Ed.2d an erning body hospital quality staff doctors suffered the for the whether the OSS injury, court found: in provided patients the circuit of all medical care the profession and for the ethical and undisputed that the Board’s deci- practices (emphasis al members.” in benefit for its sion resulted an economic added). “possess large hardship for these These directors ASL and an economic private practice, discretionary power in medical amount of within the doctors their in undisputed legal authority, limits of their and the It is also the OSS OSS. doctors, judgment per in through their medical cor- exercise of business OSS, money of their duties.” 18B AmJur2d poration spent time and to formance Mahan, him 1486. Pursuant to its au up Corporations, recruit to end with procedures thority, delegated the Board of ASL has perform unable to certain powers ap with inability to obtain staff certain associated because of his result, pointment personnel and review of medical privileges at ASL. As a OSS designated support Mahan to its medical staff. These staff doctors have had prac- powers Bylaws. their are manifested being while unable to build Bylaws Plaintiffs now claim that the Staff patient tice or increase their base as ability of the expected. Clearly trump decision-making [the OSS] [d]octors relating any all ... Board as to decisions standing. have to, way incidentally affecting, medical Members of the Board of [t]he Trustees shall have and exercise personnel agree. do not issues. We management Corporation, of the as give The circuit court failed to follows, limitation, but not in to wit: weight sufficient to the fact that the Staff Corporate are derived from the (b) implement To purpose and ob- 14(u) XIV, Bylaws. Article section Under jectives of Corporation as deter- powers sup- any mined the Members of the Cor- posedly granted under the Staff poration and in accordance with the from, originate by, must and be authorized Philosophy Statement of of the Pre- pursuant Corporate By- sentation Sisters. laws. legal relationship Their is similar to that between statutes and a constitution.
They separate equal are not and sover- (i) To periodically goals, examine its eigns. The former derives its and policies and the current programs of Hence, authority from the latter. to de- responsible and to be granted termine whether the staff was development of a mechanism that possess, that it now claims to provides systematic review of the judicial analysis begin must with an exami- quantity quality of the services Corporate nation of Bylaws. Article provided.
V, section states that business “[t]he (j) To personnel policies ensure that the property Corporation shall practices that adequate sup- are , controlled, managed be ... port patient sound care are estab- ” addition, Board of Trustees.... lished and maintained. Corporate Bylaws provide that: corporate powers, except [a]ll such *6 (r) ... to analyze and evaluate data as herein reserved the Members2 of which the reflects communities [sic] Corporation,
the except and such as are present projected health needs in provided By otherwise for Laws these accordingly develop a written and in the laws of the State of South plan hospital’s for the growth and Dakota shall be in vested and shall be development; appropriate exercised the Members of the Board physical and financial resources and of Trustees. personnel required to meet the Id., § 13. community pa- needs of the and the tients; appropriate and to make rec- Therefore, the [¶ 18.] medical staff has respect ommendations with thereto authority no any corporate over decisions Corporation. to the Members of the specifically granted unless that Corporate Bylaws the or under the laws of
the State of (u) South Dakota. Plaintiffs have To delegate to the Medical Staff the any powers not alluded to that arise under authority to evaluate profession- the the statutory or common-law of Da- competence al of staff Members and Therefore, again kota. we return to an applicants for staff and to Corporate examination of the Bylaws. Ap- responsible hold the Medical Staff V, plicable is article pro- making section for recommendations to the vides that: Members of the Board of Trustees 1. References to article and section numbers tion. Pursuant will refer to those articles and sections in the corporation membership in the is limited to Corporate Bylaws until stated otherwise. "religious Congregation Members the Sisters of the the Presentation of Blessed noted, previously 2. As members of the medi- Aberdeen, Virgin Mary of South Dakota....” corpora- cal staff are not "members” of the community. Such result is appointments, needs of the
concerning initial staff corporate law contrary the to South Dakota assignment reappointments privileges, all sub- thus cannot be allowed to stand. curtailment of approval ject to the final made its deci- When the Board Board Trustees. Members three sion to close the medical staff 26, 1997, acting it was
procedures on June (v) development of the To ensure powers granted Corpo- it in the within the ByLaws, Rules and Medical Staff 14(r). XIV, § Bylaws. See art When rate must state the
Regulations which decisions, specifi- the Board making these which the Medical policies under cally determined that the staff closures itself, approve and to regulates Staff community’s best were the Aberdeen same, added). (emphasis interests, 24- necessary and were to insure 14(u), for the Aber- neurosurgical coverage that hour designated all Under section profitable responsibility By preserving is the deen area. to the medical staff ASL, neurosurgical to the Board re- services make recommendations unprofitable that other ser- competence of also insured professional garding in the Article vices would continue to be offered applicants. members and staff 1(a) When, here, XVI, or- area. as it is clear directs the Board to Aberdeen section by- Corporate Bylaws that the Board under medical-dental ganize staff corpora- laws, approved by authority manage has the which must be tion, authority necessarily Fi- “would in- they become effective. Board before 2(a) XVI, operate on how to individu- article section commands clude decisions nally, departments in serve the to the medical-dental al order best “assign the Board to authonty ensuring corporation’s purposes.... The cost of reasonable promotion community hospi- care to the such care and appropriate professional added). to the communi- (emphasis vitally important health is patients.” tal’s ty legitimate and a concern for board.” under ex Clearly, these Center, Bartley v. Eastern Maine Medical has the plicit powers, the Board (Me 1992). 617 A.2d ASL can- decisions without first to make business unprofitable, yet not continue to offer es- the medical staff. Nowhere consulting including maternity sential services explicitly is the staff Corporate Bylaws *7 ward, room, pediatrics and crit- emergency to decisions on authorized make business units, offsetting ical care without the finan- in corporation. Plaintiffs behalf of the profitable cial benefit of areas such more rely Bylaws on the Staff as their stead responded neurosurgery. as The Board to authority to assume the Board’s source the effect the would have on OSS Yet, power. Bylaws, even within viability the economic of ASL’s explicit provision granting is no there needs of the entire and the health care personnel medical staff control over issues. community. Aberdeen These actions were Instead, that the circuit court found surely power within the of the Board. spirit “the actions of the Board violated attempt to has the insure ASL’s a reli taken as whole.” Such such, the courts economic survival. As “spirit bylaws” of the [Staff] ance on politics in should not interfere the internal corporate up structure of ASL turns the making private, nonprofit and decision of a down, day control over granting side hospital corporation when those decisions a medical day hospital administration to pursuant Corporate By- are to its made that accountable for the legally staff is not laws. decisions, hospital’s obligation has no action, In this the circuit court further the mission of the Presentation Sisters, not an adminis- experience in determined that this was and has unknown Instead it by trative decision the Board. running hospital meeting or the medical regarding gate only “authority held this was decision to evaluate the “granting withholding privi- or professional competence [of] of staff Members ” that leges,” and the action fell “within the applicants and privileges.... for staff provisions bylaws.” of the medical staff 14(u).4 V, art The The circuit court concluded that the Board purpose of this delegation limited of au- “delegated significant had amount of its thority input was to obtain from the staff authority profes- concerning expertise. on areas of its Decisions relat- qualifications sional and staff to ing competence, training, qualifica- the medical staff.” to the cir- According tions and particular physician ethics of a court, cuit in personnel, matters of are for which matters the medical staff is only “secondary approval Board has au- uniquely qualified, while the Board admit- ...; thority originate no with actions tedly has in expertise limited those areas. view, support Board itself.”3 As for this Corporate Under the Bylaws, only it is in III, circuit court cited to article section expertise those confined areas of that the 2(a) Bylaws. of the Staff That section any authority However, staff has at all. provides as follows: Corporate Bylaws delegate do other appointments Initial reappointments duties the staff when it holds the staff to the Medical staff shall be made “responsible for making recommendations Governing Body. Governing Body The to the Members of the Board of Trustees appointments, shall act on reappoint- concerning appointments, initial staff reap- ment, appointment only or revocation of pointments and assignment or curtail- after there has been recommendation privileges.” ment of Id. Clearly, the medi- provided from the Medical as Staff gives cal staff recommendations to the Bylaws. these relating appointment Board on issues The circuit court provision also cited a However, privileges. this case is not the Credentialing support Manual to appointments about assignment or the claim that the Board essentially only has privileges. curtailment of It is about an rubber stamp authority. provision That administrative decision to close ASL’s staff states Board shall accept “[t]he either therefore, procedures, for certain the med- or reject the recommendation of the Cre- part ical staff no has the decision and ” dentials and Executive Committee.... apply. Staff do not The circuit Manual, Credentialing section 1.5-7. Final- responsibilities court has taken the ly, the circuit court proce- found that the staff in certain areas and elevated them dure for hearings appellate review was into and control over those areas. further evidence that the Board was not clearly This result was intended originate allowed to relating actions Corporate either or the Staff staff, the medical it allowed to Bylaws. appeals. Bylaws, hear Staff art VIII. *8 The of sections the Staff provisions [¶ 22.] These have been mis- upon by relied by provide the circuit court construed the circuit court. When the delegated power non-application. Board additional evidence of Ar- to the medical staff through III, the Bylaws, only applies Staff it had the au- ticle section appoint- to ments, thority corporate bylaws under the reappointments, to dele- or revocation of 3. The circuit authority responsibility, assign court further concluded that the give Board is allowed to its "seal of authority medical-dental staff reasonable approval” stages at the final of staff actions. ensuring appropriate professional care to the added). hospital’s patients.” (emphasis Clear- Another limitation on the Board’s to ly, degree authority given by the to the staff delegate authority Corporate is found in the interpretation the circuit court’s not a rea- XVI, 2(a), Bylaws, article section where it authority. sonable amount of states that "[t]he Members of the Board of shall, Trustees in the exercise of their overall the Board determined pre- quired personnel, privileges.5 As of staff
appointments
necessary to
the staff of
that it was
close
noted,
does not involve
this case
viously
procedures and ortho-
as to the three
ASL
procedure for
The
procedures.
those
the
pedic
privileges. Under
Cor-
surgery
found in article VIII
review
hearings and
reason-
Bylaws, this decision was
porate
Board
by the
if a decision
only applies
legal
has no
basis
able and this Court
practitioner’s]
adversely
[the
affect
“will
decision.
second-guess its
as a member
to or status
appointment
of clinical
or his exercise
Medical Staff
powers of man-
its broad
[¶ 25.] Within
”
VIII,
Bylaws, art
Staff
privileges....
the business decisions
agement, some of
1(a).
Board
by
action
disputed
The
undoubtedly im-
by the Board will
made
physician’s appointment
not affect
did
affect
matters that relate to or
pinge upon
All
of the staff.
as a member
or status
This fact
hospital.
staff of the
the medical
clinical
However,
that had
merely because
is unavoidable.
26, 1997,
priv-
retained those
ASL on June
of the Board affects the staff
a decision
provision in the Cre-
Finally,
authority
to over-
ileges.
give
the staff
does
ap-
only applies to the
made
dentialing Manual
business decision
rule
valid
here
is not at issue
plication process,
Allowing
the staff this amount
Board.
given
appli-
authority
effectively
was never
would
because Mahan
administrative
cannot
privileges. We
Board of ASL. ASL
cripple
governing
cation for clinical
analysis of
in its current cor-
circuit court’s
would cease to function
accept that the
porate
given
if its staff were
such
Bylaws can somehow override
form
power.
Board
authority granted to the
specific
can
Bylaws of ASL. Nor
Corporate
decision,
In
the circuit
26.]
[¶
“spirit
[Staff]
accept that
we
attempted
distinguish
between
court
usurp
can
bylaws taken as a whole”
present
this
situation and the situation
Board.
away from ASL’s
enters into an exclusive
wherein
Under
attempt
find this
to be un
contract. We
analyze
has the
An exclusive contract arises
persuasive.
present and
reflecting
data
evaluate
with an out
when the
contracts
of the Aber-
health care needs
projected
physicians,
physician
group
side
or
data,
light
of that
community.
deen
phy
hospital agrees
that the
whereby
hospi-
develop “plan
for the
Board must
physicians shall be the
group
sician or
provide
development;
growth
tal’s
to use certain facili
only personnel allowed
financial
re-
physical and
appropriate
units
hospital,
radiology
such as
ties
personnel required to meet
sources
room units. Such exclusive
emergency
pa-
community and the
the needs of the
for most
contracts are common
14(r).
V, §
Corporate Bylaws, art
uni
today,
tients.”
and have been almost
hospitals
enforceable,
that it was in the
versally
The Board determined
valid and
even
found
community
provide
corporate
for in
explicitly provided
best interests of the
if not
neurosurgical
bylaws. Lyons
services.
v. St. Vincent Health Cen
24 hour access to
(Pa.Comwlth. 1999);
ter,
ASL needed
731 A.2d
coverage,
To
Health,
orthope-
Hosp. &
neurosurgeons
two
or two
Holt v. Good Samaritan
recruit
439, 590 N.E.2d
App.3d
re-
69 Ohio
spine surgeons. To recruit
dic
III,
Staff as
ommendation from the Medical
2 of the Staff
5. Article
section
*9
Bylaws.
part:
provided
states in
in these
reappoint-
appointments
a.
Initial
shall
Appointment
c.
to the Medical Staff
be made
ments to the Medical staff shall
appointee only
such clinical
confer on
Governing
Governing Body.
by the
The
granted by
privileges
been
as have
reap-
Body
appointments,
shall act on
Governing Body,
in accordance with
appoint-
pointments, or revocation of
Bylaws.
only
been
rec-
these
[a]
ments
after there has
(1990).
Corporate
past,
In the
ASL has closed sever-
and common sense.
facility
physicians
al
grant privileges
areas
its
Are we to force ASL to
part
an
contract. Such areas
exclusive
every qualified physician
may
that
stand at
anesthesiology, radiology,
include
emer-
doorstep
and announce that he or she
care,
gency
pathology,
inter-
room
EKG
using
hospital’s
will henceforth be
fa-
pretation, pulmonary
interpreta-
function
cilities, simply
they
because the staff said
tion and cardiac catherization.
grant
pow-
could? Absent a dear
of such
er,
any corporation
the staff of
does not
Plaintiffs
allege
do not
have the kind of control that
the circuit
prior
that the
exclusive contracts entered
grant
court would
to the medical staff.
into
ASL are invalid. Neither is it
disputed
is not
that there is no such clear
that
alleged
the Board does not have the
case,
mandate in
only
“spirit
of the
authority
into
to enter
such exclusive con
bylaws
spirit
taken as a whole.” The
Yet, they
tracts.
claim that the action of
bylaws
these
cannot
override
entire
they
challenge
now
is somehow
corporate structure of ASL. The Board
logical
invalid. There
no
why
is
reason
only
delegate
authorized to
to the staff
facility
ASL could close certain areas of its
authority
reasonable
appropri-
to ensure
(via
to all
but
few
an exclusive
professional
Corporate
ate
care.
Bylaws,
contract), yet not be allowed to close its
2(a).
XVI, §
art
The result reached
any
orthopedic
facilities to
new
surgeons
circuit
gives
court
the staff an unrea-
certain,
performing
procedures.
named
authority
sonable amount of
that is viola-
sense,
has entered
implied
ASL
into an
tive of SDCL 47-23-13 and ARSD
orthope
exclusive contract with all current
impractical
44:04:04:02.01 and is
in a cor-
spine surgeons.
implicit
dic
The
au
same
porate business environment.7 Imagine
that
thority
allows the Board to enter into
the confusion and lack of clear lines of
exclusive contracts allows it to close ASL’s
management authority that would ensue at
staff as was done here.
if
the Board had
[¶
The circuit court
28.]
also conclud-
minimal amount of control over its medical
accept
ed that ASL
application
must
an
give
that the circuit court would
it.
any
wishing
doctor
to have privileges
court,
According
ASL.
to the circuit
it is
29.] B. Contractual Element of
[¶
then the responsibility of the medical staff
Faith.
Good
applicant
to decide whether the
compe-
[¶ 30.] We stated
Garrett
applicant
tent to
and whether the
BankWest, Inc.,
(S.D.
160 performance not interfere with the staffs performance faith include ampies bad of negotiated simply It made an party Bylaws. other of of the Staff depriving the contract, preventing the not to al- right economically under the reasonable decision receiving the bene- party physicians perform from to aggrieved any low additional interfering in the bargain, orthope- of the procedures fits the three named Therefore, contract. party’s performance of the any allegations other surgeries. dic 841, Id. at implied duty breached its that ASL faith must fail. good noted, previously As hospital’s bylaws binding constitute a “a Hospitals legally have de hospital and the hos contract between responsibilities and duties. See Ten fined Read, 66, members .” 2000 SD pital staff Zamora, 464, Health Ltd. v. 13 S.W.3d et ¶ 14, at 785. Because the 610 N.W.2d hospi that (Tex.App.2000)(stating 471 “[a] accepted approved Board hostery providing [sic] tal is not a mere a contract was formed between Bylaws, place and a for room board contract, medical staff. This ASL and its craft, their but institution [an Dakota, im all in contains the like independent of care to its owes duties that] and fair deal plied good covenant faith carry duty, To out this patients.”). implied covenant allows either ing. That must have the to close its Board for of contract “even party to sue breach fact, physicians. certain In doors to the conduct failed to violate though Impe nearly beyond is refute. See agreed express terms of the contract Ass’n, Inc., 862 Hosp. rial v. Suburban Garrett, parties.” 459 N.W.2d (D.Md.1993) 1390, F.Supp. (noting 1401 assume this is what the circuit 841. We “ private hospital right that ‘a has the “spirit court meant reference practicing from any physician exclude bylaws.” duty good of the But the faith therein, such exclusion rests within the Implied not limitless. Id. defini tlje managing discretion of the authori sound faith that tion of bad is the idea the actions ”); Hosp., ties.’ Hutton v. Memorial 824 unreasonable, therefore, were a breach of 61, (Colo.App.1991) that (stating P.2d 63 good the covenant of faith cannot exist nothing “requires hospital there is parties act a reasonable man when every physician grant ner. the minimum criteria set who satisfies The 32.] Board’s decision to [¶ obtaining privi forth in its for such certain, hospital’s facility close the v. Health leges.”); Sarin Samaritan Cen procedures named was a reasonable ad ter, 790, 80, Mich.App. 82 ministrative decision. It had determined (1989) (declaring that rule is well “[t]he necessary to that the closures were insure private hospital that a has a established viability hospital. the continued right any physician prac- to exclude The Board must be allowed to make such therein.”); tising Joseph [sic] Lewin St. reasonable, independent if it is to decisions Cal.Rptr. Hosp., Cal.App.3d provide comprehensive continue to medical (1978) (stating every 906-07 that “in community. services to the Aberdeen to our in which a brought case attention should also be noted that the Board did hospital’s operation facility of a on a any right abrogate for which the staff challenged, ‘closed-staff basis was the de previously negotiated. had Nor was the governing authority cision of the medical staff denied the benefit of its bar upheld.”). has been gain. rights The and benefits that addition, claiming negligent 34.] staff is now are not mentioned in [¶ impute liability can to a Bylaws, they delegated nor are act of a doctor Staff theory respondeat under a su Corporate Bylaws. the staff in the It is unless it can be shown that perior clear from the record that the Board did
lfil Therefore, independent an con tween the Board and the staff. acting as doctor § 28.8 Hospitals 40 AmJur2d tractor. judgment the circuit court’s is reversed. Behrens, Further, Shamburger in v. 380 imposition perma- a The circuit court’s of (S.D.1986) 659, we held that 665 injunction nent is likewise reversed. liability negligence attaches to separate own when it has breached its MILLER, C.J., [¶ 36.] standards, those available in the same or KONENKAMP, JJ., AMUNDSON and community hospitals general or or similar concur. ly, allowing incompetent such as a known on staff. also doctor to remain See Good JOHNSON, C.J., part [¶ 37.] concurs States, 291, 2 man v. F.3d United in part. and dissents (8thCir.1993) law). (applying South Dakota completely to first illogical It would be JOHNSON, Judge (concurring Circuit impose duty upon of reasonable care part, dissenting part) hospital, strip and then later ability implement to I majority concur with the on fulfill policies programs required to I, Issue but dissent on Issue II. duty. that ignored
[¶ 39.] ASL
the Medical Staff
Conclusion
Bylaws, which allow the active medical
concerning
vote and be heard
Because the actions of ASL’s
Instead,
bylaws.
amendments to the
ASL
Corpo-
permissible
Board were
under the
faith,
unilaterally made a business decision to
good
and done in
there
rate
breach of the contract
close the medical
orthopedic
has been no
be-
staff to new
appointment
go beyond
8. Given the fact that
to ASL
cases
the definition used in that
staff,
bylaws,
type
medical
under its
with it
of document and
of
carries
invoke some form an
event,
agency, adoption
any
of
of the circuit
elements
“economic realities" test.
In
our
Akins,
124,
legal
at
court's rationale arrives
further
diffi-
recent case of
v.
2000 SD
Setliff
Vilhauer,
54,
878,
Lucey
culties.
64 S.D.
employ-
616 N.W.2d
dealt with
which
an
203,
(S.D.1935) (overruled
N.W.
on other
dispute
ment
in a
between doctors
medical
grounds),
duty
agent
clinic,
we set forth the
an
agency principles
is instructive on
as
principal:
well. We cited
SDCL 60-2-13 which
states,
employee
who has
business
"[a]n
The law is well settled that the relation of
account,
to that
to transact on his own
similar
agent
principal
an
to his
is one of confi-
employer,
entrusted to him
his
must al-
agent
duty
dence and
It is the
trust.
ways give
preference.” We
the latter the
fur-
good
to act with the utmost
faith for the
although
ther concluded that
SDCL 60-2-13
principal
dealings
best interest
his
in all
flatly prohibit employees
pursu-
does not
concerning
affecting
subject
matter
interests,
ing
require
their own
it does
an
agency,
place
and he
must not
him-
¶
Id.,
employee
prioritize.
616 N.W.2d
self in such relations
his own interests
employee
give preference
at 887. An
must
repre-
or the interests of others whom he
employer's
his
interests over his or
business
may
antagonistic
sents
become
to those of
(citing
v. Pure Plant
her own.
Id.
Bushman
principal.
his
matters not how fair the
Intern., Ltd.,
Food
330 N.W.2d
763-64
agent may
conduct of the
have been nor
(S.D.1983)).
principal
injured.
that the
was not
part
can a doctor who is a
owner of the
How
opinion
The circuit court’s
elevates the inter-
for-profit
expected
staff,
OSS be
to fulfill his or her
agent,
as
ests of
above
interests
ASL,
duties
or her co-owners and in
towards his
principal.
clearly
as
This
violates
the same instance fulfill the duties towards
general
principles
agency
and cannot
al-
be
ASL,
profit
principal,
who is a not for
lowed.
hospital?
imply
This does not
ill-will on
employees
Whether the medical staff are also
doctor,
part
simply
presents
question.
it
faces fundamental
a difficult
Cases from oth-
results,
jurisdictions
er
arrive at
medical issues such as at which institution
different
place
patients,
employee
something
from that of
to a
does the doctor
his or her
OSS
akin
agent
corporate
independent
We
officer to that of an
or ASL?
have often stated that
applies
rule
contractor. A review of the ASL Staff
cannot serve two masters. This
professionals
does not
a definitive answer. Other
to medical
as well.
except
surgeons,
annually.
those
ASL was
least
The review shall be
*12
recruiting.
any proposed bylaw
timed so that
changes
ready
are
for submission to the medical
entirely
ASL relies almost
on
[II40.]
staff on or
the
meeting.”
before
annual
2(a)
III,
bylaws,
the
article
which
Article
further
XVI
notes:
appointments
reap-
“Initial
and
states:
any
the event that
[i]n
member of the
shall
pointments to the medical staff
be
question
medical staff has a
or disagrees
Governing Body. The
by
made
the
Govern-
proposed
with
changes
By-
the
the
appointments, reap-
ing Body shall act on
laws, ...
[d]iscussion from the floor re-
pointments,
appointments
revocation of
or
garding
changes
the
in the
and
has been a
only after there
recommenda-
may
Rules and Regulations
be conduct-
provided by
tion
medical staff as
from the
by
participate,
ed
those who desire to
reliance
Bylaws.”
these
This
is flawed.
revisions,
following which
al-
change,
or
deals with a unilateral amend-
This case
upon, (empha-
terations shall be balloted
bylaws,
prescribed
ment to
without the
the
added).
sis
staff,
approval
the medical
and not an
appointment
reappointment.
or
At no time
the Board of
did
Trustees allow
any
the
input
medical staff to have
or vote
This Court has held that “medi-
[¶ 41.]
proposed changes
bylaws
on the
to the
as
bylaws
cal staff
do constitute a contract
required.
is,
terms,
express
subject
which
to
bylaws
Article
of the
[¶ 43.]
XVII
sets
amendment when the
amendment
forth that
Bylaws together
“[t]he
with the
agreed
to
both the medical staff and
appended
Regulations
Rules and
shall be
Hosp.
medical
v.
center.” St. John’s
M.S.
adopted
any regular
special
or
meeting
C.,
674, 679,
Reg.
St. John
M.
90 S.D.
245
of the active medical staff.” This
(1976).
means
(Holding
the
bylaws
that the amendments to
cannot be
board of directors unilateral amendments
adopted unilaterally;
the active medical
bylaws
to the
staff
null and void
medical
present.9
staff must be
and
participation
approval
without the
provided in
by-
the medical staff as
The trial court found:
[¶ 44.]
laws).
principles
govern
“The
whole,
reading
bylaws,
as a
[i]n
govern
construction of contracts also
bylaws
Court concluded that
con-
interpretation
corpo-
construction and
template
applications
taking
any
Johnson,
bylaws.”
rate
State v.
Wis.2d
doctor
privi-
who wishes to have staff
624, 626,
(1963).
124 N.W.2d
As
leges
bylaws
at ASL. The
do not contain
such, “where the terms of a contract are
any
may
restrictions as to who
apply,
plain
unambiguous,
duty
and
of the
they
put
professional
logistical
stands,
court is
it as it
giving
to construe
qualifications on who can
accepted
be
plain meaning
language
effect to the
qualifications
These
on
center
staff.
used.” Id.
a physician’s competence
hand,
In the case at
the follow-
availability
medicine and his or her
to be
by-
ing language
hospital. They bylaws
article XVI of ASL’s
at the
do not
to the
clearly delegates
laws
active medical
for restrictions of staff for
power
and be heard
Any
interpretation
vote
when
other reason.
other
proposed
there
would
contrary
are
amendments
lead to
result
whole,
bylaws:
Bylaws,
Regula-
spirit
bylaws
“The
Rules and
taken as a
(emphasis
tions Committee shall review these
in original).
alter,
Clearly
repeal
bylaws
adopt
under articles XVI and XVII of the
amend or
or
bylaws
given
bylaws
the board of
have
directors
new
shall be vested in the board of
alter,
provided
active medical staff
amend or
directors
in the arti-
unless otherwise
repeal
adopt
bylaws.
bylaws.’’ (empha-
incoiporation
new
See
cles
added).
provides:
SDCL 47-22-33 which
"The
sis
in this conclu-
is no flaw
There
restrictions on place did restrictions privileges, but COMPANY, This COMBINED INSURANCE accepted to the staff. may who be members, Appellee. Defendant as it to the staff benefit to their to recruit allowed them No. 21291. *13 the new exception clinics with Supreme Court South Dakota. (to receive staff privileges doctors would full within 90 service Sept. Argued Aberdeen) they profes- if met the miles of 17, 2001. Decided Jan. of the geographic requirements sional and bylaws. staff unilaterally denied 46.] ASL
[¶ by blatantly ig- members
benefit to staff provisions of the
noring the amendment “Every contract contains an bylaws.
staff and fair good covenant of faith
implied contracting
dealing prohibits either injuring the oth-
party preventing agreed party’s right
er to receive the bene- BankWest, of the contract.” Garrett
fits (S.D.1990). partial ASL’s staff, orthopedic strictly for
closure reasonable, reasons, was not
economic faith, and was a breach of contract. good may sue for breach of con- party
Either though the conduct failed to
tract “even express terms of
violate parties.” Id. at agreed
contract issuing correct in
841. The trial court was injunction requiring ASL to permanent application Dr. Mahan with privileges. Accordingly, I would affirm the
circuit court on Issue II. JOHNSON, C.J., sitting for
SABERS, J., disqualified.