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holding that a Rule 12(b) dismissal for failure to state a claim "is a resolution on the merits and is ordinarily prejudicial"
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No. 91-7078.
Argued February 7, 1992.
Decided March 31, 1992.
James Chandler, with whom William T. Underwood was on the brief, for appellant.
Thomas A. Guidoboni, for appellees.
Appeal from the United States District Court for the District of Columbia (Civil Action No. 90-00800).
Before BUCKLEY, D.H. GINSBURG, and SENTELLE, Circuit Judges.
Opinion for the Court filed by Circuit Judge D.H. GINSBURG.
Separate opinion filed by Circuit Judge SENTELLE.
Dr. Taiwo Okusami brought this suit in diversity against a hospital (the Psychiatric Institute of Washington, Inc. or PIW), its medical director (Dr. Howard Hoffman), and two affiliated corporations over their handling of his application for admitting privileges at, and appointment to the medical staff of, the hospital. The district court, after having repeatedly allowed the plaintiff to amend his complaint, ultimately dismissed the case, with prejudice, for failure to state a claim upon which relief could be granted.
Taking the facts alleged in the complaint as true, see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957), we affirm the judgment of the district court with respect to the counts alleging violations of the antitrust laws, intentional infliction of emotional distress, denial of "statutory due process," and conspiracy. We remand the remaining counts, alleging negligence and tortious interference with the plaintiff's business relationships, to the district court for further proceedings.
I. THE ALLEGATIONS IN THE COMPLAINT
Dr. Okusami is certified to practice medicine in the District of Columbia. The PIW is a psychiatric hospital located in the District; defendant Hoffman is the president and medical director of the PIW, and the two other corporate defendants are each said to be "the parent company of PIW."
In February 1987 the plaintiff applied for "admitting privileges and membership" with the PIW and was routinely granted those emoluments on a temporary basis "while his application was being reviewed and considered." In August 1987 the acting medical director of the PIW notified the plaintiff that because of questions raised about his care of two patients and because of his refusal to answer questions concerning a third patient, his temporary admitting privileges could be continued only under supervision. The "[p]laintiff protested this conclusion, stating, inter alia, that he had not been subject to the standard peer review process of being able to have his case presented and reviewed before a committee of his peers. . . ." The defendants rejected the plaintiff's request that they proceed pursuant to "the established peer review process . . . and immediately revoked [the p]laintiff's temporary privileges." As a result, the "[p]laintiff's employment as a physician with [a health maintenance organization]" was terminated, causing him financial, physical, and emotional distress.
In taking these steps against him, the defendants "neglected to use the appropriate and mandatory procedures" set out "by PIW's own bylaws, rules, and regulations." The defendants "applied the peer review process discriminatorily" to the plaintiff, in contrast to his predecessor, and did so "in order to punish him for his prior refusal to use hospital resources that would generate additional revenues and profits for the hospital, even though use of these hospital resources had no direct contribution to proper patient care under him."
Finally, in August 1988 the plaintiff inquired of the defendant Dr. Hoffman, the PIW's medical director, about the status of his 1987 application for admitting privileges and membership at the PIW. After initially taking the position that the plaintiff would have to file a new application, Dr. Hoffman agreed that the original application would be reviewed by the PIW's Executive Committee. In April 1989, that Committee recommended that the plaintiff's application be approved subject to the condition that each of his cases "be closely reviewed by members of [the PIW's] Patient Care Evaluation Committee." The plaintiff protested this "unusual and irregular requirement" and "requested a 'fair hearing' as provided under the Fair Hearing Plan of the PIW bylaws." The defendants declined to grant such a hearing but in June 1989 nonetheless approved the plaintiff's application without the disputed condition.
II. ANALYSIS
For clarity of exposition, we group the plaintiff's claims into two categories: antitrust and tort.
A. The Antitrust Claims
Upon the basis of the foregoing factual allegations, without more, the plaintiff charges the defendants with "Violation of Antitrust Laws in Restraint of Trade" and "Conspiracy to Violate the Federal Antitrust Laws." The defendants counter that the antitrust counts do not state a claim for relief because the complaint fails to allege (1) an "antitrust injury," that is, an injury caused by a lessening of competition; (2) an effect on interstate commerce; and (3) a cognizable conspiracy. The last point is made on the strength of Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 777, 104 S.Ct. 2731, 2744, 81 L.Ed.2d 628 (1984), in which the Supreme Court overruled prior cases approving the "bathtub conspiracy" theory of antitrust liability, and held that a corporation "and its wholly owned subsidiary . . . are incapable of conspiring with each other for purposes of § 1 of the Sherman Act." See also id. at 769, 104 S.Ct. at 2741 ("officers or employees of the same firm do not provide the plurality of actors imperative for a § 1 conspiracy") and at 770 n. 15, 104 S.Ct. at 2741 n. 15 ("corporations cannot conspire with their own officers").
The plaintiff argues on brief that his complaint is sufficient because, under Summit Health, Ltd. v. Pinhas, ___ U.S. ___, 111 S.Ct. 1842, 114 L.Ed.2d 366 (1991), "an alleged restraint on his provision of psychiatric services accomplished by an alleged misuse of a congressionally regulated peer review process" establishes both (1) the lessening of competition and (2) the interstate commerce elements of a cause of action under § 1 of the Sherman Act. But see Stephen Calkins, The 1990-91 Supreme Court Term and Antitrust: Toward Greater Certainty, 60 Antitrust L.J. 603, 604 (1992) (" Summit Health majority opinion is subject to conflicting interpretations, and failed to resolve the tensions and correct the misunderstandings that underlie the interstate commerce requirement").
With regard to the conspiracy element of the cause, we note as a preliminary matter that the complaint does not on its face allege any agreement among the defendants. By attributing form and intention to the indistinct figures discernible through the fog that is the complaint, one with a particularly vivid imagination might think he sees there portrayed a conspiracy among the defendants — the PIW, its two corporate parents, and Dr. Hoffman, "the President and Medical Director for The [PIW]." Even if such an agreement be assumed, however, Copperweld, which reasons that two entities (whether a corporation and an individual or two corporations) cannot conspire under § 1 of the Sherman Act if they "have a complete unity of interest," 467 U.S. at 771, 104 S.Ct. at 2741, would seem clearly to preclude finding a conspiracy among this group.
The plaintiff stakes his all upon the proposition that, notwithstanding Copperweld, "a hospital and the members of staff are . . . capable of conspiring with one another" under the Sherman Act. Compare Bolt v. Halifax Hosp. Medical Center, 851 F.2d 1273, 1280 (11th Cir. 1988) ("A hospital and the members of its medical staff, in contrast to a corporation and its agents, are legally separate entities, and consequently there is no similar danger that what is in fact unilateral activity will be bootstrapped into a 'conspiracy'") and Oltz v. St. Peter's Community Hosp., 861 F.2d 1440, 1450 (9th Cir. 1988) (finding the interests of the doctors and hospital involved to be "sufficiently independent so that the collaborated conduct between [them] coalesced economic power previously directed at disparate goals") with Weiss v. York Hosp., 745 F.2d 786, 814-15 (3d Cir. 1984) ("We . . . agree . . . that the hospital cannot legally conspire with its medical staff") and Potters Medical Center v. City Hosp. Ass'n, 800 F.2d 568, 573 (6th Cir. 1986) ("Because [the defendant doctors] are officers and agents of [the defendant hospital], they thus lack the capacity to conspire with [the defendant hospital]"). The whole of the plaintiff's theory, as applied to the defendants before us, is that although Dr. Hoffman "may have been the agent for Defendant PIW for some purposes, their interests are not as wed as the ties between a corporation and its officers or employees"; because their economic interests diverge, that is, they are to be regarded in law as independent actors who are capable of conspiring.
Interesting as these issues are, we need not resolve any of them today. Even assuming that a hospital and its staff may in some circumstances conspire under the Sherman Act, we have no basis upon which to say that a hospital and its medical staff necessarily have divergent interests, nor do we read any of the relevant cases to say as much. Failing that, we have searched the complaint in vain for any allegation whatsoever to the effect that Dr. Hoffman's interests in particular differ from those of the corporate co-defendants. There is no allegation that he himself practices medicine at all, or indeed that he has any economic interest independent of that of the PIW. We can hardly assume that, simply because he is entitled to be called "doctor," his interests somehow diverge from those of the corporation of which he is president and align him with other, unspecified doctors in a conspiracy to suppress the plaintiff's competition in the provision of psychiatric services. If anything, the allegation that the defendants were motivated "to punish [the plaintiff] for his prior refusal to use [additional] hospital resources" surely suggests that Dr. Hoffman's interests were in harmony with those of the corporate defendants. (The plaintiff might have argued that the unity of economic interest between Dr. Hoffman and the PIW is an affirmative defense, which need not be anticipated in the complaint. The plaintiff made no such argument, however, and we take the case as we find it — with the issues as framed by the parties.)
Without Dr. Hoffman's complicity, moreover, there can be no conspiracy at all, as the parent and subsidiary corporate defendants cannot alone constitute a conspiracy in light of Copperweld. Accordingly, the plaintiff's antitrust claims, lacking the essential element of an agreement, were properly dismissed for failure to state a claim upon which relief could be granted. So too his statutory due process claim, which the appellant conceded at oral argument depends entirely upon the viability of the antitrust claims.
The appellant also argues that even if the antitrust claims were properly dismissed, they should not have been dismissed with prejudice: Dismissal based upon Rules 8(a)(2) and 41(b), he points out, is "a harsh sanction which should be resorted to only in extreme cases." But the district court dismissed for "fail[ure] to state a claim upon which relief can be granted." A dismissal on that ground, pursuant to Rule 12(b)(6), is a resolution on the merits and is ordinarily prejudicial. The appellant does not argue otherwise; he merely misreads the district court as having proceeded under the earlier-cited rules. Proceeding as it does from an erroneous premise, his argument against prejudice attaching is beside the point.
B. The Tort Claims.
Negligence. The plaintiff's claim for negligence depends upon the proposition that the PIW bylaws impose upon the defendants a duty to afford him certain procedural rights. The district court dismissed this count for failure to state a claim upon which relief can be granted, but did not specifically identify the deficiency in the pleading. The defendants assert that plaintiff "failed either to plead or to incorporate those bylaws" into his complaint, and thus "fail[ed] to identify what duty was breached, and . . . how the breach, if any, injured" him.
We part company with the defendants at the threshold of this argument; in our view the bylaws are adequately incorporated into the complaint. The complaint itself is replete with references to them. See, e.g., paragraphs 10 ("Defendants' own bylaws, rules and regulations"), 16 (specific description of peer review process), and 18 (defendants "neglected to use the appropriate and mandatory procedures outlined in the bylaws"), and Appendix II, which consists of a section of the bylaws entitled "Fair Hearing Plan." Although the origin of the Appendix was not identified, the defendants could hardly have failed to recognize their own bylaws. Hence, the complaint is sufficient "to give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests." Sinclair v. Kleindienst, 711 F.2d 291, 293 (D.C. Cir. 1983).
Tortious interference. The district court also dismissed the claim for "tortious interference with plaintiff-physician's business relationship with his patients," pursuant to Rule 12(b)(6), again without specifying the deficiency. The defendants support the district court's decision on the ground that the plaintiff did not allege "[a]n intent to interfere by defendant." Not so. See paragraph 19 ("Defendants purposefully applied the peer review process discriminatorily to him to interfere with his function as a physician"); see also paragraph 30 ("Defendants' failure to afford him the process and protections encompassed in its bylaws amounted to arbitrary, capricious, and otherwise discriminatory conduct . . . against him as a physician, and thus tortiously interfered with Plaintiff's business relationship with his patients"). We therefore hold that the claim for tortious interference, like the claim for negligence, is adequately pled.
Civil conspiracy. The complaint alleges that the defendants engaged in a civil conspiracy to act negligently. "[I]n the District of Columbia a conspiracy requires: an agreement to do an unlawful act or a lawful act in an unlawful manner; an overt act in furtherance of the agreement by someone participating in it; and injury caused by the act." Halberstam v. Welch, 705 F.2d 472, 487 (D.C. Cir. 1983). Thus, in order to state a cause of action, the plaintiff need only allege, in addition to negligence, an agreement to take part in the negligent conduct.
As we noted in connection with the antitrust claims, however, the complaint alleges no agreement of any kind. Assuming that an agreement could be inferred from the facts that are alleged, moreover, the plaintiff does not explain how a single entity — the PIW, one of its officers, and two parent corporations — may be liable for civil conspiracy. See, e.g., Michelin v. Jenkins, 704 F.Supp. 1, 4 (D.D.C. 1989) ("there can be no conspiracy between the District of Columbia Board of Education and its officials . . ., since these defendants comprise a single entity, not capable of entering into a conspiracy"); cf. Copperweld, 467 U.S. at 777, 104 S.Ct. at 2744 (corporation and wholly owned subsidiary cannot conspire under § 1 of the Sherman Act). The dismissal of the civil conspiracy claim is therefore affirmed.
Intentional distress. The plaintiff also asserts that the defendants intentionally inflicted mental, emotional, and physical distress upon him. In the absence of physical injury, "extreme and outrageous" conduct is a necessary element of this tort. See Abourezk v. New York Airlines, Inc., 895 F.2d 1456, 1458 (D.C. Cir. 1990). Because no such conduct has been alleged, we affirm the court's dismissal of this claim.
III. CONCLUSION
For the foregoing reasons, the judgment of the district court is affirmed in part and reversed in part. The plaintiff's claims for negligence and for tortious interference with his business relationships are remanded to that court for further proceedings.
So ordered.
I concur in my colleagues' affirmance of the dismissal of the counts alleging violations of the antitrust laws, intentional infliction of emotional distress, denial of "statutory due process," and conspiracy. I dissent from my colleagues' reversal of the dismissal of the counts of negligence and tortious interference.
At the outset, I wish to set forth a complete procedural history of the case at the district level in order to allay any fear the reader might harbor that the District Court failed to provide the plaintiff with the liberal standard of construction contemplated by the Federal Rules.See 5A WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE, § 1356, at 296-98. Plaintiff filed this action in the District Court on April 6, 1990. The defendants moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief could be granted. Dr. Okusami filed an amended complaint, virtually identical to the original, on June 5, 1990. Defendants again moved to dismiss for lack of jurisdiction and failure to state a claim. On June 21, 1990, Dr. Okusami filed a "Second Amended Complaint" which purported to add a party and drop a party, apparently intending to cure a lack of diversity. Defendants again moved to dismiss on the same grounds. In addition, the defendants sought dismissal because plaintiff had failed to obtain leave of court to file this second amended complaint. Dr. Okusami then filed a motion for leave to file a second amended complaint. On October 23, 1990, the District Court entered a Memorandum and Order stating, inter alia:
The compilation of this complete procedural history was hampered somewhat by the woefully incomplete appendix filed by appellant in this Court. The appendix contains neither the "relevant docket entries in the proceeding below" required by Fed.R.App.P. 30(a), nor any of the pleadings preceding the fifth attempt at the complaint.
Despite three attempts at stating a viable claim for relief — plaintiff has tendered a "second amended complaint" for filing — and the multiple theories of recovery he advances, he has yet to allege any facts tending to show that the hospital was not entirely within its rights in insisting upon supervision of his patient care, in refusing him any formal peer review as a condition precedent to supervision, and in terminating his temporary admitting privileges when he refused to submit to supervision. Absent any such allegations of fact, his general conclusory allegations of wrongdoing are insufficient as a matter of law to require defendants to make a defense to them. . . .
Nonetheless, the Court granted plaintiff leave to file one more attempt to comply with Fed.R.Civ.P. 8(a). Failure to so comply would result in dismissal with prejudice. At this point I would remind the reader that Fed.R.Civ.P. 8(a) requires that "a pleading which sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief. . . ."
On October 31, 1990, plaintiff filed his "Court-Granted Second Amended Complaint." Defendants moved to dismiss for failure to state a claim. On April 26, 1991, the District Court entered the order of dismissal from which Dr. Okusami now appeals.
In order that the reader may make an informed personal decision as to the compliance of Dr. Okusami's fifth attempt at a complaint meeting the requirements of Rule 8(a), Rule 12(b)(6), and the Court's order, I attach a copy of that entire complaint along with eleven exhibits apparently filed with it, though only four of them appear to be referenced therein. At this point I suggest the reader peruse those documents.
While I am tempted at this point to rest upon Dr. Okusami's pleadings, I will proceed with a short further discussion of my reasons for believing that the District Court's dismissal of the negligence and tortious interference claims was correct.
THE NEGLIGENCE ACTIONS
Counts I and II of the Second Amended Complaint purport to set forth claims for negligence. I had thought it axiomatic that negligence requires a duty on the part of the defendant running toward the plaintiff to conform to a certain standard of conduct to protect the plaintiff against unreasonable risks, and that the plaintiff must further plead and prove a failure on the part of the defendant to conform to the standard of conduct, and that the failure proximately caused an actual loss or damage to the plaintiff. W. PAGE KEETON, ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 30 (5th ed. 1984), and authorities collected therein. I find nothing in the complaint that sets forth any duty on the part of the defendants running toward Dr. Okusami; any failure by the defendants to meet the standard of conduct contemplated by that duty; or any damages proximately caused thereby. I would note at this point that I do not share the majority's ease in determining that Appendix 2, the untitled "Exhibit 8," referenced nowhere in the complaint, has any relevance. Again, I thought it axiomatic that Rule 12(b)(6) tests the sufficiency of the complaint, without reference to evidence. See, e.g., Scheuer v. Rhodes, 416 U.S. 232, 235, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1973). I find nothing in Dr. Okusami's complaint that tells me that this exhibit is part of the defendants' by-laws, that it applies to him if it is part of the by-laws, or that defendants should recognize it as such.
I, therefore, would affirm the dismissal.
TORTIOUS INTERFERENCE
I would also affirm the District Court's dismissal of Counts VIII and IX, each of which purports to allege "Tortious Interference With Plaintiff-Physician's Business Relationship With His Patients." Second Amended Complaint at 11, 12. Count VIII in a single sentence "repeats, realleges and incorporates by reference paragraphs 1 through 22 of [the] complaint." Count IX is identical except that it realleges and incorporates "paragraphs 1 through 30." Id.
The law of the District of Columbia governs this diversity action. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Gray v. American Express, 743 F.2d 10, 16-17 (D.C. Cir. 1984). The plaintiff offered us no law stating the circumstances under which the District of Columbia recognizes a tort for interference with business relationships. However, in at least two cases, our district courts have had occasion to apply District of Columbia law on this subject.
In Business Equipment Center Ltd. v. DeJur Amsco Corp., 465 F.Supp. 775 (D.D.C. 1978), Judge Gasch noted that "[i]nterference with business relations is a tort that can arise in two situations." Id. at 788. He described these as (1) where "there is interference with a contract between the plaintiff and some third party," and (2) where the defendant interferes with the "plaintiff's prospective business advantage." Id.
In Genetic Systems Corp. v. Abbott Laboratories, 691 F.Supp. 407 (D.D.C. 1988), Judge Joyce Hens Green stated:
To establish a claim for tortious interference with prospective economic advantage, a plaintiff ordinarily must plead (1) the existence of a valid business relationship or expectancy, (2) knowledge of the relationship or expectancy on the part of the interferer, (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy, and (4) resultant damage.
Id. at 422-23.
Nothing I see in the complaint alleges such a factual predicate. I recognize that paragraph 19 does state that the "Defendants purposefully applied the peer review process discriminatorily to him to interfere with his function as a physician, not as they stated in the PIW letter of August 14, 1987, 2nd paragraph. ( See Plaintiff's Exhibit 2)." However, it is my understanding of Rule 12(b)(6) practice that a court must accept only well-pleaded allegations of fact, it need not "accept 'legal conclusions.'" 5A WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE, § 1357, at 315, and authorities collected therein. I see in this cryptic paragraph of the complaint at most a conclusion of law.
CONCLUSION
While dismissal is an extreme remedy, when repeated attempts to state a claim for relief fail to do so, it does not to me appear an improper one. Maddox v. Shroyer, 302 F.2d 903 (D.C. Cir. 1962) (affirming dismissal after repeated attempts to state a claim complying with the Federal Rules of Civil Procedure failed). Unless it is an appropriate remedy for such inadequate pleading, then I perceive no office that Rule 12(b)(6) can perform. In my view, the District Court correctly held this to be an appropriate case for that remedy. I would affirm.