Docket No.: CL18-6614-00
W. Ryan Snow, Esquire
David C. Hartnett, Esquire
Christine E. Ganley, Esquire
CRENSHAW, WARE & MARTIN, P.L.C.
150 W. Main Street, Suite 1500
Norfolk, Virginia 23510 Kathleen M. McCauley, Esquire
Matthew J. Hundley, Esquire
Moran Reeves & Conn, P.C.
100 Shockoe Slip, 4th Floor
Richmond, Virginia 23219 George H. Bowles, Sr., Esquire
WILLIAMS MULLEN, P.C.
999 Waterside Drive, Suite 1700
Norfolk, Virginia 23510 Dear Counsel:
This matter came before the Court on November 5, 2018, for a hearing (the "Hearing") on Defendants' Demurrers to the Complaint filed by Bryan Fine, M.D. ("Dr. Fine"). Defendant Sentara Hospitals t/a Sentara Williamsburg Regional Medical Center ("Sentara") demurs to the following counts of the Complaint: Count II, Tortious Interference with Contractual Relationship; Count III, Tortious Interference with Business Expectancy; and Count IV, Business Conspiracy. Defendant Children's Specialty Group, PLLC ("CSG") demurs to Count IV, Business Conspiracy, of the Complaint.
For the reasons discussed herein, the Court finds that, for purposes of a demurrer, Dr. Fine adequately pleaded tortious interference with a contractual relationship, Dr. Fine adequately pleaded tortious interference with a business expectancy, and Dr. Fine adequately pleaded business conspiracy. The Court OVERRULES Sentara's Demurrer as to Dr. Fine's tortious interference with a contractual relationship and tortious interference with a business expectancy claims. In addition, the Court OVERRULES both Sentara's and CSG's Demurrers as to the business conspiracy claim.
On July 31, 2018, Dr. Fine filed suit against CSG and Sentara. CSG is a professional limited liability company comprised of pediatric physicians who are members of the company and provide services to local hospitals, including Sentara hospitals. (Compl. ¶ 2.) Sentara owns and operates several acute care hospitals, including Sentara Williamsburg Regional Medical Center ("SWRMC"), which provide clinical and pediatric care to its patients. (Id. ¶ 3.) To provide this care, Sentara engages the services of medical practices that provide physicians who are qualified to fulfill the needs of Sentara's patients. (Id. ¶¶ 5-7.)
On July 1, 2014, Sentara and CSG entered into a Pediatric Coverage Agreement ("PCA") pursuant to which CSG's Hospitalist Division would provide certain medical coverage and medical director services to acute care hospitals operated by Sentara, including SWRMC. (Id. ¶ 9.) Sentara and CSG subsequently renewed the PCA on July 1, 2016, for an additional term. (Id. ¶ 11, Ex. A.) Specifically, the PCA requires CSG to assign a Pediatric Hospitalist to serve as the medical director for the SWRMC program and serve as the point of contact between CSG and SWRMC. (Ex. A.) Under the PCA, Sentara has the right, at its discretion and without notice or providing an opportunity to cure, to remove any CSG provider who is excluded from a federal or state health program; who has his or her Commonwealth of Virginia license to provide Services as required under the PCA suspended, revoked, or restricted; who has a guardian of his or her person or estate appointed by a court of competent jurisdiction; or who Sentara determines "to pose an immediate threat to the health, welfare, or safety of Sentara patients, Sentara employees, or Sentara guests." (Id.) Unless otherwise terminated, the term of the PCA ended June 30, 2018, with CSG and Sentara each having the right to terminate the PCA prior to this date without cause upon 180 days' notice. (Id.) In exchange for CSG providing the services under the PCA from July 1, 2016, through June 30, 2017, Sentara agreed to pay CSG "$825,000, net of [CSG's] professional collections for such services." (Id.) Further, Sentara agreed to pay CSG for providing services under the PCA from July 1, 2017, through June 30, 2018 "$825,000, net of [CSG's] professional collections for such services." (Id.)
Immediately after entering into the PCA with Sentara, CSG assigned Dr. Fine to serve as the medical director at SWRMC. (Compl. ¶ 10.) Although Dr. Fine served in that capacity since 2014, it was not until February 15, 2017, that Dr. Fine and CSG memorialized his role in a memorandum of understanding ("MOU"). (Id. ¶ 12.) The MOU, alleged by Dr. Fine to be a business contract, indicates that Dr. Fine will receive no less than $866,250 per year as compensation for managing staff and providing medical director services to SWRMC from July 1, 2017, until June 30, 2019, so long as the PCA between Sentara on behalf of SWRMC and CSG is active. (Id. ¶ 12, Ex. B.) According to Dr. Fine, the MOU was intended to clarify that his role as medical director at SWRMC was his separate business interest, apart from his membership interest with CSG. (Id.) The MOU did not change Dr. Fine's job responsibilities as medical director at SWRMC; however, the MOU shifted responsibility from the CSG Hospitalist Division to Dr. Fine.
The PCA between Sentara and CSG was active at all times relevant to this action. As of November 5, 2018, the date of the Hearing, the PCA was still active. --------
Dr. Fine alleges that Sentara was aware of the business relationship—specifically the MOU—between CSG and Dr. Fine. (Id. ¶ 17.) However, the specific terms of the MOU were required by the contract to remain confidential between Dr. Fine and CSG. (Ex. B.) On June 27, 2017, during a meeting with both CSG and Sentara representatives, Dr. Fine discussed his role as medical director at SWRMC and the MOU itself. (Id.) The individuals who attended the June 27, 2017, meeting were as follows: David Masterson, President of SWRMC; Dennis Szurkus, SWRMC's Vice President of Medical Affairs; Donna Wilmouth, SWRMC's Vice President of Nursing; and Brad Marino, CSG's Chief Executive Officer. (Id.)
On September 7, 2017, CSG's CEO emailed Dr. Fine to request that he attend a meeting on September 13, 2017, with SWRMC's Vice President of Medical Affairs. (Id. ¶ 21.) CSG's CEO did not disclose to Dr. Fine the reason for the meeting or what was going to be discussed. (Id.) Upon Dr. Fine's inquiry, CSG's CEO stated that he expected the meeting to concern negotiation of the PCA. (Id.) At the meeting on September 13, 2017, SWRMC's Vice President of Medical Affairs informed Dr. Fine that Sentara no longer wanted him working at SWRMC. (Id. ¶ 22.) During the same meeting, at the direction of Sentara, CSG immediately terminated the MOU with Dr. Fine. (Id. ¶ 25.) Dr. Fine alleges that at the time of the September 13, 2017, meeting, his performance record at SWRMC had been exemplary. (Id. ¶¶ 18-20.)
After CSG terminated the MOU with Dr. Fine, he remained a member of CSG. (Id. ¶ 28.) CSG did not thereafter terminate Dr. Fine as a member, nor did CSG restrict his access to patients at any other medical facility. (Id.) On January 4, 2018, Dr. Fine gave the requisite 180 days' notice of his intent to resign as a member of CSG and completed his final day with CSG on July 3, 2018. (Id. ¶ 34.)
A demurrer tests the legal sufficiency of the claims stated in the challenged pleading. Dray v. New Mkt. Poultry Prods., Inc., 258 Va. 187, 189, 518 S.E.2d 312, 312 (1999). The sole question to be decided by the court is whether the facts pleaded, implied, and fairly and justly inferred are legally sufficient to state a cause of action against the defendant. Thompson v. Skate Am., Inc., 261 Va. 121, 128, 580 S.E.2d 123, 126-27 (2001). On demurrer, the court must admit "the truth of all material facts that are properly pleaded, facts which are impliedly alleged, and facts which may be fairly and justly inferred from the alleged facts." Cox Cable Hampton Rds., v. City of Norfolk, 242 Va. 394, 397, 410 S.E.2d 652, 653 (1991). A demurrer does not admit the correctness of any conclusion of law. Ward's Equip., Inc. v. New Holland N. Am., Inc., 254 Va. 379, 382, 493 S.E.2d 516, 518 (1997).
Even if imperfect, a complaint drafted such that a defendant cannot mistake the true nature of the claim should withstand demurrer. CaterCorp, Inc. v. Catering Concepts, Inc., 246 Va. 22, 24, 431 S.E.2d 277, 279 (1993). The court will not consider any factual assertions not included in the pleading being attacked, or its accompanying exhibits, for purposes of a demurrer. See id. at 24, 431 S.E.2d at 279. I. Sentara's Demurrer as to Count II, Tortious Interference with Contractual Relationship, and as to Count III, Tortious Interference with Business Expectancy
POSITIONS OF THE PARTIES
Sentara argues that Counts II and III fail to state claims for tortious interference against Sentara because (1) the allegations establish that CSG was excused from performance of the MOU, and therefore no breach or termination of that contract could have occurred; (2) the MOU is a contract terminable-at-will and the Complaint fails to allege that Sentara used improper methods or means to breach it; (3) Sentara was entitled to direct the replacement of Dr. Fine as the medical director of its hospital and was not constrained by the MOU, an agreement to which Sentara was not a party and of which it was not aware; and (4) the Complaint fails to establish that Sentara had knowledge of the confidential MOU, whose text prohibited disclosure of its terms to third parties like Sentara.
Dr. Fine's Position
Dr. Fine claims that all four of Sentara's arguments against tortious interference fail. First, Sentara's interference should not be forgiven because CSG was not excused from performing the MOU; Sentara was not permitted to interfere and its interference caused CSG to breach the MOU by immediately terminating it. Second, the Complaint does allege improper methods because undue influence and overreaching are both improper methods identified in the Complaint. Third, Sentara's PCA with CSG does not entitle Sentara to force CSG to remove Dr. Fine as CSG's medical director. Finally, the Complaint expressly alleges Sentara's knowledge of the MOU. All reasonable inferences must favor Dr. Fine, not Sentara.
In addition, Dr. Fine asserts that the MOU was a business contract rather than an employment contract terminable at will. However, he alleges that even if the MOU were an at-will employment contract, Sentara engaged in tortious interference via overreaching and practicing undue influence, both of which are improper methods.
The Virginia Supreme Court has identified the necessary elements to establish a prima facie case of tortious interference with a contract. The elements are as follows:
(1) the existence of a valid contractual relationship or business expectancy; (2) knowledge of the relationship or expectancy on the part of the interferor; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted.
Dunlap v. Cottman Transmission Sys., LLC, 287 Va. 207, 216, 754 S.E.2d 313, 318 (2014). In addition, if a contract is terminable at-will, a plaintiff must allege and prove "not only an intentional interference that caused the termination of the at-will contract, but also that the defendant employed improper methods." Duggin v. Adams 234 Va. 221, 226-227 360 S.E.2d 832, 836 (1987). "Improper methods may include . . . undue influence [and] overreaching." Id. at 227-228, 360 S.E.2d at 836-837. "However, the plaintiff need not prove that the improper methods used were inherently illegal or tortious, but only that the interference was intentional and improper under the circumstances of the particular case." Lewis-Gale Med. Ctr., LLC v. Alldredge, 282 Va. 141, 150, 710 S.E.2d 716, 720 (2011) (citation omitted).
Dr. Fine's Complaint alleges all four of the elements of tortious interference with a contract: (1) that the MOU is valid and enforceable; (2) that Sentara was aware of the MOU; (3) that Sentara intentionally interfered with the MOU by preventing Dr. Fine from performing his obligations and directing CSG to terminate it; and (4) resulting damage to Dr. Fine.
In addition, the Complaint alleges the additional element needed to interfere with an at-will contract, that Sentara used improper methods of undue influence and overreaching to force CSG to terminate the MOU. Specifically, the Complaint states that Sentara used its special position and business relationship with CSG to exercise undue influence over CSG to cause CSG to terminate the MOU. The Complaint also alleges that Sentara overreached by demanding that CSG remove Dr. Fine from SWRMC even though none of the aforementioned circumstances in the PCA allowing removal of a physician had been met. II. Sentara's and CSG's Demurrer as to Count IV, Business Conspiracy
POSITIONS OF THE PARTIES
Sentara asserts that Count IV fails to state a claim for business conspiracy because: (1) the Complaint fails to allege an unlawful act or unlawful purpose, as it fails to state an underlying claim for tortious interference and the mere breach of a contract cannot constitute an unlawful act; (2) it is legally impossible for Sentara to conspire with CSG to tortiously interfere with the MOU because CSG is a party to the MOU; (3) the Complaint fails to allege any concrete action by Sentara and CSG or that they had a unity of purpose; and (4) the Complaint fails to allege any injury to Dr. Fine's business interests.
CSG argues that the Court should sustain its demurrer to Count IV (Business Conspiracy) of the Complaint because the claim fails as a matter of law. CSG also contends that to plead a cause of action for statutory conspiracy, Dr. Fine must allege that CSG and Sentara "combined for the purpose of willfully and maliciously injuring Fine in his business." (Dem. 10.) It contends that to survive a demurrer, Dr. Fine must at least allege an unlawful act or an unlawful purpose. Here, CSG alleges that Dr. Fine has alleged neither a conspiracy, an unlawful act, nor an unlawful purpose, let alone a conspiracy directed at his business.
CSG purports that although the Complaint alleges that the MOU was Dr. Fine's separate business interest, apart from his membership interest in or employment with CSG, there is not a single fact supporting such allegation. It asserts that there is no separate business identified anywhere in the Complaint, but rather that Dr. Fine filed this lawsuit as an individual. CSG further alleges that even if Dr. Fine had identified in some way a separate business, the alleged services he provided to SWRMC were performed on behalf of CSG as part of his employment because, at all relevant times, Dr. Fine was a licensed physician and member of CSG. It contends that the MOU did not change Fine's status as a member of CSG or create a business interest, but rather simply shifted responsibility for SWRMC from the CSG Hospitalist Division, which Dr. Fine was a part of, to Dr. Fine individually. CSG asserts that under the MOU, Dr. Fine was still providing the same services he provided on behalf of CSG prior to the MOU, and the MOU itself is signed by "Bryan Fine, M.D."
In addition, CSG argues that Dr. Fine fails to allege facts establishing a conspiracy. Although Dr. Fine alleges that CSG and Sentara combined, associated, agreed, mutually undertook and/or concerted together, there are no facts pleaded demonstrating when, where, or how CSG and Sentara allegedly conspired prior to Dr. Fine's removal by Sentara. Dr. Fine's allegations simply lump CSG and Sentara together as conspirators and state that Sentara intentionally interfered with the MOU because Sentara had no right to remove Fine from SWRMC and CSG knew that Sentara had no right to remove Fine from SWRMC. Fine has failed to allege any specific facts concerning the formation of the alleged conspiracy or any facts demonstrating that CSG and Sentara combined together to effect a preconceived plan. Of note, there is not a single fact alleged demonstrating that CSG and Sentara undertook concerted action prior to Sentara's removal of Dr. Fine during the September 13, 2017, meeting. Rather, Dr. Fine alleges that CSG was unaware of the purpose of the September 13 meeting and did not know why Sentara removed Fine.
The only concerted action alleged by Dr. Fine is that CSG willingly agreed to cooperate and improperly terminate Fine's ability to practice at SWRMC. Dr. Fine fails, however, to allege how CSG cooperated with Sentara. Likewise, Dr. Fine fails to allege a single fact or otherwise explain how CSG improperly terminated his ability to practice at SWRMC when he repeatedly alleges that it was Sentara's decision, a decision made and conveyed to CSG and Fine at the same meeting. Accordingly, Dr. Fine has failed to allege the first element of its statutory conspiracy claim.
Further, CSG argues that Dr. Fine fails to allege an unlawful act or an unlawful purpose as to CSG. Even if Dr. Fine could demonstrate concerted action directed to a business, Dr. Fine fails to allege an unlawful act or an unlawful purpose. Rather, Dr. Fine alleges facts that, at best, demonstrate a breach of the underlying MOU. Fine argues that Sentara removed him without lawful justification, that CSG knew Sentara had no lawful justification but agreed to cooperate and improperly terminate the MOU. Dr. Fine asserts that the purpose of the alleged conspiracy was to withhold compensation to which Dr. Fine was allegedly entitled under the MOU, the same damages Dr. Fine seeks from CSG in Count 1 of his Complaint.
Accordingly, Dr. Fine is asserting a conspiracy to breach the MOU, and Virginia law does not permit a claim for conspiracy to breach a contract. Dr. Fine is already seeking the damages associated with the MOU ($1,666,250) in his breach of contract cause of action.
Dr. Fine's Position
Dr. Fine alleges that all four of Sentara's arguments against business conspiracy fail. First, the Complaint does allege an unlawful action, as tortious interference with a contract or business expectancy constitutes unlawful action under the conspiracy statutes. Second, it was not legally impossible for Sentara to conspire with CSG. Third, the Complaint alleges concerted action because none of the unlawful acts would have happened without the coordination of both CSG and Sentara. Finally, the Complaint alleges an injury to Dr. Fine's business interests as he is not an employee of CSG for purposes of the MOU.
In addition, Dr. Fine alleges that this case arises from the coordinated efforts of CSG and Sentara to improperly terminate Fine's business interests in SWRMC and is not merely a breach of contract case. CSG is incorrect in its argument that a business conspiracy cannot involve a breach of contract by one of the parties. CSG improperly identifies Dr. Fine as an employee rather than a business owner. Fine's MOU with CSG was a standalone contract reflecting a separate business interest from his membership in CSG. Dr. Fine argues that an individual can have a business interest that is protected by statute.
Dr. Fine alleges that he is not required, at this stage of the litigation, to demonstrate exactly when, where, or how CSG and Sentara conspired to remove him from SWRMC. Dr. Fine need only allege that CSG and Sentara combined, acted together, or mutually undertook to harm him in his reputation, trade, business, or profession. The Complaint alleges that CSG and Sentara combined, associated, agreed, mutually undertook, and/or concerted together for the purpose of willfully injuring Dr. Fine in his reputation, trade, business, and profession. The Complaint further alleges that Sentara knew of Dr. Fine's MOU and directed CSG to terminate it without legal justification, and CSG improperly agreed to cooperate in order to maintain its lucrative relationship with Sentara. In doing so, Sentara and CSG conspired to terminate the MOU and remove Dr. Fine from SWRMC for the purpose of injuring his reputation, trade, business, and profession. The allegations therefore establish conspiracy under Virginia law.
Further, Dr. Fine asserts that CSG wrongfully contends that there is not a single fact alleged demonstrating that CSG and Sentara undertook concerted action prior to Sentara's removal of Dr. Fine during the September 13, 2017 meeting. He argues that the Complaint specifically alleges that on or about September 7, 2017, CSG's CEO notified Dr. Fine via email that he was to attend a meeting with the Vice President of Medical Affairs for SWRMC; the CEO stated that he expected the meeting was about the contract between CSG and SWRMC; at the September 13, 2017 meeting with CSG, SWRMC, and Dr. Fine, he was told by SWRMC that SWRMC no longer wanted him at the hospital; and on September 13, 2017, at the direction of Sentara, CSG terminated its MOU with Dr. Fine. Dr. Fine contends that what exactly happened leading up to the September 13, 2017, meeting will be developed in discovery.
Dr. Fine concludes that the allegations are more than sufficient to establish concerted action. Dr. Fine asserts that the Court may reasonably infer from them that CSG and Sentara formulated and carried out a plan whereby CSG would induce Dr. Fine to attend the meeting under the pretense of discussing his contract, Sentara would inform Dr. Fine of his removal as medical director at SWRMC, and CSG would terminate the MOU immediately thereafter. Dr. Fine asserts that none of these events would have occurred without both CSG and Sentara.
Section 18.2-499 of the Code of Virginia criminalizes conspiracies undertaken to "willfully and maliciously injur[e] another in his . . . business." Further, Section 18.2-500 of the Code of Virginia provides that "[a]ny person who shall be injured in his . . . business or profession by reason of a violation of § 18.2-499, may . . . recover three-fold the damages by him sustained, . . . , and without limiting the generality of the term, 'damages' shall include loss of profits." Thus, "[t]o recover in an action for conspiracy to harm a business, the plaintiff must prove (1) a combination of two or more persons for the purpose of willfully and maliciously injuring plaintiff in his business and (2) resulting damage to plaintiff." Allen Realty Corp. v. Holbert, 227 Va. 441, 449, 318 S.E.2d 592, 596 (1984) (citing Va. Code §§ 18.2-499, 18.2-500).
The Virginia Supreme Court has held that both tortious interference with a contractual relationship and tortious interference with a business expectancy satisfy the requisite unlawful act for a business conspiracy claim, as both "are intentional torts predicated on the common law duty to refrain from interfering with another's contractual and business relationships." Dunlap v. Cottman Transmission Sys., LLC, 287 Va. 207, 218, 754 S.E.2d 313, 319 (2014).
The Complaint alleges that Sentara knew of Dr. Fine's MOU with CSG and directed CSG to terminate it without legal justification. Further, the Complaint alleges that CSG agreed to terminate the MOU with Dr. Fine under Sentara's direction in order to maintain its lucrative relationship with Sentara and to prevent Dr. Fine from realizing the compensation he would have received under the MOU, approximately $1,666,250.
For the reasons stated herein, the Court OVERRULES Sentara's demurrers as to Counts II and III of the Complaint and OVERRULES Sentara's and CSG's demurrers to Count IV of the Complaint. In addition, the Court denies CSG's and Sentara's requests to impose sanctions against Plaintiff.
The Court directs counsel for Plaintiff to prepare and circulate an Order consistent with the ruling in this Opinion and submit it to the Court for entry within fourteen days.
Michelle J. Atkins