Steven T. Meister, M. D., John Does v. Avera Marshall d/b/a Avera Marshall Regional Medical Center, John Roes

• Court: Court of Appeals of Minnesota
• Decided: July 25, 2016
• Docket: A15-1982
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A15-1982

Steven T. Meister, M. D., et al., Appellants,

John Does, et al., Plaintiffs,

vs.

Avera Marshall d/b/a Avera Marshall Regional Medical Center, Respondent,

John Roes, et al., Defendants

Filed July 25, 2016 Affirmed Worke, Judge

Lyon County District Court File No. 42-CV-12-69

Eric Magnuson, Katherine S. Barrett Wiik, Chelsea A. Walcker, Robins Kaplan LLP, Minneapolis, Minnesota; and

Robert L. Gjorvad, Runchey, Louwagie & Wellman, PLLP, Marshall, Minnesota (for appellants)

David R. Crosby, Bryant D. Tchida, Stinson Leonard Street LLP, Minneapolis, Minnesota (for respondent)

Considered and decided by Worke, Presiding Judge; Rodenberg, Judge; and

Smith, Tracy M., Judge. UNPUBLISHED OPINION

WORKE, Judge

Appellants challenge the district court’s summary-judgment determination that

respondent medical center could unilaterally amend and repeal medical staff bylaws. We

affirm.

FACTS

Respondent Avera Marshall is a nonprofit corporation that owns and operates

Avera Marshall Regional Medical Center (the hospital). Appellants Drs. Steven T.

Meister, Jane Willett, and Anthony Nwakama (the doctors) practice medicine at the

hospital. Avera Marshall’s articles of incorporation state that “[t]he general management

of the [c]orporation shall be vested in its [b]oard of [d]irectors.”

Avera Marshall’s corporate bylaws state that Avera Marshall’s board of directors

shall organize a medical staff under medical staff bylaws “approved by the [b]oard.” The

corporate bylaws provide the medical staff with “appropriate authority and responsibility

for the care of such member’s patients, subject to such limitations as are contained in [the

corporate bylaws] and in the [medical staff bylaws].”

In 1995, the board approved the medical staff bylaws. The purposes of the

medical staff bylaws are:

(a) To endeavor to provide that all patients, regardless of race, color, religion, national origin, sex, age or disability, receive appropriate medical care from practitioners appointed to the [m]edical [s]taff; (b) To strive to maintain and enhance the professional performance of all [m]embers of the [m]edical [s]taff through

2 an ongoing review and evaluation of the clinical performance of each [m]ember of the [m]edical [s]taff in the [hospital]; (c) To provide an appropriate setting that will maintain practice standards and that will lead to a continuous advancement in professional knowledge, skill and training; (d) To initiate and maintain rules, regulations and policies for the internal governance of the [m]edical [s]taff; and (e) To provide a means whereby issues concerning the [m]edical [s]taff and the [hospital] may be directly discussed by the [m]edical [s]taff with the [board] and the [a]dministration, with the understanding that the [m]edical [s]taff is subject to the ultimate authority of the [board].

In January 2012, the board unilaterally amended the medical staff bylaws and

notified the medical staff. The medical staff, medical executive committee, and the

doctors collectively sought declaratory judgment that the medical staff bylaws constitute

a contract between Avera Marshall and the medical staff. The plaintiffs also sought

declaratory judgment that Avera Marshall could not unilaterally adopt and repeal the

medical staff bylaws. The district court concluded that the medical staff bylaws are not a

contract, and Avera Marshall could unilaterally modify the medical staff bylaws.

This court affirmed the district court’s decision, but the supreme court reversed

and remanded, concluding that the medical staff bylaws constitute a contract between

Avera Marshall and the individual members of the medical staff. Med. Staff of Avera

Marshall Reg’l Med. Ctr. v. Avera Marshall, 857 N.W.2d 695, 698, 704 (Minn. 2014).

The dissent concluded that the medical staff bylaws did not constitute a contract between

the medical staff and Avera Marshall. Med. Staff of Avera Marshall Reg’l Med. Ctr. v.

Avera Marshall, 857 N.W.2d 695, 709 (Minn. 2014) (Anderson, J., dissenting). On

remand, Avera Marshall moved for summary judgment, arguing that the board could

3 unilaterally amend the medical staff bylaws. The district court granted Avera Marshall’s

motion. This appeal follows.

DECISION

Contract interpretation

The doctors argue that the district court erred when it granted Avera Marshall’s

summary-judgment motion because the medical staff bylaws prohibit Avera Marshall

from unilaterally adopting, amending, or repealing the medical staff bylaws. An

appellate court reviews a district court’s summary-judgment decision de novo. Riverview

Muir Doran, LLC v. JADT Dev. Grp., 790 N.W.2d 167, 170 (Minn. 2010). “In doing so,

[an appellate court] determine[s] whether the district court properly applied the law and

whether there are genuine issues of material fact that preclude summary judgment.” Id.

“Contract interpretation is a question of law that we review de novo.” Valspar

Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 364 (Minn. 2009) (quotation omitted).

“The primary goal of contract interpretation is to ascertain and enforce the intent of the

parties.” Id. When interpreting a contract, “the language is to be given its plain and

ordinary meaning.” Brookfield Trade Ctr., Inc. v. Cty. of Ramsey, 584 N.W.2d 390, 394

(Minn. 1998).

Relying on article 17.2 of the medical staff bylaws, the doctors argue that the

board cannot adopt, amend, or repeal the medical staff bylaws without an affirmative

two-thirds vote of the medical staff eligible to vote. We are not persuaded. Accepting

the doctors’ argument would contradict basic principles of contract interpretation. An

appellate court interprets a contract “in such a way as to give meaning to all of its

4 provisions.” Id. Article 2.1-1(e) of the medical staff bylaws states that the purpose of the

medical staff is “[t]o provide a means whereby issues concerning the [m]edical [s]taff . . .

may be directly discussed . . . with the understanding that the [m]edical [s]taff is subject

to the ultimate authority of the [b]oard.” If the medical staff could effectively veto a

proposed amendment pursuant to article 17.2, then Article 2.1-1(e) would be meaningless

because the medical staff would not be “subject to the ultimate authority of the [b]oard.”

On the other hand, Avera Marshall’s interpretation of article 17.2 would not lead

to meaningless provisions. Avera Marshall argues that article 17.2 applies only to action

proposed by the medical staff. In other words, for the medical staff to propose a change

to the bylaws, a quorum must be present and two-thirds of the staff eligible to vote must

vote in favor of the proposed change. Under this interpretation, the board retains its

ultimate authority and the medical staff retains its ability to review and propose changes

to the medical staff bylaws.

Additionally, article 16.1(c)(iii) of the medical staff bylaws and article 15.1(a) of

the corporate bylaws support Avera Marshall’s argument. Article 16.1(c)(iii) of the

medical staff bylaws states: “If there is conflict . . . [b]etween . . . the [m]edical [s]taff

[b]ylaws and the [corporate bylaws], the [corporate bylaws] shall prevail.” Article

15.1(a) of the corporate bylaws states that the board shall organize the medical staff

“under medical staff bylaws approved by the [b]oard.” Article 15.1(a) does not state that

the medical staff bylaws require board and staff approval. Thus, even if we accepted the

doctors’ interpretation of article 17.2, the board would still retain its authority pursuant to

5 article 16.1(c)(iii) because article 17.2 of the medical staff bylaws and article 15.1(a) of

the corporate bylaws would conflict.

Finally, Minn. Stat. § 317A.201 (2014) states that the business and affairs of a

corporation “must be managed by or under the direction of a board of directors.” A

hospital’s medical staff “shall be responsible . . . for the clinical and scientific work of the

hospital. It shall be called upon to advise regarding professional problems and policies.”

Minn. R. 4640.0800, subp. 1 (2015) (emphasis added). These authorities support Avera

Marshall’s ability to unilaterally amend the medical staff bylaws.

Caselaw from several other states informs us that a corporation’s board of

directors retain significant discretion to act independently despite the fact that medical

staff bylaws constitute a contract between the hospital and its staff. See Mahan v. Avera

St. Luke’s, 621 N.W.2d 150, 161 (S.D. 2001) (stating that the board’s action did not

constitute a breach because the actions were “permissible under the [c]orporate [b]ylaws

and done in good faith”); see also Bartley v. E. Me. Med. Ctr., 617 A.2d 1020, 1022–23

(Me. 1992) (stating that hospital did not breach its contract when the bylaws stated that

the staff assumed its responsibilities subject to the authority of the board).

The doctors also argue that the district court’s order renders the contract illusory

because the board may amend the bylaws unilaterally. This argument is based on the

principle of “mutual obligation,” which has sometimes been described as: “Both parties

must be bound or neither is bound.” Restatement (Second) of Contracts § 79 & cmt. f

(1981).

6 However, “[t]he concept of mutuality has been widely discredited . . . and it is

now generally recognized that the obligations of the parties need not be substantially

equal for there to be a binding contract.” Cardinal Consulting Co. v. Circo Resorts, Inc.,

297 N.W.2d 260, 266 (Minn. 1980). “Minnesota has long recognized the principle that

whe[n] a contract is supported by valuable consideration (such as a detriment incurred in

exchange for a promise), then a right of one party to terminate it at will does not render it

invalid for lack of mutuality.” Id. (quotation omitted).

Here, as recognized in by our supreme court, the contract is not illusory because

both parties exchanged promises constituting valuable consideration. Avera Marshall,

857 N.W.2d at 703 n.6. In Avera Marshall, the supreme court reasoned:

To be clear, consideration does not exist simply because the medical staff bylaws exist. Consideration exists because, with the appointment of each member to the [m]edical [s]taff, that member and Avera Marshall both voluntarily assumed an obligation on the condition of an act by the other party—that is, each member of the [m]edical [s]taff agreed to be bound by the medical staff bylaws and Avera Marshall agreed to let each member of the [m]edical [s]taff practice at its hospital.

Id.

Therefore, the district court did not err when it granted summary judgment in

favor of Avera Marshall, concluding that Avera Marshall has authority to unilaterally

amend the medical staff bylaws.

Supreme court mandate

The doctors argue that the district court erred by following the framework of the

dissent in Avera Marshall. “[W]hen an appellate court has ruled on an issue, the issue

7 decided becomes the law of the case and may not be relitigated or re-examined.”

Kissoondath v. U.S. Fire Ins. Co., 620 N.W.2d 909, 917 (Minn. App. 2001) (quotation

omitted), review denied (Minn. Apr. 17, 2001). On remand, a district court cannot “alter,

amend, or modify” an appellate court’s mandate. Halverson v. Vill. of Deerwood, 322

N.W.2d 761, 766 (Minn. 1982).

The supreme court in Avera Marshall considered: (1) whether the medical staff

had capacity to sue, and (2) whether the medical staff bylaws constitute an enforceable

contract. 857 N.W.2d at 698–99. The supreme court recognized Avera Marshall’s

argument that it could unilaterally amend bylaws, id. at 701, but it did not address the

argument, id. at 700–704.

Here, the district court repeatedly recognized that the medical staff bylaws

constitute a contract between the medical staff and Avera Marshall. The district court

simply took the next step and analyzed whether the contract permitted the board to

unilaterally amend the medical staff bylaws. Additionally, the district court’s reference

to the dissent as “well-reasoned and persuasive” was not erroneous. See In re Welfare of

B.R.K., 658 N.W.2d 565, 576 (Minn. 2003) (“We view the dissent’s reasoning as being

particularly persuasive.”); see also Jennie-O Foods, Inc. v. Safe-Glo Prods. Corp., 582

N.W.2d 576, 579 (Minn. App. 1998) (“We find persuasive . . . the well-reasoned dissent

in Regents.”), review denied (Minn. Oct. 20, 1998). Therefore, the district court did not

err because it did not alter, amend, or modify the supreme court’s mandate.

Affirmed.