Court: District Court, D. Minnesota; June 30, 2017; Federal District Court
On April 11, 2017, Judge Ann D. Montgomery heard arguments regarding two motions for partial judgment on the pleadings from the HealthEast Defendants and the CentraCare Defendants, which were opposed by Plaintiff Dr. Gregory Sherr. The court granted the motions. Dr. Sherr, a neurosurgeon, claims the Defendants conspired to undermine his competitive status in the neurosurgery market in Minnesota by initiating false complaints against him during the peer review process at HealthEast, leading to a summary suspension of his privileges at St. Joseph’s Hospital. This action allegedly damaged his reputation and forced him to relocate to continue his career. He asserts claims including breach of peer review confidentiality, invasion of privacy, defamation, tortious interference with economic advantage and contract, and violations of antitrust laws, but the court dismissed the breach of confidentiality, invasion of privacy, and antitrust claims, allowing others to proceed.
Dr. Sherr is a Florida resident specializing in high-risk neurosurgery, while the HealthEast Defendants include HealthEast, a non-profit health care provider based in St. Paul, Minnesota, and several employed neurosurgeons. The CentraCare Defendants consist of CentraCare, another non-profit provider in central Minnesota, and its staff, including Dr. Jerone D. Kennedy and administrator Archie Defillo. Dr. Sherr began his neurosurgery career in 2011, joining an independent practice until it was acquired by CentraCare in 2014.
Dr. Sherr joined the Midwest Spine, Brain Institute (MSBI) in January 2015, expanding its services to include cranial neurosurgery and opening a clinic in St. Cloud. This clinic, located near SCH, was staffed with his former administrative team and Dr. David Chang, leveraging their familiarity with local patients and referral sources, leading to its successful operation. During his 15 months with MSBI, Dr. Sherr performed about 500 surgeries, primarily complex reconstructive spine procedures for high-risk, low-income patients.
Dr. Sherr contends that MSBI's St. Cloud clinic threatened CentraCare's neurosurgery patient base at SCH, prompting concerns from Dr. Kennedy and Defillo regarding revenue impacts. Additionally, the addition of Dr. Sherr and Dr. Chang to MSBI posed challenges for HealthEast in retaining patients from SJH. Following this, the HealthEast Neuro Group transitioned from United Hospital to HealthEast, demanding that HealthEast cease using MSBI physicians and their clinic presence. HealthEast declined these requests but asked MSBI to limit its involvement in SJH emergency and elective procedures.
Post-transition, the HealthEast Neuro Group allegedly initiated efforts to remove MSBI neurosurgeons from HealthEast, purportedly collaborating with Dr. Kennedy and Defillo to eliminate Dr. Sherr and MSBI as competitors. Dr. Sherr claims that Dr. Kennedy had longstanding ties with the HealthEast Neuro Group, having practiced with them for a decade prior to his resignation from United Hospital in 2012.
Dr. Sherr accuses Dr. Kennedy and Defillo of exhibiting open hostility toward him and his clinic, MSBI, intending to undermine his practice. After MSBI opened its St. Cloud clinic, Defillo allegedly threatened local physicians to deter them from referring patients to Dr. Sherr, claiming their practices would suffer as a consequence. Complaints from the HealthEast Neuro Group about Dr. Sherr's use of operating room time further demonstrated their animosity. Dr. Sherr asserts that Defillo and Dr. Kennedy conspired with the HealthEast Neuro Group to eliminate him as a competitor by influencing the HealthEast physician peer review committee, known as the Spine Council. Their alleged strategy included generating complaints against Dr. Sherr, making false statements to persuade Dr. Kolar, HealthEast’s Chief Medical Officer, to suspend Dr. Sherr’s privileges, and securing the Spine Council's unanimous support for this decision.
Additionally, Dr. Wallenfriedman is accused of unlawfully assuming the chairperson role of the Spine Council without a proper vote. During a meeting on October 6, 2015, the council discussed complaints regarding Dr. Sherr’s care, some of which Dr. Sherr believes came from the HealthEast Neuro Group. Following this meeting, a consensus was reached for MSBI to create a corrective action plan. However, Dr. Wallenfriedman scheduled a subsequent meeting without notifying MSBI's president. At the October 20, 2015 meeting, Dr. Kolar decided to summarily suspend Dr. Sherr's privileges, a decision unanimously upheld by the Spine Council and later approved by the HealthEast Medical Executive Committee.
Dr. Sherr was notified of his summary suspension on October 20, 2015, after it was upheld by the Spine Council but prior to MEC approval. He had to cancel two scheduled surgeries, which caused personal embarrassment and distress for the patients. One surgery was later performed at a different hospital that evening, and the other was rescheduled. Despite Minnesota laws prohibiting the disclosure of peer review matters, news of Dr. Sherr's suspension spread quickly. Doug Maekay from Stryker Spine learned of the suspension from a coworker, and Tom O’Connor of United Hospital communicated to MSBI's president that the suspension would negatively impact referrals to Dr. Sherr. O’Connor implied that the HealthEast Neuro Group was responsible for the leaks, using aggressive tactics against competitors. A credentialing specialist at Fairview Southdale hospital also indicated awareness of the suspension, requiring Dr. Sherr to provide an explanation letter from a HealthEast neurosurgeon for re-credentialing. In December 2015, Dr. Sherr received a text about a job opportunity in Dubai, raising concerns about improper disclosures. He appealed the suspension successfully, having it reversed on February 4, 2016, but suffered reputational damage and lost referral sources. Subsequently, MSBI informed him that it could no longer keep him as an employee, leading to his resignation and relocation to Florida for a new job. Dr. Sherr claims the defendants’ actions harmed not only his career but also the quality of neurosurgery care available to patients in the Twin Cities and St. Cloud areas.
In considering a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure, the court accepts all facts pleaded by the non-moving party as true and makes all reasonable inferences in their favor. Judgment is warranted when no material factual issues remain, and the movant is entitled to judgment as a matter of law, following the same standard applied in Rule 12(b)(6) motions. A plaintiff's allegations must elevate the right to relief beyond speculation, requiring claims to transition from conceivable to plausible. This is achieved when factual content enables a reasonable inference of the defendant's liability. Legal conclusions presented as factual allegations should not be presumed true, and complaints based solely on labels, conclusions, or unsupported assertions are subject to dismissal.
Dr. Sherr alleges that the HealthEast Defendants breached peer review confidentiality per Minn. Stat. 145.64 by disclosing confidential peer review information, purportedly motivated by malice. The HealthEast Defendants contend that this claim should be dismissed on the grounds that Minn. Stat. 145.64 does not allow for a private cause of action. The statute prohibits the disclosure of peer review meeting content, allowing such disclosure only as necessary to fulfill the review organization's purposes. Violations of this confidentiality, as outlined in Minn. Stat. 145.66, are classified as misdemeanors.
A civil cause of action cannot arise from a statute unless explicitly stated or clearly implied. The Minnesota Supreme Court maintains that when a statute specifies certain remedies, courts should refrain from inferring additional ones. The court has consistently denied recognition of private causes of action under statutes that impose penalties but do not mention private remedies. In this context, Minn. Stat. 145.64 imposes a criminal penalty for breaches of peer review confidentiality, but does not establish a civil cause of action. Dr. Sherr's argument for a civil cause of action based on alleged malice in disclosures is unfounded, as the immunity provision in Minn. Stat. 145.63 does not pertain to unauthorized disclosures. Instead, the confidentiality and penalties are governed by Minn. Stat. 145.64 and 145.66, which state that any unauthorized disclosure is a misdemeanor, irrespective of malice, and provide no civil remedy. Consequently, Dr. Sherr's claim under Minn. Stat. 145.64 is dismissed for lack of a valid claim.
Regarding the invasion of privacy claim against the HealthEast Defendants, Dr. Sherr alleges that they disclosed private peer review information to the broader neurosurgery community. The HealthEast Defendants counter that the claim lacks specificity and fails to establish a valid cause of action. To succeed in a claim for publication of private facts, the plaintiff must prove that the defendant publicized a matter concerning the plaintiff's private life, which is offensive to a reasonable person and not of legitimate public concern. "Publicity" entails making information public to such an extent that it is likely to become widely known.
Communication of private facts about an individual does not constitute an invasion of privacy if shared with only one person or a small group. However, any publication through media outlets, regardless of circulation size, or to a large audience qualifies as "publicity" under invasion of privacy law. In the Bodah case, the Minnesota Supreme Court ruled that disclosing employees' social security numbers to a limited number of managers did not meet the threshold for public disclosure necessary for a privacy claim. Dr. Sherr's allegations against the HealthEast Defendants lack sufficient facts to demonstrate the required "publicity." The complaint identifies only one individual who learned of Dr. Sherr’s suspension and makes unsupported allegations of broader communication. The Court is not required to accept these claims as factual. Additionally, allegations of disclosure to a small group of 35-40 neurosurgery practitioners are considered insufficient for publicity, as confirmed by prior cases indicating that this does not equate to disclosure to the public at large.
Dr. Sherr references a 1991 Wisconsin Court of Appeals decision to support his argument that publicity can be established even if information is only shared within a relevant smaller population, rather than the public at large. He asserts that the awareness of his summary suspension among those relevant to him indicates the matter is substantially public knowledge. However, the Minnesota Supreme Court has rejected this "relevant population" standard, opting instead for a broader definition of "publicity" that requires the information to be communicated to the public or sufficiently many people to ensure it becomes public knowledge. Consequently, Dr. Sherr's invasion of privacy claim is dismissed for failing to meet this standard.
In relation to his Sherman Act, Section 1 claim, Dr. Sherr alleges that the defendants conspired to impede his participation in neurosurgery markets by disseminating false peer reviews and suspending his privileges, thereby reducing patient options. To prove this claim, he must show a contract, unreasonable restraint of trade, and that the restraint affects interstate commerce. Dr. Sherr claims two levels of conspiracy: intra-corporate conspiracies (where corporate defendants conspired with their own medical staff) and a broader conspiracy among all defendants. The defendants contend that the intra-corporate conspiracy allegations fail under the intra-corporate immunity doctrine, which posits that employees of the same firm cannot constitute separate actors necessary for a conspiracy. This doctrine applies as all individual defendants are alleged to be employees of their respective healthcare organizations.
Dr. Sherr contends that an exception to the intra-corporate immunity doctrine applies when peer review committee members have a personal interest in the peer review's outcome. However, the court finds that the concept of conspiracy among medical staff lacks significance in antitrust terms if they do not possess final authority over any agreements. Citing Oksanen v. Page Memorial Hospital, the court emphasizes that the ultimate decision-making power lay with the Medical Executive Committee (MEC), which approved Dr. Sherr's summary suspension, negating the possibility of a viable intra-corporate antitrust conspiracy claim.
Additionally, the defendants assert that Dr. Sherr has not adequately pleaded a conspiracy involving HealthEast and CentraCare. For a claim to survive a motion to dismiss, more than mere allegations of conspiracy is required; specific factual support is necessary. Dr. Sherr's claims, based on vague assertions of communication between the two entities regarding a scheme to oust him from neurosurgery, lack detail about the motivations or mechanisms for such collaboration, especially given that the two organizations do not compete. The court references prior cases where insufficient factual detail led to dismissal of similar claims.
Furthermore, Dr. Sherr's allegations of parallel conduct do not substantiate a plausible conspiracy claim, as they merely approach the threshold of a valid claim without crossing it. The absence of a clear economic motive for either defendant to engage in a conspiracy to suspend Dr. Sherr's privileges further undermines his position. The court concludes that the allegations fail to demonstrate a plausible claim of conspiracy to restrain trade.
Dr. Sherr's allegations of an unreasonable restraint of trade are insufficient as he has not demonstrated actual detrimental effects on the neurosurgery market nor defined a relevant geographic market adequately. A restraint can be deemed unreasonable either as "per se" or under the "Rule of Reason," which evaluates whether the restraint regulates or suppresses competition. Legal precedent indicates that courts focus on actual detrimental effects when assessing trade restraints.
To establish such effects, a plaintiff can show either a reduction in output or define the relevant market and assess the defendant’s market power. Dr. Sherr claims detrimental effects by stating that patients have been deprived of his care, but this does not indicate a decrease in service output since patients are still receiving treatment from other physicians. Furthermore, his assertion of superior skills lacks factual support and does not prove a decline in service quality. Unsupported claims of detrimental effects are insufficient to oppose a motion to dismiss. Additionally, he has not shown that prices for neurosurgery services have increased due to his exit from the market.
Due to the absence of actual detrimental effects, Dr. Sherr is required to demonstrate that the defendants possess market power in a clearly defined relevant market. Without such a market definition, it is impossible for a court to evaluate the competitive impact of the alleged illegal conduct.
In Little Rock Cardiology Clinic PA v. Baptist Health, the Eighth Circuit defines a relevant market as comprising both a product market and a geographic market. The product market includes all reasonably interchangeable products, while the geographic market is determined by the area where consumers can practically seek alternatives. Proper market definition requires a factual inquiry into commercial realities, but failure to adequately plead a relevant market can lead to dismissal of antitrust claims under Federal Rule of Civil Procedure 12(b)(6). The Eighth Circuit has consistently dismissed such claims at the pleading stage due to inadequate market allegations, particularly given the high costs associated with antitrust discovery.
In this case, the defendants contended that the First Amended Complaint did not identify a relevant geographic market. The court concurred, stating that in the medical context, the appropriate geographic market should reflect areas where patient mobility is limited. The complaint suggested markets in the “Twin Cities” and “St. Cloud,” but failed to explore where neurosurgery patients could realistically seek alternative care. Notably, many patients may travel to the Mayo Clinic in Rochester, Minnesota, which is significantly distant from the alleged markets, indicating a broader market consideration should have been made. The omission of the Mayo Clinic, a prominent neurosurgery provider, illustrates a failure to acknowledge the commercial realities relevant to neurosurgery patients, leading to an overly narrow definition of the geographic market.
The First Amended Complaint fails to adequately establish a relevant geographic market, resulting in the dismissal of Dr. Sherr's Section 1 antitrust claim under the Sherman Act. For a valid claim under Section 2, a plaintiff must demonstrate that the defendant possessed monopoly power in a relevant market and willfully maintained that power, rather than acquiring it through superior means. Dr. Sherr's assertion of monopolizing the "St. Cloud market" is deemed unsupportable, as his own allegations reveal practice in a larger geographic area, which invalidates the proposed market definition.
Furthermore, Dr. Sherr's claims under Minnesota antitrust law, which are interpreted consistently with federal law, also fail due to the dismissal of the corresponding federal claims. Consequently, all related counts, including Counts I, II, VII, VIII, IX, and X of the First Amended Complaint, are dismissed with prejudice. The court's conclusions are based on the assumption that all facts in the complaint are true.
