Wuchenich v. Shenandoah Memorial

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

JOHN D. WUCHENICH, M.D.,
Plaintiff-Appellant,

v.

SHENANDOAH MEMORIAL HOSPITAL;
No. 99-1273
ROBERT KARMY, M.D.; DAVID
CIOCHETTY, M.D.; GEORGE PHILLIPS,
M.D.,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Virginia, at Harrisonburg.
James H. Michael, Jr., Senior District Judge.
(CA-98-41-5)

Argued: January 28, 2000

Decided: May 22, 2000

Before NIEMEYER, Circuit Judge, HAMILTON,
Senior Circuit Judge, and Frederic N. SMALKIN,
United States District Judge for the District of Maryland,
sitting by designation.

_________________________________________________________________

Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Edward B. Lowry, MICHIE, HAMLETT, LOWRY,
RASMUSSEN & TWEEL, P.C., Charlottesville, Virginia, for Appel-
lant. Gregory Thomas St. Ours, WHARTON, ALDHIZER & WEA-
VER, P.L.C., Harrisonburg, Virginia, for Appellees. ON BRIEF:
Robert A. Kantas, MICHIE, HAMLETT, LOWRY, RASMUSSEN &
TWEEL, P.C., Charlottesville, Virginia, for Appellant. Marshall H.
Ross, WHARTON, ALDHIZER & WEAVER, P.L.C., Harrisonburg,
Virginia, for Appellees Hospital and Karmy; C.J. Steuart Thomas, III,
Randall T. Perdue, TIMBERLAKE, SMITH, THOMAS & MOSES,
P.C., Staunton, Virginia, for Appellee Ciochetty; William D.
Cremins, Jennifer E. Cremins, CREMINS & ASSOCIATES, P.C.,
Fairfax, Virginia, for Appellee Phillips.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Rule
12(b)(6)), the district court dismissed the complaint of Dr. John
Wuchenich, M.D. (Dr. Wuchenich), a professionally licensed anesthe-
siologist, alleging numerous causes of action under Virginia law,
premised upon diversity jurisdiction, against Shenandoah Memorial
Hospital (SMH) and/or three fellow physicians in connection with the
lack of patient volume in his anesthesiology practice and SMH's
revocation of his medical staff privileges. Dr. Wuchenich appeals the
district court's dismissal of his complaint. For the reasons that follow,
we affirm in part, vacate in part, and remand for further proceedings.

I

Because this case is before us on appeal from a Rule 12(b)(6) dis-
missal, we must accept all of the factual allegations contained in Dr.
Wuchenich's complaint as true and draw all reasonable factual infer-
ences therefrom in his favor. See Edwards v. City of Goldsboro, 178
F.3d 231, 244 (4th Cir. 1999). In light of this mandate, the facts for
purposes of this appeal are as follows.

2
In April 1995, SMH, located in Woodstock, Virginia, recruited Dr.
Wuchenich as an anesthesiologist to provide services to its patients.
At that time, Dr. Wuchenich was practicing anesthesiology in his
well-established private medical practice in California. In August
1995, Dr. Wuchenich and SMH entered into a written twelve-month
agreement (the Physician Guarantee Agreement or the Agreement),
which guaranteed Dr. Wuchenich an income of $15,000 per month for
the first four months after he obtained medical staff privileges at
SMH. The Physician Guarantee Agreement also called for Dr. Wuc-
henich to repay any monies received from the income guarantee over
the ensuing eight-month period to the extent he earned an income
over $15,000 a month. Dr. Wuchenich alleges that SMH induced him
to sign the Physician Guarantee Agreement by orally assuring him
that it would be hiring more surgeons, updating its equipment, and
making other changes that would ensure his success in establishing an
anesthesiology practice at SMH.

Of relevance to the issues on appeal, Article I of the Physician
Guarantee Agreement provided as follows:

[Dr. Wuchenich], in consideration of the covenants and
agreements made by [SMH] contained herein, covenants
and agrees to practice medicine in the specialty of Anesthe-
sia at [SMH] and upon the effective date hereof to immedi-
ately apply, become upon commencement of this medical
practice at [SMH] and remain continuously during the term
of this Agreement, a member of [SMH's] Active Medical
Staff as defined in its Medical Staff Bylaws subject, how-
ever, to said Bylaws.

(J.A. 34-35). Also of relevance to the issues on appeal, Article XVII
of the Physician Guarantee Agreement contained the following
merger clause:

This writing constitutes the entire agreement between [Dr.
Wuchenich] and [SMH]. No oral or written prior or contem-
poraneous agreements shall have any force or effect, nor
shall any subsequent agreements have any force or affect
[sic], unless signed and embodied in writing.

3
(J.A. 41).

By its terms, the Physician Guarantee Agreement was not termina-
ble at will. Specifically, Article IV provided for an effective duration
of twelve months from the date Dr. Wuchenich began practice in
Woodstock, Virginia, unless earlier terminated as provided in the
Agreement. For example, Article VIII provided that the Agreement
would terminate if Dr. Wuchenich became mentally ill in the opinion
of a panel of three independent health practioners so that he became
unable to carry on the practice of anesthesiology for a period of three
months.

In accord with the terms of the Physician Guarantee Agreement,
upon the effective date of that Agreement, Dr. Wuchenich immedi-
ately applied for medical staff privileges at SMH. SMH in turn
granted him medical staff privileges.

After setting up his practice in Woodstock, Dr. Wuchenich did not
receive a warm reception from several of the physicians who prac-
ticed at SMH. For example, Dr. George Phillips (Dr. Phillips), the
only other physician practicing anesthesiology at SMH prior to Dr.
David Ciochetty (Dr. Ciochetty) arriving to fill the position of Chief
of Anesthesiology in the early spring of 1996, engaged in several
actions in an effort to quell competition from Dr. Wuchenich. First,
although Dr. Wuchenich postponed two surgeries for medical reasons
on patients of Dr. Baumunk, an orthopedic surgeon, Dr. Phillips
falsely told Dr. Baumunk that the postponements were unnecessary,
and that Dr. Wuchenich "was not a very good anesthesiologist." (J.A.
13). Thereafter, Dr. Baumunk refused to use Dr. Wuchenich's ser-
vices for a period of three months. Second, in his capacity as senior
anesthesiologist at SMH, Dr. Phillips instigated the implementation of
a new policy causing all operating room cases to be assigned to anes-
thesiologists according to surgeon request. He then asked all surgeons
to request him for their anesthesia needs, indicating to them that Dr.
Wuchenich was less than competent. Third, prior to the time the sur-
geon request policy was in place, Dr. Phillips, in his capacity as
senior anesthesiologist assigned the vast majority of cases to himself
and to Certified Registered Nurse Anesthetists (CRNA) performing
services under his supervision, for which he was compensated.

4
Another example of hostility encountered by Dr. Wuchenich at
SMH related to SMH's appointment of a Chief of Anesthesiology.
Prior to Dr. Ciochetty's appointment to the position of Chief of Anes-
thesiology, CRNA Clark held the position. After CRNA Clark
resigned, Dr. Wuchenich inquired regarding the availability of the
position of Chief of Anesthesiology at SMH and requested a job
description. SMH refused to provide him with a job description and
shortly thereafter told him in a letter dated January 17, 1996, that it
intended to continue to fill the position with a CRNA. SMH then
approved a thirty-day appointment of CRNA Hubbard pending com-
pletion of her application. CRNA Hubbard is the wife of Dr. C. Hub-
bard, an orthopedic surgeon who practiced at SMH. By hiring CRNA
Hubbard in this fashion, SMH facilitated and participated in a plan to
allow Dr. Phillips to maintain control of two operating rooms thereby
ensuring that Dr. Wuchenich would not succeed financially.

Approximately six weeks later, in March 1996, without consulting
Dr. Wuchenich or Dr. Phillips, SMH circulated a memorandum
announcing that it had contracted with Dr. Ciochetty to become Chief
of Anesthesiology. SMH did not ask for Dr. Wuchenich's opinion
regarding what effect the hiring of a third anesthesiologist would have
on his ability to earn a living, nor did SMH pay any attention to the
fact that there was an insufficient number of anesthesiology patients
to support the practices of two or more anesthesiologists and several
CRNAs.

Upon his appointment as Chief of Anesthesiology, Dr. Ciochetty
stated that he would be assigning all anesthesia cases. Concerned
about the effect a third anesthesiologist would have on his practice,
Dr. Wuchenich asked Dr. Ciochetty how he planned to deal with the
apparent lack of work to support three anesthesiologists and
expressed his concern that there was insufficient work for two anes-
thesiologists. Dr. Ciochetty responded that Dr. Wuchenich would not
need to work full time and that whatever SMH had promised him was
"`old news'" because he (Dr. Ciochetty) was in charge, and SMH had
hired him to do things his way. (J.A. 15). In his capacity as Chief of
Anesthesiology, acting for his own independent benefit and acting in
conspiracy with SMH, Dr. Ciochetty picked up where Dr. Phillips left
off, assigning the vast majority of cases to himself and the CRNAs
whom he was paid to supervise.

5
On or about March 20, 1996, Dr. Phillips and Linda Aleska, the
Co-Chief Operating Officer of SMH, had a conversation during which
Linda Aleska stated that "they would have to get rid of Dr. Wuc-
henich because he won't work with us." (J.A. 15) (internal quotation
marks omitted). On or about April 15, 1996, SMH unexpectedly
forced Dr. Phillips to resign his medical staff privileges at SMH.

After Dr. Phillips resigned, SMH, in consultation with Dr. Cio-
chetty, once again began recruiting another anesthesiologist, despite
the fact that Dr. Wuchenich had voiced his concerns over the lack of
sufficient cases for two, let alone three, anesthesiologists. As part of
SMH's recruiting efforts, in May 1996, Dr. Ciochetty sent a note to
Jim Greer stating that he (Dr. Ciochetty) would need a partner for his
pain clinic, even though Dr. Ciochetty had not discussed personnel
needs with Dr. Wuchenich.1 In sending this letter, Dr. Ciochetty acted
in his capacity as Chief of Anesthesiology, for his own economic ben-
efit, as well as in conspiracy with SMH to injure Dr. Wuchenich.

In addition to Dr. Phillips and Dr. Ciochetty's hostile actions
towards Dr. Wuchenich, Dr. Wuchenich was subjected to hostile con-
duct by Dr. Robert Karmy (Dr. Karmy). At the same time SMH
engaged in efforts to recruit Dr. Wuchenich, and after Dr. Wuchenich
accepted SMH's offer, SMH engaged in efforts to recruit Dr. Wuc-
henich's sister, Dr. Nanette Wuchenich. Dr. Nanette Wuchenich
maintained a successful medical practice in obstetrics and gynecology
(OB/GYN) in California. As an experienced, practicing OB/GYN
physician, Dr. Nanette Wuchenich posed a financial threat to Dr.
Karmy, who at the time was the only OB/GYN physician on staff at
SMH, and in the City of Woodstock. As a result of this financial
threat, Dr. Karmy had an openly hostile attitude toward Dr. Wuc-
henich in hopes of scaring off Dr. Wuchenich's sister from accepting
medical staff privileges at SMH. Out of the dozens of cases per-
formed by Dr. Karmy during Dr. Wuchenich's time at SMH, Dr.
Wuchenich was only assigned four of them and none at the request
of Dr. Karmy. Dr. Karmy falsely reported to Dr. Ciochetty, the Chief
of Anesthesiology at SMH, that Dr. Wuchenich possibly committed
malpractice with respect to two cases. These two cases ultimately
_________________________________________________________________
1 The complaint does not allege any facts describing the identity of Jim
Greer.

6
came before the Peer Review Committee for evaluation of Dr. Wuc-
henich's professional performance.

On or about May 28, 1996, at a regularly scheduled Peer Review
Committee meeting, four cases in which Dr. Wuchenich was
involved, including the two instigated by Dr. Karmy, were reviewed.
None of the patients involved in the four cases suffered any adverse
consequences as a result of the care provided by Dr. Wuchenich. Nor
did the Peer Review Committee obtain an opinion from an anesthesi-
ologist with respect to the actions of Dr. Wuchenich in the four cases.
Furthermore, the Peer Review Committee did not give Dr. Wuchenich
an opportunity to respond to any allegations made against him. In
spite of these facts and the fact that the actions of Dr. Wuchenich
were within the relevant standard of care for anesthesiologists in each
of the four cases, the Peer Review Committee recommended to the
Executive Committee of SMH that Dr. Wuchenich's privileges to
practice at SMH be revoked.

Dr. Wuchenich then received a letter dated May 31, 1996 (the Sus-
pension Letter), which stated, inter alia:

Based upon the results of the Peer Review, the Executive
Committee of the General Medical Staff has recommended
that your privileges be suspended at Shenandoah Memorial
Hospital. Based upon this recommendation and the fact that
the allegations pertain to matters that could endanger the
safety and well-being of patients, the acting Chief Executive
Officers have directed that you be removed from On Call
status until further notice. This action is deemed necessary
based upon the results of the Peer Review and the facts sur-
rounding the cases that were submitted for review.

(J.A. 49). SMH then promptly reported Dr. Wuchenich's suspension
to the State Board of Medical Examiners. SMH knew the State Board
of Medical Examiners would in turn report the suspension to the
National Practitioner's Data Bank, which would operate as a bar to
Dr. Wuchenich obtaining medical staff privileges at any other hospital
in the United States.

On September 12, 1996, SMH held a hearing to review Dr. Wuc-
henich's suspension. SMH appointed attorney Paul Neal as the hear-

7
ing officer. Paul Neal also serves as legal counsel to SMH. Paul Neal
along with six members of SMH's medical staff not previously men-
tioned constituted the hearing committee (the Hearing Committee).
The Hearing Committee heard opinions from anesthesiologists relat-
ing to Dr. Wuchenich's four cases. None stated they believed suspen-
sion of Dr. Wuchenich's medical staff privileges was appropriate.
Indeed, the only two outside expert anesthesiologists to testify were
brought by Dr. Wuchenich. These two experts testified without con-
tradiction that Dr. Wuchenich did not depart from the appropriate
standard of care for anesthesiologists with respect to the four cases at
issue.

On September 24, 1996, the Hearing Committee issued its report.
In its report, the Hearing Committee recommended that Dr. Wuc-
henich's medical staff privileges be reinstated, but that he undergo
proctoring, education, and training as follows: (1)"Observation by
Staff Anesthesiologist of not less than five inductions including at
least two obstetric inductions"; (2) "In service training in the trouble-
shooting and repair of the specific pieces of anesthesia equipment in
use at SMH"; and (3) "In service training as to the location of anesthe-
sia related equipment and resuscitation equipment in the Operating
Room at SMH." (J.A. 20). The Hearing Committee forwarded its
report to SMH's Medical Staff Executive Committee, which in turn
recommended to the Board of Directors of SMH that: (1) Dr. Wuc-
henich's medical staff privileges be reinstated; (2) prior to engaging
in further work at SMH, Dr. Wuchenich should be observed by a
Director of Anesthesiology at a health care facility on not less than
twenty-five inductions, including at least five obstetric inductions; (3)
prior to engaging in further work at SMH, Dr. Wuchenich should par-
ticipate in an in service training program on the trouble shooting and
repair of four particular pieces of anesthesia equipment; and (4) prior
to performing further independent work at SMH, Dr. Wuchenich
should undergo in service training with regard to the specific location
of anesthesia-related equipment and resuscitation equipment in the
operating room at SMH. Subsequently, on December 6, 1996, the
Executive Committee offered to lift the suspension of Dr. Wuc-
henich's medical staff privileges if Dr. Wuchenich would submit his
immediate resignation from the SMH Associate General Medical
Staff.

8
On December 12, 1996, Dr. Wuchenich met with the Board of
Appeals Committee who inquired regarding the circumstances of the
cases in question. Then on January 28, 1997, SMH offered to reinstate
Dr. Wuchenich's medical staff privileges without conditions in
exchange for Dr. Wuchenich agreeing in writing to waive any claims
against SMH, its employees, directors, or agents. Dr. Wuchenich
refused; yet, on April 16, 1997, nearly one year after SMH suspended
Dr. Wuchenich's medical staff privileges, SMH's Board of Director's
passed a resolution voiding the suspension of Dr. Wuchenich.

On or about May 2, 1997, SMH purported to send information
regarding the voided suspension to the National Practitioner's Data
Bank but failed to properly address the envelope causing it to be
returned and causing further delays in clearing Dr. Wuchenich's
name. Subsequently, SMH sent the information to the correct address,
but sent an improperly completed form. Therefore, the National Prac-
tioner's Data Bank returned the form to SMH for proper completion.
Finally, on or about June 10, 1997, the National Practioner's Data
Bank removed all mention of Dr. Wuchenich's suspension from its
records, approximately one year after SMH suspended his medical
staff privileges.

On May 21, 1998, following a detailed investigation, a hearing was
conducted by the Informal Conference Committee of the Common-
wealth of Virginia Board of Medicine to determine if the allegations
against Dr. Wuchenich with respect to the four cases at issue were
supported by evidence. After thoroughly reviewing the record, which
included the transcript of the hearing before the Hearing Committee,
the Informal Conference Committee voted to dismiss all charges
against Dr. Wuchenich and instructed its staff to note on the notice
of action that Dr. Wuchenich was completely exonerated of all
wrongdoing.

The following sections of SMH's bylaws setting forth the proce-
dures SMH should follow when considering the suspension of a phy-
sician's medical staff privileges are at issue in this case: SMH Bylaws
§§ 6.1(a), (c)-(e) and 6.2(a). SMH Bylaws§ 6.1(a) states that once a
case alleging professional misconduct has been reviewed by the Peer
Review Committee, the Peer Review Committee should refer it to the
Informal Review Committee in accordance with SMH Bylaws

9
§ 6.1(c). SMH Bylaws § 6.1(c) provides that "before curtailment or
suspension of clinical privileges is implemented, the Executive Com-
mittee shall immediately appoint an ad hoc committee for a prelimi-
nary review of the matter (the Informal Review Committee)." (J.A.
17) (internal quotation marks omitted). SMH Bylaws§ 6.1(d) pro-
vides, inter alia, that prior to the Informal Review Committee making
its report and recommendations for corrective action to the Executive
Committee, "the practitioner against whom corrective action has been
requested shall have an opportunity for an interview with the [Infor-
mal] Review Committee. At such interview, he/she shall be informed
of the general nature of the charges against him/her, and shall be
invited to discuss, explain or refute them." (J.A. 17) (internal quota-
tion marks omitted). SMH Bylaws § 6.1(e) provides that upon receipt
of a report and recommendation of the Informal Review Committee
requesting reduction or suspension of clinical privileges, SMH's
"President/CEO shall notify the affected practitioner that he/she shall
be permitted to make an appearance before the Executive Committee
prior to its taking action on such request." (J.A. 17-18) (internal quo-
tation marks omitted). SMH Bylaws § 6.2(a) provides that a "Sum-
mary Suspension," i.e., suspension of medical staff privileges without
following the procedures required in SMH Bylaws§ 6.1, "may only
be imposed whenever action must be taken immediately, to protect
the life of any patient or to reduce the substantial likelihood of imme-
diate injury or damage to the health o[r] safety of any patient,
employee, or other person present in SMH." (J.A. 18-19) (internal
quotation marks omitted).

According to Dr. Wuchenich's complaint, SMH did not suspend
Dr. Wuchenich's medical staff privileges pursuant to SMH Bylaws
§ 6.2(a). Therefore, under SMH's Bylaws, SMH was required to com-
ply with the procedures set forth in SMH Bylaws§ 6.1 in suspending
Dr. Wuchenich's medical staff privileges.2 SMH failed to comply
_________________________________________________________________
2 We note that SMH argues in its brief and asserted at oral argument
that liberally construing the factual allegations of Dr. Wuchenich's com-
plaint reveals that it suspended Dr. Wuchenich's medical staff privileges
pursuant to SMH Bylaws § 6.2(a). SMH Bylaws§ 6.2(a) allows for the
summary suspension of a physician's medical staff privileges (i.e., sus-
pension without prior notice to the physician or an opportunity to be
heard) "whenever action must be taken immediately, to protect the life

10
with several of the procedures. First, SMH failed to appoint an Infor-
mal Review Committee prior to suspending Dr. Wuchenich's medical
staff privileges as required by SMH Bylaws § 6.1(c). Second, SMH
failed to allow Dr. Wuchenich the opportunity for an interview with
the Informal Review Committee prior to suspending his medical staff
privileges as required by SMH Bylaws § 6.1(d). Third, neither of
SMH's Co-Chief Executive Officers notified Dr. Wuchenich that he
was permitted to make an appearance before the Executive Commit-
tee prior to the Executive Committee suspending his medical staff
privileges as required by SMH Bylaws § 6.1(e).

On June 1, 1998, Dr. Wuchenich filed a six-count complaint in the
United States District Court for the Western District of Virginia based
upon diversity jurisdiction. See 28 U.S.C.§ 1332. The complaint
asserts claims alleging breach of contract by SMH; negligent breach
of contract by SMH; statutory conspiracy to injure a person in his rep-
utation, business or profession against SMH, Dr. Karmy, Dr. Cio-
chetty, and Dr. Phillips (collectively the Defendants); common law
conspiracy to breach a contract against the Defendants; defamation
against SMH, Dr. Karmy, and Dr. Phillips; and tortious interference
with an existing contract and business expectancies against the Defen-
dants. The complaint alleged that as a result of the actions complained
about, Dr. Wuchenich suffered $1,121,000 in economic damages and
_________________________________________________________________
of any patient or to reduce the substantial likelihood of immediate injury
or damage to health o[r] safety of any patient." (J.A. 19). In support of
its assertion, SMH relies upon the following language found in its May
31, 1996 letter to Dr. Wuchenich, which is attached as Exhibit G to the
complaint: "Based upon the results of the Peer Review, the Executive
Committee of the General Medical Staff has recommended that your
privileges be suspended at Shenandoah Memorial Hospital. Based upon
this recommendation and the fact that the allegations pertain to matters
that could endanger the safety and well-being of patients, the acting
Chief Executive Officers have directed that you be removed from On
Call status until further notice." (J.A. 49) (emphasis added). Liberally
viewing this language in the light most favorable to Dr. Wuchenich
reveals that SMH did not necessarily suspend Dr. Wuchenich's medical
staff privileges pursuant to SMH Bylaws § 6.2(a). The language in
SMH's letter is simply not as definitive as that required by SMH Bylaws
§ 6.2(a).

11
$500,000 in damages for emotional distress and loss of reputation.
His complaint also sought punitive damages.

The Defendants timely filed Rule 12(b)(6) motions to dismiss. A
magistrate judge considered the motions and reported and recom-
mended dismissal of the claims alleging breach of contract, negligent
breach of contract, and common law conspiracy to breach a contract.
However, the magistrate judge recommended refusing dismissal with
respect to the claims alleging statutory conspiracy to injure a person
in his reputation, business, trade or profession and tortious interfer-
ence with an existing contract and business expectancies. With
respect to the claim alleging defamation, the magistrate judge granted
Dr. Wuchenich ten days to supplement and amend his complaint to
state the precise words of the alleged defamation, but Dr. Wuchenich
elected not to do so.

On January 29, 1999, in a memorandum opinion, the district court
adopted the magistrate judge's report and recommendations with
respect to the claims alleging breach of contract, negligent breach of
contract, and common law conspiracy to breach a contract. The dis-
trict court, however, declined to adopt the magistrate judge's recom-
mendations with respect to the claims alleging statutory conspiracy to
injure a person in his reputation, business, trade or profession and tor-
tious interference with an existing contract and business expectancies.
Thus, the district court dismissed those claims as well. The district
court also dismissed the claim alleging defamation. Thus, the district
court dismissed all counts of Dr. Wuchenich's complaint pursuant to
Rule 12(b)(6).

On February 12, 1999, Dr. Wuchenich made a motion for reconsid-
eration, which the district court denied on March 24, 1999. This
timely appeal followed. On appeal, Dr. Wuchenich challenges the dis-
trict court's dismissal of all of his claims.

II

Dr. Wuchenich first contends the district court erred in granting the
Defendants' Rule 12(b)(6) motion with respect to his breach of con-
tract claim. In that claim, Dr. Wuchenich alleges, inter alia: (1) SMH
violated SMH Bylaws § 6.1(c) by failing to appoint an Informal

12
Review Committee prior to suspending his medical staff privileges;
(2) SMH violated SMH Bylaws § 6.1(d) by failing to allow him the
opportunity for an interview with the Informal Review Committee to
discuss, explain or refute the allegations against him prior to suspend-
ing his medical staff privileges; and (3) SMH violated SMH Bylaws
§ 6.1(e) when neither of SMH's Co-Chief Executive Officers notified
Dr. Wuchenich that he was permitted to make an appearance before
the Executive Committee prior to the Executive Committee suspend-
ing his medical staff privileges. In a somewhat different vein, Dr.
Wuchenich alleges that SMH breached its oral assurances made
before and after the execution of the Physician Guarantee Agreement
that it would assign him an adequate number of patients to assure his
ability to establish his practice within the Woodstock, Virginia area.

We agree with Dr. Wuchenich that he has stated a breach of con-
tract claim against SMH with respect to SMH's Bylaws. However, we
disagree with Dr. Wuchenich that he has stated a claim for breach of
SMH's alleged oral assurances.

Rule 12(b)(6) provides for dismissal of a complaint for "failure to
state a claim upon which relief can be granted." Fed. R. Civ. P.
12(b)(6). The purpose of a Rule 12(b)(6) motion is to test the suffi-
ciency of a complaint; "importantly, [a Rule 12(b)(6) motion] does
not resolve contests surrounding the facts, the merits of a claim, or the
applicability of defenses." Republican Party v. Martin, 980 F.2d 943,
952 (4th Cir. 1992). Rather, a Rule 12(b)(6) motion should only be
granted if, after accepting all well-pleaded allegations in the plain-
tiff's complaint as true and drawing all reasonable factual inferences
from those facts in the plaintiff's favor, it appears certain that the
plaintiff cannot prove any set of facts in support of his claim entitling
him to relief. See id. For purposes of a Rule 12(b)(6) motion, we are
not required to accept as true the legal conclusions set forth in a plain-
tiff's complaint. See District 28, United Mine Workers of Am., Inc. v.
Wellmore Coal Corp., 609 F.2d 1083, 1085 (4th Cir. 1979).

A. SMH's Alleged Breach of its Bylaws.

The parties agree that the law of Virginia controls all substantive
legal issues in this case. Under Virginia law, "[t]he essential elements
of a cause of action for breach of contract are: (1) a legal obligation

13
of a defendant to the plaintiff, (2) a violation or breach of that right
or duty, and (3) a consequential injury or damage to the plaintiff."
Westminster Investing Corp. v. Lamps Unlimited, Inc. , 379 S.E.2d
316, 317 (Va. 1989) (internal quotation marks and footnote omitted).

Dr. Wuchenich first argues that the following language constituting
Article I in the Physician Guarantee Agreement expressly incorpo-
rated SMH's Bylaws as binding obligations on both himself and
SMH:

[Dr. Wuchenich], in consideration of the covenants and
agreements made by [SMH] contained herein, covenants
and agrees to practice medicine in the specialty of Anesthe-
sia at [SMH] and upon the effective date hereof to immedi-
ately apply, become upon commencement of this medical
practice at [SMH] and remain continuously during the term
of this Agreement, a member of [SMH's] Active Medical
Staff as defined in its Medical Staff Bylaws subject, how-
ever, to said Bylaws.

(J.A. 34-35) (emphasis added). Alternatively, Dr. Wuchenich argues
that because SMH made his medical staff privileges subject to and
governed by its bylaws, SMH had a corresponding obligation implied
by law to abide by its bylaws in any attempt to suspend or revoke his
medical staff privileges. The merger clause in the Physician Guaran-
tee Agreement, Dr. Wuchenich contends, does not preclude him from
alleging the existence of such an implied legal obligation because an
exception to the parol evidence rule known as the collateral contract
doctrine applies.

SMH vigorously denies that by agreeing to the terms of Article I
of the Physician Guarantee Agreement it intended to be legally obli-
gated to Dr. Wuchenich to follow its bylaws in suspending his medi-
cal staff privileges. Furthermore, SMH argues that the merger clause
in the Physician Guarantee Agreement precludes Dr. Wuchenich from
relying upon parol evidence to establish such an obligation. Finally,
SMH argues that even if we determine that it had an obligation (under
the Physician Guarantee Agreement or implied by law) to follow its
bylaws in suspending Dr. Wuchenich's medical staff privileges, the

14
facts as alleged in the complaint establish that it fully complied with
its bylaws in suspending Dr. Wuchenich's medical staff privileges.

In our review of the district court's decision to dismiss Dr. Wuc-
henich's breach of contract claim alleging SMH breached its bylaws
in suspending Dr. Wuchenich's medical staff privileges, we are
guided by the following principles:

If the terms of the parties' agreement are contained in a
clear explicit writing, that writing is the sole memorial of
the contract and the sole evidence of the agreement. In that
event, . . . parol evidence . . . could not be used to explain
the written contractual terms.

Conversely, the rule excluding parol evidence has no
application where the writing on its face is ambiguous,
vague, or indefinite. In such a case, the proper construction
of the contract is an issue for the trier of fact, and the court
should receive extrinsic evidence to ascertain the intention
of the parties and to establish the real contract between
them.

Cascades N. Venture v. PRC, Inc., 457 S.E.2d 370, 373 (Va. 1995)
(internal citations omitted). The language of a written contract is
ambiguous if it is reasonably susceptible to more than one interpreta-
tion or makes reference to two or more things at the same time. See
Tuomala v. Regent Univ., 477 S.E.2d 501, 505 (Va. 1996). "The ques-
tion of whether a writing is ambiguous is one of law, not of fact." Id.
at 505.

Below, the district court concluded that the language contained in
Article I "cannot be construed under a fair reading as giving rise to
an incorporation by reference of the provision of the Bylaws as provi-
sions of the contract binding on SMH as well as plaintiff." (J.A. 158).
We disagree with this conclusion. In our view, the language contained
in Article I referring to SMH's Bylaws (i.e., "subject . . . to said
Bylaws," (J.A. 35)), is reasonably susceptible to two interpretations,
and is, therefore, ambiguous. One reasonable interpretation is that
only Dr. Wuchenich was obligated to abide by SMH's Bylaws. The
other is that both Dr. Wuchenich and SMH had a legal obligation in

15
favor of each other to abide by SMH's Bylaws. In this regard, the trier
of fact could reasonably construe the language "subject . . . to said
Bylaws," id., as implying that SMH intended to follow its bylaws
with respect to its conduct toward Dr. Wuchenich.

Given our conclusion that the terms of the Physician Guarantee
Agreement are ambiguous regarding whether SMH had a legal obli-
gation to abide by its bylaws with respect to its conduct toward Dr.
Wuchenich, the merger clause does not bar Dr. Wuchenich from
offering parol evidence to establish that he and SMH intended such
an obligation to exist on the part of SMH at the time they executed
the Physician Guarantee Agreement. In light of this conclusion, we
need not and do not address Dr. Wuchenich's alternative argument
that SMH has an obligation implied by law to abide by its bylaws
with respect to Dr. Wuchenich.

We next address SMH's argument that in any event, it fully com-
plied with its bylaws in suspending Dr. Wuchenich's medical staff
privileges. Specifically, SMH asserts the facts as alleged in the com-
plaint and contained in Exhibit H to the complaint establish that it
gave Dr. Wuchenich sufficient notice to appear before the Peer
Review Committee at its regularly scheduled meeting on May 28,
1996. In this regard, SMH is referring to Dr. Wuchenich's allegation
in the complaint that a regularly scheduled Peer Review Committee
meeting was held on or about May 28, 1996, and to the following
statements in Exhibit H to the complaint: (1) "Cases 2 and 4 were
placed in Dr. Wuchenich's mailbox for review on May 22, 1996,"
(J.A. 57); and (2) "Case 3 was placed in Dr. Wuchenich's mailbox for
review on May 22, 1996," (J.A. 58).3 SMH argues that, collectively,
the allegation about the meeting on May 28, 1996, and these state-
ments contained in Exhibit H conclusively establish that Dr. Wuc-
henich received sufficient notice to appear in his defense before the
Peer Review Committee on May 28, 1996.
_________________________________________________________________
3 Exhibit H is the Written Statement of the Executive Committee,
issued on December 6, 1996, regarding the professional misconduct
charges against Dr. Wuchenich. The Written Statement of the Executive
Committee contains a sequence of events that the Executive Committee
opines demonstrate that SMH took the charges against Dr. Wuchenich
very seriously and adhered to its bylaws throughout the review process.

16
We disagree. First, the complaint in no way incorporates by refer-
ence, as factual allegations of the complaint, the statements in Exhibit
H relied upon by SMH. Indeed, as is clear from simply reading the
complaint, the complaint only includes Exhibit H as an attachment for
the limited purpose of providing direct support for the allegation that
"on December 6, 1996, the [Executive Committee] offered to lift the
Summary Suspension of Dr. Wuchenich's privileges if Dr. Wuc-
henich would `submit his immediate resignation from the Shenandoah
Memorial Hospital Associate General Medical Staff.'" (J.A. 21)
(quoting Ex. H at p. 6). Alternatively, even considering, for purposes
of argument, that the statements in Exhibit H at issue are factual alle-
gations of the complaint, they do not allege sufficient notice to Dr.
Wuchenich to appear before the Peer Review Committee on May 28,
1996, even when coupled with the allegation that"[o]n or about May
28, 1996, at a regularly scheduled Peer Review Committee meeting
four cases in which Dr. Wuchenich was involved were reviewed,"
(J.A. 16). Critically, nothing in this combination of allegations sug-
gests that SMH alerted Dr. Wuchenich that it would be reviewing his
four cases at the regularly scheduled Peer Review Committee meeting
on May 28, 1996.4

In sum, we hold the complaint sufficiently alleges that SMH owed
Dr. Wuchenich the legal obligation to follow its bylaws, SMH
breached that obligation, and Dr. Wuchenich suffered damages as a
result. Thus, the district court erred by dismissing Dr. Wuchenich's
breach of contract claim alleging breach of SMH's Bylaws. We,
therefore, vacate the district court's dismissal of this portion of Dr.
_________________________________________________________________
4 SMH also argues that the following statement in Exhibit H shows that
it gave Dr. Wuchenich sufficient notice under its bylaws to appear before
the Executive Committee: "Attempts to reach Dr. Wuchenich on Thurs-
day, May 30, 1996 to inform him of the pending [Executive Committee
meeting] at which time Dr. Wuchenich would have been invited to attend
were further explained. All attempts were unsuccessful and messages left
had no response." (J.A. 59). SMH's argument is without merit, because,
as we have already explained, these statements are not incorporated as
allegations in the complaint. Furthermore, assuming arguendo they are,
viewing them in the light most favorable to Dr. Wuchenich, they do not
establish that SMH gave Dr. Wuchenich sufficient notice under its
bylaws to appear before the Executive Committee to defend himself.

17
Wuchenich's breach of contract claim and remand for further pro-
ceedings.

B. Oral Assurances Regarding Assigning Patients.

We next consider Dr. Wuchenich's challenge to the district court's
dismissal of the portion of his breach of contract claim attempting to
enforce oral assurances on the part of SMH made prior and subse-
quent to execution of the Physician Guarantee Agreement to the effect
that it would assign him a sufficient volume of patients to establish
a full-time practice in the Woodstock, Virginia area. Applying Vir-
ginia substantive law, we uphold the district court's dismissal as it
relates to these alleged oral assurances.

The parol evidence rule is a basic principle of contract law provid-
ing that parol evidence is not admissible if offered to vary or contra-
dict the terms of a complete and unambiguous written instrument. See
Amos v. Coffey, 320 S.E.2d 335, 337 (Va. 1984). Under Virginia law,
the parol evidence rule is not applicable if either the partial integra-
tion doctrine or the collateral contract doctrine is applicable. See Jim
Carpenter Co. v. Potts, 495 S.E.2d 828, 833 (Va. 1998). Under the
partial integration doctrine "[w]here the entire agreement has not been
reduced to writing, parol evidence is admissible, not to contradict or
vary its terms but to show additional independent facts contemporane-
ously agreed upon, in order to establish the entire contract between
the parties." Renner Plumbing, Heating & Air Conditioning, Inc. v.
Renner, 303 S.E.2d 894, 898 (Va. 1983) (internal quotation marks
omitted). Under the collateral contract doctrine, parol evidence is
admissible to establish a "prior or contemporaneous oral agreement
that is independent of, collateral to and not inconsistent with the writ-
ten contract, and which would not ordinarily be expected to be
embodied in the writing." Jim Carpenter Co. , 495 S.E.2d at 833
(internal quotation marks omitted).

The language of the Physician Guarantee Agreement makes clear
that its purpose was to assist Dr. Wuchenich in establishing an anes-
thesiology practice in the Woodstock, Virginia area. The merger
clause states that the Physician Guarantee Agreement is the entire
agreement between the parties. Thus, to the extent the Physician
Guarantee Agreement addresses efforts on the part of SMH to assist

18
Dr. Wuchenich in establishing an anesthesiology practice in the
Woodstock, Virginia area, it represents the entire agreement between
the parties.

Under the parol evidence rule, Dr. Wuchenich cannot introduce
evidence that prior to execution of the Physician Guarantee Agree-
ment, SMH assured him of a sufficient patient volume to establish an
anesthesiology practice in the Woodstock, Virginia area, because to
do so would clearly contradict the unambiguous language of the Phy-
sician Guarantee Agreement limiting SMH's obligation to assist Dr.
Wuchenich in establishing his anesthesiology practice to providing
him a salary guarantee under the terms specified. See Amos, 320
S.E.2d at 337. Hand in glove with this conclusion is the conclusion
that the partial integration doctrine is not applicable here given the
fact that the Physician Guarantee Agreement is a complete integration
of the parties' agreement with respect to SMH's obligations to assist
Dr. Wuchenich in establishing his anesthesiology practice. See Ren-
ner Plumbing, 303 S.E.2d at 898. Furthermore, because assurances by
a hospital to assign a new physician a sufficient number of patients
to establish a practice in the area in which the hospital is located
would ordinarily be expected to be included in an agreement between
the physician and the hospital whereby the hospital guarantees the
physician a salary for a specified period of time, the collateral con-
tract doctrine is also inapplicable. See Jim Carpenter Co., 495 S.E.2d
at 833.

Finally, to the extent Dr. Wuchenich alleges an oral modification
of the Physician Guarantee Agreement with respect to SMH's oral
assurances of patient volume allegedly made subsequent to execution
of the Physician Guarantee Agreement, his argument is foreclosed by
Virginia case law requiring a mutual intention to modify the existing
contract. See Cardinal Dev. v. Stanley Const. Co., 497 S.E.2d 847,
850-51 (Va. 1998). Even viewing the allegations in the complaint in
the light most favorable to Dr. Wuchenich, one cannot reasonably
conclude that SMH intended to modify any terms of the Physician
Guarantee Agreement.

For these reasons, we affirm the district court's dismissal of the
portion of Dr. Wuchenich's breach of contract claim seeking to
enforce oral assurances allegedly made by SMH to assign him a suffi-

19
cient volume of patients to establish an anesthesiology practice in the
Woodstock, Virginia area.5

III

Dr. Wuchenich next challenges the district court's dismissal of his
claim alleging the Defendants committed civil conspiracy in violation
of Virginia Code § 18.2-499 to 500 by conspiring to injure him in his
reputation, business, trade and profession. Before addressing the mer-
its of Dr. Wuchenich's challenge, it is necessary to set forth the terms
of Virginia's civil conspiracy statute and the relevant case law.

Virginia's civil conspiracy statute states, in pertinent part, that
"[a]ny two or more persons who combine, associate, agree, mutually
undertake or concert together for the purpose of . .. willfully and
maliciously injuring another in his reputation, trade, business or pro-
fession by any means whatever" shall be liable civilly for treble dam-
ages. Va. Code Ann. § 18.2-499 to 500 (Michie 1996). The Virginia
Supreme Court has made clear that this statute does not require proof
that a conspirator's primary and overriding purpose is to injure
another in his reputation, business, trade or profession. See Commer-
cial Bus. Sys., Inc. v. BellSouth Servs. Inc., 453 S.E.2d 261, 267 (Va.
1995). Instead, only legal malice is required, i.e., proof that the defen-
dant acted intentionally, purposely, and without lawful justification.
See id.

Furthermore, the "two or more persons" requirement is not satisfied
_________________________________________________________________
5 Dr. Wuchenich also contends the district court erred in dismissing his
claim alleging negligent breach of contract, which claim he admits in his
Reply Brief is identical in substance to his claim alleging breach of con-
tract. Because Dr. Wuchenich's claim alleging negligent breach of con-
tract is duplicative of his claim alleging breach of contract, and because
Virginia substantive law does not recognize a tort cause of action based
solely on the negligent breach of a contractual duty with no correspond-
ing common law duty, we hold the district court properly dismissed Dr.
Wuchenich's claim alleging negligent breach of contract. See Foreign
Mission Bd. v. Wade, 409 S.E.2d 144, 148 (Va. 1991) (rejecting plain-
tiff's attempt to establish a tort action based solely on the negligent
breach of a contractual duty with no corresponding common law duty).

20
by proof that a principal conspired with one of its agents acting within
the scope of his agency. See Charles E. Brauer Co. v. Nationsbank,
466 S.E.2d 382, 386-87 (Va. 1996); Fox v. Deese , 362 S.E.2d 699,
708 (Va. 1987). Under such a circumstance, a conspiracy is a legal
impossibility because a principal and an agent are not separate per-
sons for purposes of the conspiracy statute. See id.

Virginia has thus far not recognized an exception to the general
rule that a principal cannot conspire with one of its agents to form a
conspiracy, a rule sometimes referred to as the intracorporate immu-
nity rule. However, in Greenville Publ'g Co. v. Daily Reflector, Inc.,
496 F.2d 391 (4th Cir. 1974), we observed that an exception to the
general rule "may be justified when the officer has an independent
personal stake in achieving the corporation's illegal objective." Id. at
399. In that case, we held that the president of the defendant company
could conspire with it for purposes of an antitrust claim under the
Sherman Act, see 15 U.S.C. § 1, where he had a financial interest in
another company that competed with the plaintiff company and he
would directly benefit if the plaintiff company was eliminated as a
competitor. See id. at 400.

In an en banc case seventeen years later, we revisited the personal
stake exception in a case somewhat similar to the facts in the case
before us. See Oksanen v. Page Mem'l Hosp., 945 F.2d 696 (4th Cir.
1991) (en banc). In Oksanen, a physician brought an antitrust claim
under the Sherman Act against a hospital and several other physicians
who were members of its medical staff as a result of his medical staff
privileges being revoked. See id. at 702. The plaintiff physician
alleged that the hospital and the other physicians violated the Sher-
man Act by conspiring to revoke his medical staff privileges. See id.
The hospital and the other physicians argued that they were legally
incapable of conspiring. See id. The plaintiff physician argued in
response that the personal stake exception applied. See id. at 702-03.

We held that under the circumstances of that case, the exception
did not apply. First, we recognized that only one of the individual
defendants stood to directly gain from the revocation of the plaintiff
physician's medical staff privileges. See id. at 705. That physician
was the only defendant physician who could be said to have been in

21
competition with the plaintiff physician. See id. We explained that in
any event, the

more important aspect of Greenville for the purposes of peer
review is the degree of control the officer or agent with the
independent interest exercised over the defendant firm's
decision making process. If the officer cannot cause a
restraint to be imposed and his firm would have taken the
action anyway, then any independent interest is largely
irrelevant to the antitrust analysis.

Id. (emphasis added). In Oksanen, the hospital board retained author-
ity in the end over staff privilege decisions. See id. at 705-06. Because
revocation of the plaintiff physician's medical staff privileges was
subject to review by the hospital, and because decision making
authority in the plaintiff physician's case was dispersed among a
number of individuals, we held the personal stake exception did not
apply. See id. at 706.

Liberally construed, Dr. Wuchenich's complaint alleges that Drs.
Phillips, Ciochetty, and Karmy, on the one hand and SMH on the
other hand conspired to injure Dr. Wuchenich in his reputation, busi-
ness, trade, and profession by: (1) Dr. Phillips and Dr. Ciochetty fail-
ing to assign Dr. Wuchenich a fair share of the patient load; (2) Dr.
Karmy instigating peer review of two of Dr. Wuchenich's cases with-
out just cause; and (3) SMH suspending Dr. Wuchenich's medical
staff privileges without just cause. Initially, the rule that a principal
cannot conspire with one of its agents appears to resolve this claim
in favor of the Defendants. Clearly, the actions of the individual phy-
sicians of which Dr. Wuchenich complains fell within the scope of
their agency authority from SMH. Thus, the question arises as to
whether the personal stake exception applies.6

Our careful review of the allegations in the complaint reveals that
the exception applies in part. The personal stake exception does not
_________________________________________________________________
6 The Defendants do not dispute that under the appropriate set of facts,
Virginia law would recognize the applicability of the personal stake
exception to the intracorporate immunity rule as developed by our court
with respect to the Sherman Act.

22
apply to the extent Dr. Wuchenich alleges a conspiracy to suspend his
medical staff privileges, including Dr. Karmy's action in recommend-
ing that two of Dr. Wuchenich's cases be subject to peer review. This
is because the facts alleged in Dr. Wuchenich's complaint parallel the
facts of Oksanen: SMH's Board of Directors, its governing body,
retained decision making authority over decisions involving medical
staff privileges and review was disbursed among various committees
that did not include the defendant physicians. See id. at 705-06. The
personal stake exception does apply, however, to the allegation that
SMH conspired with Dr. Phillips and Dr. Ciochetty to injure Dr.
Wuchenich in his reputation, business, trade and profession by failing
to assign Dr. Wuchenich a fair number of patients. Dr. Wuchenich's
complaint plainly alleges that in so doing these physicians were acting
for their own independent financial benefit by reducing direct compe-
tition. Therefore, we affirm the district court's dismissal of Dr. Wuc-
henich's claim alleging civil statutory conspiracy against the
Defendants except to the extent it alleges a conspiracy by SMH, Dr.
Phillips, and Dr. Ciochetty to injure Dr. Wuchenich in his reputation
and to injure his ability to engage in his business, trade, and profes-
sion by failing to assign him a fair number of patients. On that point,
we vacate the district court's dismissal and remand for further pro-
ceedings.

IV

Next, Dr. Wuchenich contends the district court erred in dismissing
his claim against the Defendants alleging common law conspiracy to
breach contractual obligations.

Applying Virginia substantive law, we hold the district court acted
properly in dismissing Dr. Wuchenich's claim alleging common law
conspiracy to breach contractual obligations. Virginia "common law
recognizes a cause of action against those who conspire to induce the
breach of a contract, even when one of the alleged conspirators is a
party to the contract." Catercorp, Inc. v. Catering Concepts, Inc., 431
S.E.2d 277, 281 (Va. 1993). The "foundation" of an action alleging
common law conspiracy "is the damage caused by the acts committed
in furtherance of the conspiracy." Commercial Bus. Sys., Inc., 453
S.E.2d at 267.

23
Here, the only contractual obligation that Dr. Wuchenich suffi-
ciently alleges SMH breached is the obligation to abide by its bylaws
in suspending his medical staff privileges. Thus, we must consider
whether the allegations in the complaint sufficiently allege a cause of
action with respect to each defendant for common law conspiracy to
cause SMH to breach its bylaws with respect to suspending Dr. Wuc-
henich's medical staff privileges.

The complaint does not allege that Dr. Phillips or Dr. Ciochetty
had any hand in any of the proceedings leading to the suspension of
Dr. Wuchenich's medical staff privileges; indeed, the allegations in
the complaint suggest no involvement. With respect to Dr. Phillips,
the complaint alleges that he was "[u]nexpectedly . . . forced to resign
his medical staff privileges at SMH on or about April 15, 1996," (J.A.
15), which is a month and a half before the first meeting in the review
process took place on May 28, 1996. With respect to Dr. Ciochetty,
the complaint alleges that even though Dr. Ciochetty was Chief of
Anesthesiology, he was not interviewed by the Peer Review Commit-
tee or asked to give an opinion before the Peer Review Committee
regarding Dr. Wuchenich's cases. In sum, the complaint fails to allege
sufficient facts, viewed in the light most favorable to Dr. Wuchenich,
from which a reasonable jury could find that Dr. Phillips or Dr. Cio-
chetty conspired with any other defendant to cause SMH to breach its
contractual obligation to Dr. Wuchenich to abide by its bylaws.

The only allegation pertaining to Dr. Karmy and the proceedings
leading to Dr. Wuchenich's suspension is that Dr. Karmy instigated,
without just cause, two of the four cases reviewed by the Peer Review
Committee. We are at a loss to see how this allegation supports a
claim for conspiracy to cause SMH to breach its obligation to Dr.
Wuchenich to abide by the procedural protections in its bylaws in sus-
pending Dr. Wuchenich's medical staff privileges. Finally, without a
party with whom to conspire, Dr. Wuchenich's claim alleging com-
mon law conspiracy against SMH necessarily fails. In sum, we affirm
the district court's dismissal of Dr. Wuchenich's claim alleging com-
mon law conspiracy to breach contractual obligations.7
_________________________________________________________________
7 Given our reasons for affirming the district court's dismissal of this
claim, we need not address the Defendants' alternative argument that the
claim fails under the general rule that a principal cannot legally conspire
with its agents.

24
V

Dr. Wuchenich next challenges the district court's dismissal of his
claim against SMH, Dr. Karmy, and Dr. Phillips alleging common
law defamation.

The district court dismissed Dr. Wuchenich's defamation claim
because, according to the district court, Dr. Wuchenich failed to plead
the "exact words allegedly defaming plaintiff, or the precise occasions
on which those statements were made, or to whom they were made."
(J.A. 166). In so doing, the district court relied upon Federal Land
Bank v. Birchfield, 3 S.E.2d 405 (Va. 1939), which requires a plaintiff
asserting a defamation claim in Virginia state court to plead the exact
words that the plaintiff alleges are defamatory in order to survive a
motion to dismiss. See id. at 410.

The district court's analysis is erroneous because the sufficiency of
Dr. Wuchenich's complaint to properly state a claim for relief should
be tested under Federal Rule of Civil Procedure 8 (Rule 8), which
specifies the general rules of pleading in federal court. See Hanna v.
Plumer, 380 U.S. 460, 465 (1965) (holding that federal courts sitting
in diversity must apply state substantive law and federal procedural
law). Rule 8 does not contain a special pleading requirement for defa-
mation. Thus, according to Rule 8(a), we should test the sufficiency
of Dr. Wuchenich's claim alleging defamation to determine whether
it meets Rule 8(a)'s liberal pleading requirement of a short and plain
statement showing that he is entitled to relief. See 5 Charles Alan
Wright & Arthur R. Miller, Federal Practice & Procedure: Civil 2d
§ 1245 (1990).

In general, defamation consists of the publication of an injurious
falsehood. See Gazette, Inc. v. Harris, 325 S.E.2d 713, 724-25 (Va.
1985). Unlike other jurisdictions, Virginia makes no distinction
between slander (spoken words) and libel (written words) in actions
for common law defamation. See Fleming v. Moore , 275 S.E.2d 632,
635 (Va. 1981). Virginia recognizes two general varieties of defama-
tion: (1) words that are defamatory per se; and (2) all other defama-
tory words which, though not in themselves actionable, occasion a
person special damage. See Wells v. Liddy, 186 F.3d 505, 522 (4th
Cir. 1999), cert. denied, 120 S. Ct. 939 (2000). Words that are defam-

25
atory per se are words that: (1) impute the commission of a criminal
offense involving moral turpitude; (2) impute infection of a conta-
gious disease, where if true, would exclude the plaintiff from society;
(3) impute unfitness to perform the offices or duties of employment,
or lack of integrity in the discharge of those duties; or, (4) prejudice
a person in his or her profession or trade. See id. Furthermore, "the
author or originator of a defamation is liable for a republication or
repetition thereof by third persons, provided it is the natural and prob-
able consequence of his act, or he has presumptively or actually
authorized or directed its republication." Weaver v. Beneficial Fin.
Co., 98 S.E.2d 687, 690 (Va. 1957); see also Blue Ridge Bank v. Veri-
banc, Inc., 866 F.2d 681, 689 (4th Cir. 1989).

Effective July 1, 1995, a cause of action for defamation under Vir-
ginia law has been governed by a one-year statute of limitation pre-
scribed by Virginia Code § 8.01-247.1. See Va. Code Ann. § 8.01-
247.1 (Michie 1999 Supp.). A cause of action for defamation accrues
for statute of limitation purposes on the date the defamatory acts
allegedly occurred. See Jordan v. Shands, 500 S.E.2d 215, 218 (Va.
1998).

Construing the allegations in the complaint in the light most favor-
able to Dr. Wuchenich, and drawing all reasonable inferences in his
favor, Dr. Wuchenich's defamation claim seeks redress for the fol-
lowing alleged conduct: (1) Dr. Phillips falsely stating to Dr. Bau-
munk and all surgeons practicing at SMH, at some point in time prior
to April 6, 1996, that Dr. Wuchenich "was not a very good anesthesi-
ologist," (J.A. 13), and that he was less than competent; (2) Dr.
Karmy instigating two peer review cases of Dr. Wuchenich by falsely
reporting, at some point in time prior to May 28, 1996, that Dr. Wuc-
henich did not meet the standard of care with respect to two patients;
(3) SMH falsely reporting on May 31, 1996, to various persons,
including staff members and administrators of SMH, that Dr. Wuc-
henich is not competent to practice anesthesiology; (4) SMH report-
ing shortly after May 31, 1996, to the State Board of Medicine, which
in turn reported to the National Practioner Data Bank, that it (SMH)
suspended Dr. Wuchenich's medical staff privileges for lack of pro-
fessional competence; (5) SMH continuing to publish the false state-
ment that Dr. Wuchenich is professionally incompetent in hearings
held by SMH after SMH suspended Dr. Wuchenich's medical staff

26
privileges, the last of which occurred on December 12, 1996; (6)
SMH publishing the false statement that Dr. Wuchenich is profession-
ally incompetent through conversations within SMH and the commu-
nity at large and through written correspondence with its staff and
administrators until SMH reinstated his medical staff privileges on
April 16, 1997; (7) SMH knowingly allowing the National Practioner
Data Bank to continue to report until June 10, 1997 that SMH had
suspended Dr. Wuchenich for professional incompetence; and (8)
SMH publishing the false statement that Dr. Wuchenich is profession-
ally incompetent during the post June 1, 1997 portion of the State
Board of Medicine's investigation of the allegations that lead to the
suspension of Dr. Wuchenich's medical staff privileges at SMH. We
conclude that all of the alleged conduct just listed constitutes defama-
tion per se, because each statement, whether oral or written, falsely
imputed unfitness on the part of Dr. Wuchenich to perform his duties
as an anesthesiologist and prejudiced him in his profession. See Wells,
186 F.3d at 522. Furthermore, each statement was either published
originally by the specified defendant or was republished by a third
party as the natural and probable consequence of the specified defen-
dant's original publication. See Weaver, 98 S.E.2d at 690.

We now consider whether each of these instances of defamatory
conduct is actionable under Virginia's one-year statute of limitation
for defamation claims.8 Our review of each of these instances of
defamatory conduct leads us to conclude that only two are alleged to
have occurred within one year of the filing of Dr. Wuchenich's com-
plaint on June 1, 1998: (1) the ongoing publication (knowingly
allowed and expected by SMH) in the National Practitioner's Data
Bank that SMH had suspended Dr. Wuchenich's medical staff privi-
leges for professional incompetency; and (2) SMH publishing the
false statement that Dr. Wuchenich is professionally incompetent dur-
ing the post June 1, 1997 portion of the Board of Medicine's investi-
gation of the allegations that lead to the suspension of Dr.
Wuchenich's medical staff privileges at SMH. According to SMH,
Virginia Code § 54.1-2906(C) provides it with immunity from suit
with respect to both of these instances of alleged defamatory conduct.
Virginia Code § 54.1-2906(C) provides any person immunity from
_________________________________________________________________
8 SMH, Dr. Karmy, and Dr. Phillips raised the statute of limitations
defense below in support of their Rule 12(b)(6) motions.

27
civil liability for making a report to the State Board of Medicine
regarding disciplinary action resulting from professional incompe-
tence or testifying in a judicial or administrative proceeding as a
result of such a report unless such person acted in bad faith or with
malicious intent. See Va. Code Ann.§ 54.1-2906(C) (Michie 1998).
Assuming arguendo that § 54.1-2906(C) would otherwise provide
SMH with immunity from suit with respect to the two instances of
defamatory conduct on its part not barred by the statute of limitations,
we conclude it does not provide SMH with immunity at the early dis-
missal stage of litigation because the complaint clearly alleges that
SMH engaged in the defamatory conduct in bad faith and with mali-
cious intent.

In sum, we hold the district court properly dismissed all portions
of Dr. Wuchenich's claim alleging defamation except for the portion
seeking redress against SMH for the ongoing publication (knowingly
allowed and expected by SMH) in the National Practitioner's Data
Bank that SMH had suspended Dr. Wuchenich's medical staff privi-
leges for professional incompetency, and for SMH's publication of
the false statement that Dr. Wuchenich is professionally incompetent
during the post June 1, 1997 portion of the Board of Medicine's
investigation of the allegations that lead to the suspension of Dr.
Wuchenich's medical staff privileges at SMH. We, accordingly,
vacate the district court's dismissal of these specified allegations,
remand them for further proceedings, and affirm the district court's
dismissal of the balance.

VI

Dr. Wuchenich lastly challenges the district court's dismissal of his
claims alleging tortious interference with an existing contract and tor-
tious interference with his business expectancies. Liberally construed,
the complaint alleges that the actions and statements of the Defen-
dants tortiously interfered with SMH's Bylaws as contractual provi-
sions of the Physicians Guarantee Agreement and as an implied
contract between Dr. Wuchenich and SMH. Furthermore, the com-
plaint alleges that the Defendants tortiously interfered with Dr. Wuc-
henich's business expectancy of continued referrals of patients for his
care and treatment from SMH and the physicians who had medical
staff privileges at SMH.

28
Under Virginia law, a cause of action for tortious interference by
a third party with a contract that is not terminable at will, such as the
Physician Guarantee Agreement, is comprised of the following ele-
ments: "(1) the existence of a valid contractual relationship or busi-
ness expectancy; (2) knowledge of the relationship or expectancy on
the part of the interferor; (3) intentional interference inducing or caus-
ing a breach or termination of the relationship or expectancy; and (4)
resultant damage to the party whose relationship or expectancy has
been disrupted." Duggin v. Adams, 360 S.E.2d 832, 835 (Va. 1987)
(internal quotation marks omitted). If the contract at issue is termina-
ble at will, the plaintiff must also allege and prove that the defendant
interfered with the contract by employing improper methods. See id.
at 836.

Under Virginia law, a cause of action for tortious interference with
a contractual or business expectancy is comprised of the following
elements: (1) the existence of a contractual or business expectancy,
(2) knowledge on the part of the third-party of the expectancy; (3)
intentional interference with the expectancy; (4) the third-party's use
of improper methods to interfere with the expectancy; and (5) damage
to the party making the claim proximately resulting from the third-
party's conduct. See Maximus, Inc. v. Lockheed Info. Management
Sys. Co., 493 S.E.2d 375, 378 (Va. 1997). Independently tortious con-
duct (i.e., conduct that in and of itself would be an actionable tort) is
recognized under Virginia law as an improper method. See Duggin,
360 S.E.2d at 836. But, independently tortious conduct is but one spe-
cies of improper methods. As the Virginia Supreme Court in Maximus
explained, actions may also be improper which are neither indepen-
dently tortious nor illegal, for example, unfair competition and unethi-
cal conduct. See Maximus, 493 S.E.2d at 379. Finally, we note that
while a person cannot intentionally interfere with his own contract, if
it can be shown that an agent of a party to the contract was acting out-
side the scope of his employment in tortiously interfering with such
contract, then the aggrieved party may be entitled to recover in the
event the agent is unable to establish an affirmative defense of justifi-
cation or privilege. See Fox, 362 S.E.2d at 708.

The district court properly dismissed the causes of action against
SMH for tortious interference with the Physician Guarantee Agree-
ment and any implied agreement between SMH and Dr. Wuchenich

29
to abide by SMH's Bylaws, because SMH, as a party to both the Phy-
sician Guarantee Agreement and any such implied contract, cannot
intentionally interfere with its own contract. See Fox, 362 S.E.2d at
708. The district court also properly dismissed these same causes of
action against Dr. Karmy, Dr. Ciochetty, and Dr. Phillips, because
none of their conduct (failing to assign Dr. Wuchenich patients and
referring two cases of Dr. Wuchenich for peer review without just
cause) could be reasonably considered as having interfered with the
procedural protections of SMH's Bylaws.

We do, however, conclude that Dr. Wuchenich has sufficiently
stated a cause of action at this early pleading stage against the Defen-
dants for tortious interference with his expectancy of entering into
contractual relationships with some patients at SMH. In this regard,
Dr. Wuchenich has alleged the existence of the contractual expec-
tancy, knowledge on the part of each defendant of the expectancy,
and intentional interference with the expectancy by unfair competition
(i.e., Dr. Phillips and Dr. Ciochetty failing to assign Dr. Wuchenich
a fair share of anesthesiology patients) and unethical conduct (i.e.,
SMH suspending Dr. Wuchenich's medical staff privileges without
just cause and Dr. Karmy reporting two cases of Dr. Wuchenich to
peer review without just cause) proximately resulting in damage to
Dr. Wuchenich. See Maximus, 493 S.E.2d at 378.

In sum, we affirm the district court's dismissal of Dr. Wuchenich's
tortious interference claims pertaining to SMH's Bylaws. However,
we vacate the district court's dismissal of his contractual expectancy
claim against the Defendants and remand that claim for further pro-
ceedings.

VII

In conclusion, we: (1) vacate the district court's dismissal of Dr.
Wuchenich's claim alleging breach of SMH's Bylaws; (2) affirm the
district court's dismissal of the portion of Dr. Wuchenich's breach of
contract claim seeking to enforce oral assurances allegedly made by
SMH to assign him a sufficient number of patients to establish an
anesthesiology practice in the Woodstock, Virginia area; (3) affirm
the district court's dismissal of Dr. Wuchenich's claim alleging negli-
gent breach of contract; (4) affirm the district court's dismissal of Dr.

30
Wuchenich's claim alleging civil conspiracy except to the extent it
alleges a conspiracy among SMH, Dr. Phillips, and Dr. Ciochetty to
injure Dr. Wuchenich's ability to engage in the practice of his profes-
sion by failing to assign him a fair number of patients; (5) vacate the
district court's dismissal of Dr. Wuchenich's claim alleging civil con-
spiracy to the extent it alleges a conspiracy among SMH, Dr. Phillips,
and Dr. Ciochetty to injure Dr. Wuchenich's ability to engage in the
practice of his profession by failing to assign him a fair number of
patients; (6) affirm the district court's dismissal of Dr. Wuchenich's
claim alleging common law conspiracy to breach contractual obliga-
tions; (7) affirm the district court's dismissal of Dr. Wuchenich's
claim alleging defamation except for the portion seeking redress
against SMH for the ongoing publication (knowingly allowed and
expected by SMH) in the National Practitioner's Data Bank that SMH
had suspended Dr. Wuchenich's medical staff privileges for profes-
sional incompetency, and for SMH's publishing the false statement
that Dr. Wuchenich is professionally incompetent during the post
June 1, 1997 portion of the Board of Medicine's investigation of the
allegations that lead to the suspension of Dr. Wuchenich's medical
staff privileges at SMH; (8) vacate the portion of the district court's
dismissal of Dr. Wuchenich's defamation claim seeking redress
against SMH for the ongoing publication (knowingly allowed and
expected by SMH) in the National Practitioner's Data Bank that SMH
had suspended Dr. Wuchenich's medical staff privileges for profes-
sional incompetency, and for SMH's publishing the false statement
that Dr. Wuchenich is professionally incompetent during the post
June 1, 1997 portion of the Board of Medicine's investigation of the
allegations leading to Dr. Wuchenich's suspension; (9) affirm the dis-
trict court's dismissal of Dr. Wuchenich's claims alleging tortious
interference with the Physician Guarantee Agreement and any implied
agreement between SMH and Dr. Wuchenich to abide by SMH's
Bylaws; (10) vacate the district court's dismissal of Dr. Wuchenich's
claim alleging the Defendants tortiously interfered with his contrac-
tual expectancy of entering into contractual relationships with some
patients at SMH; and (11) remand all vacated claims for further pro-
ceedings.

AFFIRMED IN PART, VACATED IN PART,
AND REMANDED

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