F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
JUL 17 1998
TENTH CIRCUIT
PATRICK FISHER
Clerk
VANCE H. SMITH and DEBORAH P.
SMITH,
Plaintiffs-Appellants,
v.
No. 97-2164
EASTERN NEW MEXICO MEDICAL
(D.C. No. CIV-92-641-LH)
CENTER; ORSON TRELOAR; JOHN
(District of New Mexico)
KIKER; MIKE MCGUIRE; RICHARD
MOONEY; THOR STANGEBYE;
KEVIN LOWE; MATT FOSTER; and
DONALD WENNER,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before BRORBY , McWILLIAMS , and HENRY , Circuit Judges.
Vance and Deborah Smith appeal the district court’s grant of the
defendants’ summary judgment motion on their Fourteenth Amendment equal
protection claims. The district court found that the Smiths’ claims were barred by
the law of the case doctrine and, further, that Mrs. Smith’s claim was barred
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
because she could not assert what was, in the district court’s view, a cause of
action belonging to her corporation. We vacate and remand because there is no
law of the case barring the Smiths’ equal protection claims and because Mrs.
Smith has alleged injuries separate and distinct from those of other corporate
shareholders.
I. BACKGROUND
Dr. Vance Smith, a board-certified surgeon in general and vascular surgery,
had medical privileges at the Eastern New Mexico Medical Center (“ENMMC”), a
general hospital in Roswell, from 1985 to 1991. Dr. Smith had numerous
conflicts with the defendant doctors and others working at the hospital. He
claims these conflicts led to many adverse actions that cost him money when,
among other things, the defendants forced him to stop performing (1) general
surgery and various specific surgical procedures, (2) certain surgeries that should
have been attended by an anesthesiology group that wouldn’t work with him, and
(3) all surgeries when his medical staff privileges were summarily suspended. He
also alleges that the defendants caused him damages when they forced him to
leave Roswell by unlawfully threatening a second summary suspension of his
medical privileges, a disciplinary action that, he claims, would have ruined his
career. Dr. Smith asserts that all of these actions and others–including placing
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him on chart review, maintaining a secret file on him, and accusing him of being
disruptive–were only done to him and were done specifically to force him out of
practice in Roswell.
The defendants respond that Dr. Smith created many of the problems he
complains of and that they provided him with procedural due process protections
every time they took or threatened adverse actions against him. Further, they
assert that the record simply does not support the vast majority, if any, of his
claims.
During roughly the same time period, Dr. Smith’s wife, Deborah P. Smith,
a registered nurse and registered vascular technician, operated the Eastern New
Mexico Medical Center Noninvasive Peripheral Vascular Laboratory, Ltd.,
(“Vascular Lab”) on property leased from the ENMMC. She and a trust created
for the benefit of Dr. Smith’s children were the only shareholders in the Vascular
Lab. Although the Vascular Lab was a corporate entity, Mrs. Smith avers that she
personally signed a promissory note obligating her to repay the debt for some of
the equipment in the Vascular Lab and that, using her own funds, she bought
other equipment for the corporation. She asserts that she had to leave Roswell
with her husband, close the Vascular Lab, and pay the note. Thus, she also
contends she was injured by the defendants’ alleged efforts to force her husband
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out of the ENMMC, and her injuries are in the form of lost profits from the
Vascular Lab and losses on the equipment in the Lab.
This appeal is the second we have heard concerning this litigation.
Initially, the Smiths sued the ENMMC and doctors working at the ENMMC
asserting fourteen federal civil rights, antitrust, and state law tort claims. The
district court granted the defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss
the Smiths’ Fourteenth Amendment equal protection claim. The district court
then granted the defendants’ summary judgment motion on the Smiths’ remaining
claims.
The Smiths appealed, and, in an unpublished Order and Judgment, our
Court affirmed the grant of summary judgment. See Smith v. Eastern New
Mexico Med. Ctr. , Nos. 94-2213 & 94-2241, 1995 WL 749712 (10th Cir. Dec. 19,
1995). However, we reversed dismissal of the equal protection claim, noting that
“the Equal Protection Clause protects not only against discrimination where
victims within an identified classification or group are injured, but also where the
plaintiff alleges an element of intentional or purposeful discrimination so as to
invoke the clause to protect an individual victim.” Id. at **7 (internal quotation
marks omitted). After listing some of the above acts alleged by the Smiths as
proof that they pled “intentional or purposeful discrimination,” we remanded
stating that “the plaintiffs may or may not be able to prove [an equal protection
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violation], but we . . . are persuaded that the complaint states an equal protection
claim.” Id. at **8.
On remand, the defendants moved for summary judgment on the equal
protection claim, and the district court granted their motion. Concluding that Dr.
Smith’s injury claim relied on his being forced or coerced into an involuntary
resignation from the ENMMC, see Dist. Ct.’s Mem. Op. filed Apr. 17, 1997, at
10, and that in its earlier grant of summary judgment, it had decided, and the
Tenth Circuit had affirmed, “that Dr. Smith was not forced or coerced into
departing,” id. at 10-11, the district court granted summary judgment to the
defendants on Dr. Smith’s claim using law of the case doctrine.
As to Mrs. Smith’s equal protection claim, the district court found two
reasons to grant summary judgment against her. First, it ruled that her losses
were actually those of the corporation and that a corporate officer may not
prosecute a corporation’s § 1983 claim. See id. at 13. Second, the district court
stated that, in its earlier order, it granted summary judgment against Mrs. Smith
on all her claims regarding the Vascular Lab, and she did not appeal the summary
judgment ruling. See id. at 14. Thus, according to the district court, “even
though the [Tenth Circuit] found that Ms. Smith stated an equal protection claim
in [her] Second Amended Complaint sufficient to withstand a motion to dismiss,
this claim is barred by the law of the case.” Id. The Smiths again appeal.
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II. STANDARD OF REVIEW
We review a summary judgment ruling de novo, applying the same legal
standard used by the district court pursuant to Fed. R. Civ. P. 56(c). See Kaul v.
Stephan, 83 F.3d 1208, 1212 (10th Cir. 1996). “Summary judgment is appropriate
if the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law.”
Id. (quoting Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir.
1995)). A “material fact is one which might affect the outcome of the dispute
under the applicable law.” Ulissey v. Shvartsman, 61 F.3d 805, 808 (10th Cir.
1995). “An issue of material fact is genuine if a reasonable jury could return a
verdict for the non-movant.” Kaul, 83 F.3d at 1212 (quoting Wolf, 50 F.3d at
796). We examine the factual record and reasonable inferences from it in the
light most favorable to the non-movant. See id. “If there is no genuine issue of
material fact in dispute, then we next determine if the substantive law was
correctly applied by the district court.” Id. (quoting Wolf, 50 F.3d at 796).
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III. DR. SMITH’S EQUAL PROTECTION CLAIM
Dr. Smith argues, first, that our earlier ruling did not specifically decide
that he could not produce facts to prove his equal protection claim but rather only
that he had not complied with the district court’s local procedural rule in resisting
summary judgment on his other claims. Second, he asserts that even if our earlier
ruling did hold that he cannot produce facts showing he was forced to leave
Roswell, he still can show the defendants injured him before he left the ENMMC,
by, for example, suspending his surgical privileges and, thereby, causing him to
lose revenue.
“Law of the case principles do ‘not bar a district court from acting unless
an appellate decision has issued on the merits of the claim sought to be
precluded.’” Wilmer v. Board of County Commissioners , 69 F.3d 406, 409 (10th
Cir. 1995) (quoting United States v. Caterino , 29 F.3d 1390, 1395 (9th Cir.
1994)). “Thus, when a dispositive procedural deficiency has obviated or
deflected consideration of the underlying merits of a claim, the law of the case
doctrine does not reach through that procedural ruling to enshrine a substantive
determination never in fact made.” Id.
In Wilmer , the district court denied a procedurally defective motion without
reaching the merits of the jurisdictional issue it raised. See Wilmer , 69 F.3d at
409. Our Court affirmed because of the procedural defect, also without reaching
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the merits of the jurisdiction question. See id. On remand, the moving party
again raised the jurisdictional issue, but the district court refused to consider the
claim on law of the case grounds. See id. On appeal, we reversed stating that
“given the majority’s unqualified reliance on the procedural disposition of the
district court and its silence with respect to the . . . jurisdictional [issues] . . . , we
cannot say this court’s prior decision actually resolved on the merits the
jurisdictional question . . . .” Id. at 410.
We agree with the district court that there is large overlap in the factual
basis for Mr. Smith’s equal protection claim and his claims on which we affirmed
summary judgment. We also agree that our affirmance in the earlier appeal was
based on our conclusion that Mr. Smith could not rely upon those facts to resist
summary judgment. However, as our earlier ruling was based on the Smiths’
failure to follow local summary judgment rules, a procedural deficiency, we
disagree that the earlier appeal automatically forecloses Mr. Smith’s efforts to
produce those facts to resist summary judgment on his equal protection claim.
In the Smiths’ first appeal, we relied on a procedural defect to affirm the
grant of summary judgment on their other-than-equal-protection claims. We
stated that the district court granted summary judgment for the defendants
because the Smiths did not comply with the district court’s local summary
judgment motion rules. See Smith , 1995 WL 749712, at **2. We then affirmed
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because “we c[ould not] say that the court abused its discretion by relying [on its
local rules] and concluding that plaintiffs failed to identify any disputed material
facts precluding summary judgment.” Id. at **4. Therefore, our earlier holding
was based on a dispositive procedural deficiency and does not prevent Mr. Smith
from producing facts in support of his equal protection claims.
Nor would it have been logical for us to remand if our earlier opinion had
foreclosed the possibility of Mr. Smith producing facts in support of his equal
protection claim. It simply would make no sense for us to have ruled (1) that the
district court improperly granted a 12(b)(6) motion dismissing the equal
protection claim, then (2) that Dr. Smith could not produce facts to support the
equal protection claim, then (3) that the equal protection claim should be
remanded even though we had already ruled Dr. Smith could not identify facts
supporting that claim.
Additionally, although the district court’s opinion was premised on the
conclusion that we decided that Dr. Smith cannot prove he was forced to leave
Roswell, see Dist. Ct.’s Mem. Op. at 10-11, Dr. Smith claims that the defendants
caused him monetary damages on many occasions before he was allegedly forced
to leave the ENMMC. Therefore, even if we were to agree that our earlier
decision foreclosed Dr. Smith’s claim that he was forced to leave the ENMMC,
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we would have to remand for consideration of the other facts underlying his equal
protection claim.
As our affirmance of the district court’s grant of summary judgment was
based on the Smiths’ failure to follow the local rules and because procedural
decisions cannot be the basis of a law of the case ruling, we vacate and remand
for consideration of Dr. Smith’s equal protection claim.
IV. MRS. SMITH’S EQUAL PROTECTION CLAIM
The district court’s grant of summary judgment to the defendants on Mrs.
Smith’s equal protection claim was based on two grounds: (1) that Mrs. Smith’s
claim is barred by law of the case because she did not appeal the district court’s
initial grant of summary judgment against her and (2) that Mrs. Smith cannot sue
for losses to the Vascular Lab because those losses were to the corporate entity.
However, we vacate the district court’s order because the district court had
already dismissed Mrs. Smith’s equal protection claim when it entered its
summary judgment order, and Mrs. Smith did appeal the district court’s dismissal
of her equal protection claim. Additionally, Mrs. Smith has alleged an injury
separate and distinct from the other Vascular Lab shareholder.
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A. Mrs. Smith’s prior appeal
The district court stated that it granted the defendants’ first motion for
summary judgment on all “‘claims related to the [Vascular Lab],’ including the
equal protection claim.” See Dist. Ct.’s Mem. Op. at 14. According to the
district court, Mrs. Smith did not appeal that ruling. See id. Therefore, the
district court concluded, “even though [the earlier panel of] the appellate court
found that Mrs. Smith stated an equal protection claim . . . sufficient to withstand
a motion to dismiss, this claim is barred by law of the case.” Id.
We do not think Mrs. Smith’s equal protection claim is barred by law of the
case. First, the record informs us that the district court had already dismissed
Mrs. Smith’s equal protection claim before it ruled on the defendants’ motion for
summary judgment. See Dist. Ct. Order filed Aug. 9, 1994. Therefore, her equal
protection claim was no longer before the district court at the time it entered its
summary judgment order, and we simply fail to see how it could have entered
summary judgment on that claim. Second, although Mrs. Smith may not have
appealed the summary judgment order regarding the Vascular Lab, our record
shows that Mrs. Smith did appeal the district court’s dismissal of her equal
protection claim. See Aplts’ Opening Br. in No. 94-2241, at 23-25; Aplts’ Reply
Br. in Nos. 94-2213 & 94-2241, at 12-16. Thus, we properly had Mrs. Smith’s
equal protection claim before us when we reinstated it in our earlier opinion. We
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once again reinstate her equal protection claim because it was not before the
district court at the time it entered its summary judgment order and because Mrs.
Smith appealed the dismissal of the claim.
B. Separate and distinct injury
“[A] stockholder of a corporation does not acquire standing to maintain an
action in his own right, as a shareholder, when the alleged injury is inflicted upon
the corporation and the only injury to the shareholder is the indirect harm which
consists in the diminution in value of his corporate shares.” Marchman v. NCNB
Tex. Nat’l Bank , 898 P.2d 709, 716 (N.M. 1995); see Stat-Tech Int’l Corp. v.
Delutes (In re Stat-Tech Int’l Corp.) , 47 F.3d 1054, 1059 (10th Cir. 1995). “The
theory behind this rule is that, once the corporation recovers its losses and
replenishes its assets, the recovery will be reflected in the price of the stock and
will allow the corporation to distribute the proceeds of the recovery, and thus the
shareholders and creditors will also recover for the indirect harm they have
suffered.” Marchman , 898 P.2d at 716. However, when the theory of indirect
loss, which is behind the rule, would not be vindicated, exceptions to the rule
apply. See id. at 716-17. For instance, when “the shareholder suffer[s] an injury
separate and distinct from that suffered by other shareholders. . . . the shareholder
is entitled to sue.” Id. at 717.
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Mrs. Smith, who owned 40% of the corporate stock, avers that she paid for
and signed a promissory note in her individual capacity for some of the
corporation’s equipment. Thus, she claims, when the corporation folded, she
suffered individual loss. According to Mrs. Smith, that individual loss was
separate and distinct from the loss suffered by the trust for Dr. Smith’s children,
which owned 60% of the corporate stock, but which had not purchased any of the
equipment. If she can prove her individual losses, she would have standing to sue
in her individual capacity for a portion of the corporation’s losses. As this is a
material factual issue, we remand to the district court to give Mrs. Smith an
opportunity to show her individual losses.
IV. CONCLUSION
There was no law of the case requiring summary judgment be entered in
favor of defendants on Dr. Smith’s equal protection claim. Additionally, Mrs.
Smith asserted a separate and distinct injury from that suffered by the other
shareholder in the Vascular Lab, and Mrs. Smith appealed the district court’s
earlier dismissal of her equal protection claim, which was not before the district
court when it entered summary judgment on her other claims relating to the
Vascular Lab. Therefore, we vacate and remand for consideration of the merits of
the Smiths’ equal protection claims. When considering the merits, the district
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court may grant summary judgment in favor of the defendants if, as they claim,
the evidence submitted by the Smiths to resist summary judgment would be
inadmissible at trial, or if summary judgment would be appropriate for any other
reason.
Entered for the Court,
Robert H. Henry
Circuit Judge
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