December 30 2008
DA 07-0410
IN THE SUPREME COURT OF THE STATE OF MONTANA
2008 MT 453
JESSE A. COLE, M.D.,
Plaintiff and Appellee,
v.
ST. JAMES HEALTHCARE,
Defendant and Appellant.
APPEAL FROM: District Court of the Second Judicial District,
In and For the County of Butte/Silver Bow, Cause No. DV 07-44
Honorable Brad Newman, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Robert F. James; Ugrin, Alexander, Zadick & Higgins, PC; Great Falls,
Montana
For Appellee:
C. Richard Anderson; McKeon & Anderson, PC; Butte, Montana
Mark Anthony Vucurovich; Henningsen, Vucurovich, Richardson, PC;
Butte, Montana
For Amici Curiae:
James P. Molloy; Molloy Law Firm; Helena, Montana (for Drs. Popovich,
Sorini, Pullman, Chamberlain & Cortese and the Association of American
Physicians & Surgeons, Inc.)
Submitted on Briefs: May 28, 2008
Decided: December 30, 2008
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 St. James Healthcare (“St. James”) appeals a preliminary injunction issued by the
Second Judicial District Court, Silver Bow County. We affirm.
¶2 St. James raises two issues on appeal, both of which go to the merits of the case.
The only issue properly before this Court, however, is the propriety of the preliminary
injunction issued by the District Court. Accordingly, we state the issue on appeal as
follows:
¶3 Did the District Court manifestly abuse its discretion when it granted Dr.
Cole a preliminary injunction against St. James?
BACKGROUND
¶4 St. James Healthcare is a not-for-profit corporation that operates a hospital in
Butte. Dr. Jesse Cole has been a member of the Medical Staff at St. James since 1996.
The St. James Healthcare Medical Staff Bylaws (“the Bylaws”) require Medical Staff
members to apply for reappointment every two years. In 2006, Dr. Cole applied for
reappointment. Later that year, St. James obtained a permanent injunction against Dr.
Cole, to enjoin him from threatening hospital staff and from contacting potential
candidates for the hospital’s radiology department. St. James Healthcare v. Cole, 2008
MT 44, 341 Mont. 368, 178 P.3d 696.
¶5 In a letter dated December 21, 2006, Dr. Sharon Hecker, the Chair of St. James’s
Board of Directors, notified Dr. Cole that the Board had “serious concerns regarding [Dr.
Cole’s] professional relationship with other healthcare providers, staff and patients.”
Hecker also informed Dr. Cole that, effective immediately, Dr. Cole’s status as a staff
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member was changed from “active” to “consulting.” St. James did not give Dr. Cole any
advance notice of this status change, and denied his request to appeal this decision.
Before the Board could make a decision on Dr. Cole’s application for reappointment,
Hecker wrote, it needed “additional information.”
¶6 The Board hired an attorney, Carey Matovich, to conduct an independent
investigation (hereinafter “Matovich investigation”). Dr. Cole refused to cooperate with
Matovich, because he believed that under Article VII, Part C, he was entitled to an
investigation conducted by his peers on the Medical Staff. At the close of her
investigation, Matovich recommended that the Board deny Dr. Cole’s application for
reappointment. The Board then issued a preliminary decision denying Dr. Cole’s
reappointment. The Board notified Dr. Cole of its preliminary decision, and offered him
the opportunity to challenge the decision through the hearing and appeals process set
forth in Article VIII of the Bylaws.
¶7 Dr. Cole chose to exercise his right to appeal the preliminary decision, but before a
hearing could be held, Dr. Cole filed this complaint against St. James. Dr. Cole alleged
that the Bylaws constituted an enforceable contract between the parties. Dr. Cole
claimed that St. James violated these Bylaws and breached their contract.
¶8 Dr. Cole also applied for a preliminary injunction, to prevent St. James from
taking further adverse action against him, and from making a detrimental report to the
National Practitioner’s Database. Dr. Cole also asked the court to order St. James to
restore his active staff privileges. Both parties presented evidence at a show cause
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hearing. The District Court granted the preliminary injunction, and issued the following
order:
1. The Defendant is enjoined from refusing to consider Dr. Jesse A. Cole
to have full active staff privileges at St. James Healthcare, and is ordered to
reinstate Dr. Cole’s privileges to the status of full active staff privileges;
2. The Defendant is enjoined from adopting the recommendation of the
Matovich investigation not to renew Dr. Cole’s privileges at St. James
Healthcare, as such investigation and recommendation did not involve peer
review as contemplated by the Hospital Bylaws;
3. The Defendant is enjoined from making any adverse report to the
National Practitioner Data Bank regarding the Hospital’s reduction of Dr.
Cole’s privileges; and
4. The Defendant is enjoined from taking any further adverse action
against Dr. Cole’s full active staff privileges unless and until the Hospital
utilizes a peer review investigation conducted by its Medical Staff as
required by the Hospital’s Bylaws.
St. James appeals the court’s order granting the preliminary injunction.
STANDARD OF REVIEW
¶9 District courts are vested with a high degree of discretion to maintain the status
quo through injunctive relief. Shammel v. Canyon Resources Corp., 2003 MT 372, ¶ 12,
319 Mont. 132, ¶ 12, 82 P.3d 912, ¶ 12. Accordingly, we refuse to disturb a district
court’s decision to grant or deny a preliminary injunction unless a manifest abuse of
discretion has been shown. Sweet Grass Farms v. Board of County Com’rs, 2000 MT
147, ¶ 20, 300 Mont. 66, ¶ 20, 2 P.3d 825, ¶ 20. A manifest abuse of discretion is “one
that is obvious, evident or unmistakable.” Shammel, ¶ 12. We employ this standard of
review in reviewing both mandatory and prohibitive injunctions. City of Whitefish v.
Troy Town Pump, Inc., 2001 MT 58, ¶ 21, 304 Mont. 346, ¶ 21, 21 P.3d 1026, ¶ 21.
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Where the district court issues an injunction based on conclusions of law, we review
those conclusions for correctness. St. James Healthcare, ¶ 21.
DISCUSSION
¶10 Did the District Court manifestly abuse its discretion when it granted Dr.
Cole a preliminary injunction against St. James?
¶11 Section 27-19-201, MCA, provides (in relevant part) that a district court may issue
a preliminary injunction under the following circumstances:
(1) when it appears that the applicant is entitled to the relief demanded and
the relief or any part of the relief consists in restraining the commission or
continuance of the act complained of, either for a limited period or
perpetually;
(2) when it appears that the commission or continuance of some act during
the litigation would produce a great or irreparable injury to the applicant;
[or]
(3) when it appears during the litigation that the adverse party is doing or
threatens or is about to do or is procuring or suffering to be done some act
in violation of the applicant’s rights, respecting the subject of the action,
and tending to render the judgment ineffectual[.]
Section 27-19-201(1) – (3), MCA (subsections (4) and (5) omitted).
¶12 On appeal, St. James fails to address the individual prongs of this statute. Instead,
St. James asks us to determine whether the Board complied with its Bylaws in denying
Dr. Cole’s application for reappointment, and whether the Matovich investigation is
privileged from discovery under § 37-2-201, MCA, and § 50-16-201, MCA. Neither
issue is properly before this Court for review.
¶13 When weighing the merits of a preliminary injunction, “[i]t is not the province of
either the District Court or the Supreme Court on appeal to determine finally matters that
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may arise upon a trial on the merits.” Sweet Grass, ¶ 38 (citing Dreyer v. Board of
Trustees, 193 Mont. 95, 100, 630 P.2d 226, 229 (1981)). By granting temporary
injunctive relief, courts “should in no manner anticipate the ultimate determination of the
questions of right involved.” Sweet Grass, ¶ 38 (citing Porter v. K & S Partnership, 192
Mont. 175, 183, 627 P.2d 836, 840 (1981)). In sum, our task in reviewing the District
Court’s decision to grant the preliminary injunction against St. James is “not to resolve
the substantive matters of law relevant to the ultimate resolution of [the] complaint;” it is
to inquire only whether the District Court manifestly abused its discretion by granting the
injunction. Benefis Healthcare v. Great Falls Clinic, LLP, 2006 MT 254, ¶ 19, 334
Mont. 86, ¶ 19, 146 P.3d 714, ¶ 19.
¶14 The District Court concluded that Dr. Cole’s application met the requirements of
§ 27-19-201(1), (2), and (3), MCA, and thus, that a preliminary injunction was
appropriate. We have held, however, that the five factors of § 27-19-201, MCA, are
disjunctive: the moving party must satisfy only one of these factors in order to prevail.
Sweet Grass, ¶ 27. We turn first to § 27-19-201(1), MCA.
¶15 Section 27-19-201(1), MCA, provides that a preliminary injunction may issue
when an applicant has demonstrated that he is entitled to the injunctive relief he has
requested. To prevail under § 27-19-201(1), MCA, an applicant must establish that he
has a legitimate cause of action, and that he is likely to succeed on the merits of that
claim. Benefis, ¶ 22; M. H. v. Montana High School Ass’n, 280 Mont. 123, 135, 929 P.2d
239, 247 (1996). Implicit in a court’s decision to issue an injunction under § 27-19-
201(1), MCA, is the finding that an injunction is, in fact, an appropriate remedy.
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¶16 As a preliminary matter, the District Court concluded that the Bylaws constituted a
contract between Cole and St. James. Neither party appeals that conclusion. Thus, for
the purposes of this appeal, we assume that a contract exists between the two parties.
¶17 At the show cause hearing, Dr. Cole contended that St. James breached by
changing his staff status from “active” to “consulting” without giving him the three
month notice required by Article VII, Part A, Section 3 of the Bylaws. Dr. Cole argued
that under Article VIII of the Bylaws, he was entitled to appeal this decision. St. James
disagreed, and denied his request for an appeal. This, Dr. Cole claimed, constituted
another breach of contract.
¶18 The District Court agreed that these actions constituted an apparent breach, and
found:
1) Dr. Cole did not receive the three-month notice that his privileges would
be reduced or not renewed before the Hospital took such action, as required
by Article VII, Part A, Section 3(a) [and] (b) of the Bylaws.
2) Dr. Cole’s request for a hearing and an appeal when his privileges were
reduced or altered was denied, in violation of Article VII, Part A, Section
5(c) and Article VIII, Part B, Section 1 of the Bylaws.
On appeal, St. James does not challenge these findings. Thus, we cannot say that the
District Court erred in concluding that Dr. Cole was likely to succeed on the merits of his
breach of contract claim with respect to these issues.
¶19 At the show cause hearing, Dr. Cole also argued that St. James failed to comply
with the Bylaws when processing his application for reappointment to the Medical Staff.
Specifically, Dr. Cole claimed that St. James violated the Bylaws by appointing Matovich
to investigate the allegations of misconduct against him. Instead, Dr. Cole maintained,
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St. James should have made a written request for an investigation to the President of the
Medical Staff, Dr. Popovich. Under Article VIII, Part C of the Bylaws, the President
would then appoint an internal investigating committee made up of Dr. Cole’s peers. Dr.
Cole contended that St. James breached by failing to follow the procedures set forth in
Article VIII, Part C of the Bylaws.
¶20 Once again, the District Court concluded that St. James’s actions constituted an
apparent breach of contract, and made the following findings:
3) When the Hospital advised Dr. Cole of its concerns regarding his
conduct toward other Medical Staff members, neither the Hospital CEO nor
the Chairperson of the Hospital Board made a written request for an
investigation of the matter to the President of the Medical Staff, contrary to
Article VII, Part C, Section 1 of the Bylaws.
4) The investigation conducted by the Hospital, which resulted in a
recommendation that Dr. Cole’s privileges not be renewed, did not involve
the President of the Medical Staff, the Executive Committee of the Medical
Staff, an Ad Hoc committee of the Medical Staff, or an Investigating
Committee of the Medical Staff comprised of up to three (3) persons all
holding appointment to the Medical Staff, as required by Article VII, Part
C, Sections 1, 2, and 3 of the Bylaws.
5) Attorney Carey Matovich is not a member of the Medical Staff. She is
not a peer of Dr. Cole. She was hired by the Hospital’s Board of Directors,
not by the Medical Staff Executive Committee or any other peer
investigating committee. The Matovich investigation and recommendation
on behalf of the Hospital was not peer review as defined in Article I(11) of
the Bylaws, and did not comply with the peer review investigation and
recommendation procedures required by Article VII of the Bylaws.
¶21 On appeal, St. James argues that the District Court misinterpreted the Bylaws, and
asks this Court to decide whether or not it complied with the Bylaws in handling Dr.
Cole’s application for re-appointment. This issue goes to the heart of Dr. Cole’s breach
8
of contract claim; again, we do not reach the merits of the ultimate legal questions when
reviewing the grant or denial of a motion for a preliminary injunction. Sweet Grass, ¶ 38.
¶22 Under the manifest abuse of discretion standard, we give great deference to a
district court’s findings of fact in reviewing the grant or denial of a preliminary
injunction. Shammel, ¶ 12. Based on the evidence produced by Dr. Cole at the show
cause hearing, the District Court concluded that Dr. Cole was likely to succeed on the
merits of his breach of contract claim. St. James has not challenged these findings, nor
have they shown that the issuance of the preliminary injunction constituted an “obvious,
evident or unmistakable” abuse of discretion. Shammel, ¶ 12.
¶23 Finally, we turn to the District Court’s conclusion that an injunction was an
appropriate remedy in the instant case. The District Court concluded that if Dr. Cole
were denied the preliminary injunction, and St. James continued its alleged breach, Dr.
Cole would suffer irreparable injury. Specifically, the court found that as a result of St.
James’s apparent breach, there was a “substantial risk” that St. James would issue an
adverse report regarding Dr. Cole to the National Practitioner’s Data Bank (“NPDB”).
The District Court analogized an adverse report to “a ‘scarlet letter’ that could
permanently harm a physician’s professional reputation.” As a result, the court
concluded, “such conduct by the Hospital would render a successful judgment in favor of
Dr. Cole ineffectual and meaningless.” Thus, the court held, a money judgment could not
adequately address Dr. Cole’s alleged injuries.
¶24 In response, St. James argues that no adverse report would be made to NPDB until
after Dr. Cole has appealed the Board’s decision denying him reappointment - a process
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that would take at least several months. As part of the appeals process under Article VIII
of the Bylaws, the Board’s decision would undergo peer review by the Medical Staff.
Thus, St. James contends, there is little chance that an erroneous adverse report would be
made. In sum, St. James asserts, Dr. Cole did not and does not face any imminent injury.
¶25 The purpose of preliminary injunctive relief is to maintain the status quo pending
the final outcome of the litigation. We have defined “status quo” as “the last actual,
peaceable, noncontested condition which preceded the pending controversy.” Benefis,
¶ 14 (citation and internal quotation marks omitted). Furthermore, “it is the court’s duty
to minimize the injury or damage to all parties to the controversy.” Benefis, ¶ 14 (citation
and internal quotation marks omitted). Dr. Cole challenged the process by which St.
James changed his staff status, investigated allegations of misconduct against him, and
denied his application for reappointment. If Dr. Cole is correct, and St. James has
breached the Bylaws, the effects of the breach on Dr. Cole’s reputation could be
permanent. The District Court restored Dr. Cole to his status as an active staff member,
restrained St. James from adopting the recommendation of the challenged Matovich
investigation, and from taking any further adverse action on Dr. Cole’s application. The
court’s injunction protects both Dr. Cole’s patients and his professional reputation, at a
minimal cost to St. James. The preliminary injunction issued by the District Court
appropriately minimized injury to both parties in the case, and preserved the status quo
pending the final resolution of this litigation.
¶26 We hold that the District Court did not err in concluding that Dr. Cole was eligible
for a preliminary injunction under § 27-19-201(1), MCA. As discussed above, the
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requirements of § 27-19-201, MCA, are disjunctive: the moving party must satisfy only
one of these factors in order to prevail. Sweet Grass, ¶ 27. Since we have concluded that
a preliminary injunction was appropriate under § 27-19-201(1), MCA, we need not reach
the remaining two subsections discussed by the District Court.
CONCLUSION
¶27 In sum, we conclude that St. James has failed to demonstrate that the District
Court manifestly abused its discretion by issuing the preliminary injunction. The District
Court correctly concluded that Dr. Cole’s application for the preliminary injunction
satisfied the requirements of § 27-19-201(1), MCA. Affirmed.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ JOHN WARNER
/S/ JAMES C. NELSON
/S/ BRIAN MORRIS
Justice Jim Rice, dissenting.
¶28 I believe that the District Court made significant errors in determining to issue the
preliminary injunction and that St. James’s arguments on appeal are not given entirely
fair consideration.
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¶29 The District Court waded deeply into the merits of this dispute, analyzing the facts
and the law. It decided that the Bylaws constituted a contract between the parties (“The
Court finds that the elements of a contract are met in this case”). It interpreted the
contract (“that procedure [under Article VI, Part C, Section 4(b)] does not constitute peer
review. Rather, the procedure for valid ‘peer review investigation’ and ‘peer review
recommendation’ is set forth in Article VII”). It then determined that St. James had
breached and was continuing to breach the contract (“Based on the record before it, the
Court finds the Matovich investigation and resulting recommendation regarding Dr.
Cole’s privileges was not peer review. . . . the Court finds that the Hospital apparently has
breached, and continues to breach, the contract between Dr. Cole and the Hospital, as
created by the Bylaws.”).
¶30 We have held that courts are not to reach the merits of a dispute when determining
whether to issue a preliminary injunction, and admonished the courts not to do so. “It
was inappropriate for the District Court to make such conclusions at this stage of the
proceedings, and we implore trial courts . . . to be careful not to resolve ultimate issues of
the case.” Benefis, ¶ 32. Days ago, we were faced with the same error in City of
Whitefish v. Board of County Commissioners, 2008 MT 436, ___ Mont. ___, ___ P.3d
___, noting that “the [district] court not only anticipated the ultimate determination of the
validity of the Agreement, it made the determination outright . . . This was error.” ¶ 18.
We turned back the improperly entered conclusions in City of Whitefish so that they could
be determined at trial. I would do the same thing here. After rolling back the improperly
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entered conclusions, I would consider whether a preliminary injunction should be issued
in this case under the correct analysis. City of Whitefish, ¶ 19.
¶31 Generally, “[a]n applicant for a preliminary injunction must establish a prima facie
case, or show that it is at least doubtful whether or not he will suffer irreparable injury
before his rights can be fully litigated.” Benefis, ¶ 14. The District Court concluded that
Dr. Cole had established a prima facie case, or demonstrated a likelihood of success on
the merits, based upon the improperly entered conclusions, addressed above. Beyond
that error, however, I believe the proper, preliminary analysis of the Bylaws necessary to
determine whether Dr. Cole had a likelihood of success on the merits demonstrates that
the District Court’s approach was significantly flawed. I agree with St. James that the
District Court looked to the wrong provisions of the Bylaws in determining what
procedures would be required following denial of Dr. Cole’s reappointment application—
a critical misstep in assessing the likelihood of success on the merits. Looking at the
correct provisions raises a serious question over whether a breach of contract warranting
an injunction can be established.
¶32 The Bylaws are laid out as follows: Article VI addresses appointment to the
Medical Staff generally, Article VII addresses “Actions Affecting Medical Staff
Members,” and Article VIII addresses “Hearing and Appeal Procedures.” Article VII,
governing actions affecting medical staff, is further broken into parts that address
different situations and the procedures applicable thereto: Part A provides the “Procedure
for Reappointment,” Part B provides “Procedures for Requesting Increase in Clinical
Privileges,” Part C provides “Procedure for Other Questions Involving Medical Staff
13
Members,” Part D addresses “Summary Suspension of Clinical Privileges,” and Part E
addresses “Other Actions.” On the face of these provisions, it appears that Part A should
govern this matter, as it specifically addresses, as its title indicates, “Procedures for
Reappointment.”
¶33 Nonetheless, the District Court concluded that the procedures in Part C of Article
VII, which generally govern “Other Questions Involving Medical Staff,” control this
matter. However, requiring St. James to follow the procedures in Part C for a
reappointment application could obviate the reason for Part A’s existence. Under the
District Court’s interpretation, the procedures set forth in Part A could be rendered
meaningless, potentially subsumed within the more general provisions of Part C. Part C
is written broadly and applies “whenever . . . [various St. James authorities] has cause to
question” a variety of problems with a medical staff member. It appears from a
preliminary review that Part C is intended to apply when an authority has cause to
question a doctor’s fitness outside of the reappointment application process. The District
Court provided no reason why Part C should be applied instead of Part A, at least with
regard to the reappointment issue. The specific provisions therein of the procedure to be
followed when “the Board determines to reject the favorable recommendations of the
Executive Committee” regarding reappointments seem particularly applicable.
¶34 The District Court got sidetracked in its extensive discussion about whether the
actions undertaken by St. James were properly considered “peer review.” However, the
initial question which should have been considered was whether peer review was even
required under the applicable Bylaws at this stage, which I seriously question. Article
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VII, Part A, and Article VI, Part C, appear to grant powers to the Board to discuss an
appointment issue with the Executive Committee Chairperson, refer the matter to the
Committee for further investigation, and consult with third parties about the applicant. I
cannot see that Dr. Cole has established a prima facie case that the Board’s actions in
hiring Matovich and proceeding exceed the powers granted it under the Bylaws. See
Article VI, Part C, Section 4(b). Then, after the Board makes its decision pursuant to
these provisions, Dr. Cole can pursue an appeal, and peer review can come into play.
¶35 The Court declines to consider St. James’s likelihood of success arguments. On
the one hand, the Court says in ¶ 22 that St. James “has not challenged these findings” of
the District Court regarding Dr. Cole’s success on the merits. However, the District
Court’s “findings” quoted by the Court in ¶¶ 18 and 20 include conclusions of law about
the governing provisions of the Bylaws, which St. James indeed contests. Then, on the
other hand, the Court in ¶ 21 dismisses St. James’s arguments because “we do not reach
the merits of the ultimate legal questions. . . .” The Court thus reaches its decision
without consideration of St. James’s arguments. Somewhere between the conclusion that
St. James has not challenged the District Court’s determination on likelihood of success
on the merits, and the refusal to consider St. James’s arguments because they go to the
merits, St. James’s arguments have completely vanished. Although St. James’s
arguments may go too far by touching on ultimate interpretational issues, we should
remember that the District Court went even further. St. James argues that the District
Court went so far as to harm the Hospital’s case on the merits. I agree with that concern,
and I believe we can entertain St. James’s arguments as a proper challenge to the District
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Court’s analysis of the likelihood of success on the merits, and properly consider them
for that purpose.
¶36 The Court concludes in ¶ 26 that Dr. Cole established a basis for issuance of an
injunction under § 27-19-201(1), MCA. That section addresses likelihood of success on
the merits, and for the reasons expressed above, I would disagree. I also agree with St.
James’s arguments regarding the likelihood of irreparable harm. St. James has not
contested for purposes of this appeal that it erred by the manner in which it reduced Dr.
Cole’s privileges from active staff to consulting staff, and has reinstated Dr. Cole’s
privileges pending continuation of the process under the Bylaws. This action preserves
the status quo, insuring that Dr. Cole will retain his current privileges during an appeal
and peer review as provided by the Bylaws. St. James’s position on Dr. Cole’s status and
its explanation that no adverse reports about Dr. Cole will be issued until the appeal
process and peer review have been completed obviate any need to issue an injunction.
The only reason for issuance of the injunction now is to prevent the possibility “that an
erroneous adverse report” may be made. Opinion, ¶ 24. However, it is clear that such a
remote possibility does not establish a “likelihood” that Dr. Cole will be irreparably
harmed.
¶37 The District Court made substantial errors in its analysis. On their face, the
Bylaws contain provisions requiring a different procedure for reappointments than
recognized by the District Court, which undermine the claim of likelihood of success on
the merits. At present, there is little or no likelihood of irreparable harm. I would
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conclude that the District Court manifestly abused its discretion and reverse those
portions of the injunction order challenged on appeal by St. James.
/S/ JIM RICE
Justice Patricia Cotter joining in the dissenting Opinion of Justice Rice.
/S/ PATRICIA COTTER
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Cole v. St. James Healthcare
Court: Montana Supreme Court
Date filed: 2008-12-30
Citations: 2008 MT 453, 348 Mont. 68
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