Philips v. Pitt County Memorial Hospital

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

SHERIF PHILIPS, M.D., 
Plaintiff-Appellant,
v.
PITT COUNTY MEMORIAL HOSPITAL;  No. 07-1986
PAUL BOLIN, M.D.; RALPH E.
WHATLEY, M.D.,
Defendants-Appellees.


SHERIF PHILIPS, M.D., 
Plaintiff-Appellant,
v.
PITT COUNTY MEMORIAL HOSPITAL;  No. 07-1996
SANJAY PATEL, M.D.; PAUL BOLIN,
M.D.; RALPH E. WHATLEY, M.D.;
CYNTHIA BROWN, M.D.,
Defendants-Appellees.

Appeals from the United States District Court
for the Eastern District of North Carolina, at Greenville.
James C. Fox, Senior District Judge.
(4:07-cv-00049-F; 4:05-cv-00097-F)

Argued: October 29, 2008

Decided: July 13, 2009
2 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
Before WILLIAMS, Chief Judge,1 MICHAEL, Circuit
Judge, and John T. COPENHAVER, Jr., United States
District Judge for the Southern District of West Virginia,
sitting by designation.

Affirmed by published opinion. Judge Copenhaver wrote the
opinion, in which Judge Michael joined.

COUNSEL

ARGUED: Karin Marshall Zaner, KANE, RUSSELL,
COLEMAN & LOGAN, Dallas, Texas, for Appellant.
Charles David Creech, HARRIS, CREECH, WARD &
BLACKERBY, New Bern, North Carolina, for Appellees.
ON BRIEF: Lisa M. Schreiner, Deborah N. Meyer, MEYER
LAW OFFICES, P.A., Cary, North Carolina, for Appellant.
W. Gregory Merritt, Jay C. Salsman, HARRIS, CREECH,
WARD & BLACKERBY, New Bern, North Carolina, for
Appellees.

OPINION

COPENHAVER, District Judge:

Dr. Sherif A. Philips instituted two civil actions challenging
the suspension of his practice privileges at Pitt County Memo-
rial Hospital ("the Hospital"). In addition to supplemental
state law claims, he alleged violations of 42 U.S.C. § 1983
based upon putative infringements of his Fourteenth Amend-
1
Chief Judge Williams heard oral argument in this case but did not par-
ticipate in the decision. The decision is filed by a quorum of the panel pur-
suant to 28 U.S.C. § 46(d).
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 3
ment due process rights surrounding the proceedings that
resulted in his suspension. He contends that Pitt County
Memorial Hospital, Inc. ("PCMHI"), a nonprofit corporation,
is a state actor.

The defendants moved to dismiss both actions. They con-
tended principally that Dr. Philips could not show they acted
under color of state law. The district court agreed and Dr.
Philips appeals. We affirm.

I.

From 1953 until June 1998, Pitt County owned all of the
property representing the Hospital, which it apparently leased
to PCMHI, a non-profit formed in 1953 under the general
nonprofit incorporation laws of North Carolina. On June 1,
1998, at a time when PCMHI was operating the Hospital
under a long term lease from Pitt County dated December 1,
1989, Pitt County and PCMHI entered into an "AGREE-
MENT TO CHANGE STATUS OF PITT COUNTY MEMO-
RIAL HOSPITAL" ("Agreement"). (JA 47).

The Agreement was designed "to change the status of . . . .
[Pitt County Memorial Hospital] from a Public Hospital to a
Private Not For Profit Hospital" pursuant to the Municipal
Hospital Act, North Carolina General Statutes § 131E-8
("Act"). (Id.) Accompanying the change over was the filing
by PCMHI with the North Carolina Secretary of State on Sep-
tember 18, 1998, of Restated Articles of Incorporation
("Restated Articles"), submitted for the purpose, in part, of
reflecting PCMHI’s "reorganization from an agency of Pitt
County to a private not-for-profit corporation."2
2
(Restated Articles at 1 (Sept. 18, 1998), available at, http://
www.secretary.state.nc.us/corporations/Filings.aspx?PItemId=5058825.
The Restated Articles do not appear in the record but are freely available
from the North Carolina Secretary of State.
4 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
The change was accomplished by the sale of the Hospital
to PCMHI, at a price of $30 million spread over two years.
The Agreement includes further terms indicative of some
measure of retained control by Pitt County over its former
agency, PCMHI:

PCMHI must make annual payments to Pitt County
"in lieu of taxes . . . ." (JA 48); and it must continue
annually to contribute $452,000 toward reimbursing
Pitt County for Medicaid payments, with annual
increases to account for inflation.

PCMHI cannot sell or encumber the Hospital real
property without Pitt County’s prior written
approval; and PCMHI’s "Permitted Indebtedness" is
limited as set forth in an attachment to the Agree-
ment.

If the Hospital is sold or merged, with Pitt County’s
required consent, all net proceeds go to Pitt County.

Pitt County approval is required for any annual asset
disposition exceeding a stated benchmark.

PCMHI is prohibited from allowing a substantial
portion of the Hospital system to be managed by an
entity not controlled by PCMHI.

PCMHI must continue an existing school nurse pro-
gram for the Pitt County Board of Education.

PCMHI must continue to serve as the primary teach-
ing hospital of East Carolina University School of
Medicine and maintain the Affiliation Agreement
between the medical school, Pitt County and
PCMHI.

PCMHI is to comply with the North Carolina Open
Meetings Law; and the Commissioners of Pitt
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 5
County are to receive notice of, and access to, all
meetings of the PCMHI Board of Trustees, including
closed sessions.

PCMHI is governed by a 20-member Board of Trust-
ees, with Pitt County appointing 11 members, and
the remaining 9 members appointed by the Board of
Governors of the University of North Carolina.
These two governmental entities can remove their
respective appointees only "for cause."3 (Id.)

Noteworthy are the Agreement’s automatic reversionary
provisions under which all Hospital assets, real and personal,
revert to Pitt County if PCMHI fails in any of the following
respects:

Fails to make payments to Pitt County in accordance
with the Agreement;

Fails to maintain a level of indigent care consistent
with historical practice and expenditures;

Loses its accreditation;

Dissolves without a successor nonprofit corporation
approved by Pitt County.

The contemplated reversion would divest PCMHI of all own-
ership rights in the real and personal property of which the
3
The term "cause" is defined in the Restated Articles as
mental incompetency, bad faith, breach of fiduciary responsibil-
ity, a conflict of interest in violation of . . . bylaw or policies,
conviction of . . . a felony or any crime involving moral turpitude,
or absenteeism . . . without excuse . . . from more than . . . 25%
. . . of the . . . meetings during [a] twelve-month period . . . .
(Restated Articles at 7).
6 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
Hospital is composed.4 It is noted that reverter is one of the
required provisions for a nonprofit corporation receiving own-
ership from a municipality of a hospital facility under North
Carolina’s Municipal Hospital Act.5

In dismissing these actions, the district court observed:

[T]he . . . Agreement expresses an intent to create a
private hospital and does not provide Pitt County
officials with control of the administration of hospi-
tal services or personnel procedures. Pitt County
officials are not involved in PCMH’s day-to-day
operation and Plaintiff has not alleged that Pitt
County officials, or any Government actors, were
involved in the suspension of his hospital privileges.

Philips v. Pitt County Mem’l Hosp., Inc., 503 F. Supp.2d 776,
782 (E.D.N.C. 2007).

The district court relied significantly upon our decision in
Modaber v. Culpeper Memorial Hospital, Inc., 674 F.2d 1023
(4th Cir. 1982), which provides that

[a] state becomes responsible for a private party’s act
if the private party acts (1) in an exclusively state
capacity, (2) for the state’s direct benefit, or (3) at
the state’s specific behest. It acts in an exclusively
state capacity when it "exercises powers traditionally
4
Discretionary reversion was authorized under some circumstances. For
example, ownership and control could vest anew in Pitt County if PCMHI
violated the "GOVERNANCE" provisions in the Agreement. These provi-
sions (1) prohibited PCMHI from amending its articles or bylaws relating
to the appointment or composition of the Board without the prior approval
of Pitt County, and (2) required the Board to approve certain actions taken
by an 85% supermajority.
5
A municipality is defined by the Municipal Hospital Act as "any
county, city, or other political subdivision of th[e] State, or any hospital
district created under Part C of this Article." Id. § 131E-6(5).
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 7
exclusively reserved to the state(,)" for the state’s
direct benefit when it shares the rewards and respon-
sibilities of a private venture with the state, and at
the state’s specific behest when it does a particular
act which the state has directed or encouraged.

Id. at 1025.

II.

A. Standard of Review

We review de novo a district court’s dismissal for failure to
state a claim under Federal Rule of Civil Procedure 12(b)(6).
Greenhouse v. MCG Capital Corp., 392 F.3d 650, 655 (4th
Cir. 2004). In considering such a motion, we accept as true all
well-pleaded allegations and view the complaint in the light
most favorable to the plaintiff. Mylan Labs., 7 F.3d at 1134.
In counterbalance to this plaintiff-centered analysis, we
recently stated:

To survive a Rule 12(b)(6) motion, "[f]actual allega-
tions must be enough to raise a right to relief above
the speculative level" and have "enough facts to state
a claim to relief that is plausible on its face." Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct.
1955, 1965, 1974, 167 L.Ed.2d 929 (2007). More-
over, the court "need not accept the [plaintiff’s] legal
conclusions drawn from the facts," nor need it "ac-
cept as true unwarranted inferences, unreasonable
conclusions, or arguments." Kloth v. Microsoft
Corp., 444 F.3d 312, 319 (4th Cir. 2006) (internal
quotation marks omitted).

Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616
n.26 (4th Cir. 2009).

In reviewing a Rule 12(b)(6) dismissal, we may properly
take judicial notice of matters of public record. Hall v. Vir-
8 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
ginia, 385 F.3d 421, 424 (4th Cir. 2004) (noting it was proper
during Rule 12(b)(6) review to consider "publicly available
[statistics] on the official redistricting website of the Virginia
Division of Legislative Services.") (citing Papasan v. Allain,
478 U.S. 265, 268 n. 1, 106 S.Ct. 2932, 92 L.Ed.2d 209
(1986) ("Although this case comes to us on a motion to dis-
miss . . . , we are not precluded in our review of the complaint
from taking notice of items in the public record . . . ."). We
may also consider documents attached to the complaint, see
Fed.R.Civ.P. 10(c), as well as those attached to the motion to
dismiss, so long as they are integral to the complaint and
authentic. See Blankenship v. Manchin, 471 F.3d 523, 526 n.
1 (4th Cir. 2006).

B. Analysis

Title 42 U.S.C. § 1983 is a federal statutory remedy avail-
able to those deprived of rights secured to them by the Consti-
tution and, in a more sharply limited way, the statutory laws
of the United States. Section 1983 provides pertinently as fol-
lows:

Every person who, under color of any statute, ordi-
nance, regulation, custom, or usage, of any State or
Territory or the District of Columbia, subjects, or
causes to be subjected, any citizen of the United
States or other person within the jurisdiction thereof
to the deprivation of any rights, privileges, or immu-
nities secured by the Constitution and laws, shall be
liable to the party injured in an action at law, suit in
equity, or other proper proceeding for redress . . . .

42 U.S.C. § 1983.

One alleging a violation of section 1983 must prove that the
charged state actor (1) deprived plaintiff of a right secured by
the Constitution and laws of the United States, and (2) that the
deprivation was performed under color of the referenced
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 9
sources of state law found in the statute. Adickes v. S.H. Kress
& Co., 398 U.S. 144, 150 (1970); Mentavlos v. Anderson, 249
F.3d 301, 310 (4th Cir. 2001).

The statutory color-of-law prerequisite is synonymous with
the more familiar state-action requirement—and the analysis
for each is identical. See Lugar v. Edmondson Oil Co., 457
U.S. 922, 929 (1982) (stating "[I]t is clear that in a § 1983
action brought against a state official, the statutory require-
ment of action ‘under color of state law’ and the ‘state action’
requirement of the Fourteenth Amendment are identical.");
United States v. Price, 383 U.S. 787, 794, n. 7 (1966); Dowe
v. Total Action Against Poverty in Roanoke Valley, 145 F.3d
653, 658 (4th Cir. 1998); Moore v. Williamsburg Reg’l Hosp.,
560 F.3d 166, 178 (4th Cir. 2009) ("The same analysis applies
to whether an action was taken ‘under color of state law’ as
required by § 1983 and whether the action was state action.");
Haavistola v. Cmty. Fire Co., 6 F.3d 211, 215 (4th Cir. 1993).

It has been observed that "‘merely private conduct, no mat-
ter how discriminatory or wrongful[,]’" fails to qualify as
state action. See Mentavlos, 249 F.3d at 301 (quoting Ameri-
can Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50 (1999))
(quoting Blum v. Yaretsky, 457 U.S. 991, 1002 (1982)). This
is so, in part, to "‘preserve[ ] an area of individual freedom by
limiting the reach of federal law’ and ‘avoid[ing] impos[ition]
[up]on the State, its agencies or officials, responsibility for
conduct for which they cannot fairly be blamed.’" Edmonson
v. Leesville Concrete Co., 500 U.S. 614, 619 (1991) (quoting
Lugar, 457 U.S. at 936-37). In sum, "‘private activity will
generally not be deemed "state action" unless the state has so
dominated such activity as to convert it to state action: "Mere
approval of or acquiescence in the initiatives of a private
party" is insufficient.’" Wahi, 562 F.3d at 616 (quoting
DeBauche v. Trani, 191 F.3d 499, 507 (4th Cir. 1999)).

Nevertheless, there are infrequently arising circumstances
under which the actions of an ostensibly private party will be
10 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
deemed to satisfy the color-of-law requirement. We recently
summarized when that sort of attribution was appropriate,
with a concomitant observation of why it was the exception
rather than the rule:

Under th[e state-action or color-of-law] doctrine, we
"insist [ ]" as a prerequisite to liability "that the con-
duct allegedly causing the deprivation of a federal
right be fairly attributable to the State." By doing so,
we maintain the Bill of Rights as a shield that pro-
tects private citizens from the excesses of govern-
ment, rather than a sword that they may use to
impose liability upon one another.

Holly v. Scott, 434 F.3d 287, 292 (4th Cir. 2006) (emphasis
added); see also Brentwood Acad. v. Tenn. Secondary Sch.
Athletic Ass’n, 531 U.S. 288, 295-96 (2001).

Commentators and appellate courts, including our own,
have attempted to categorize situations that justify the state-
action label.6 See, e.g., Moore, 560 F.3d at 179 (noting "a pri-
vate entity’s action can constitute state action if ‘"there is a
sufficiently close nexus between the State and the challenged
action of the regulated entity that the action of the latter may
fairly be treated as that of the State itself,"’ but ‘state involve-
ment without state responsibility cannot establish this
nexus’")(emphasis added)(citation omitted); DeBauche, 191
F.3d at 507 (observing, based upon Burton v. Wilmington
Parking Authority, 365 U.S. 715 (1961), that a "symbiotic
relationship" may establish state action where profits earned
by a private restaurant practicing discrimination "not only
6
One commentator suggests, based upon a review of Supreme Court
precedent, that private parties may theoretically be sued under § 1983
using several theories, labeled as "symbiotic relationship; public function;
close or joint nexus; joint participation; and pervasive entwinement." Fed-
eral Judicial Center, Martin A. Schwartz & Kathryn R. Urbonya, Section
1983 Litigation 88 (2nd ed. 2008).
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 11
contribute[d] to, but also [were] indispensable elements in, the
financial success of a governmental agency" leasing space to
the restaurant) (emphasis added); Andrews v. Fed. Home Loan
Bank of Atlanta, 998 F.2d 214, 218 (4th Cir. 1993) (quoting
Jackson v. Metro. Edison Co., 419 U.S. 345, 352 (1974))
(noting the "‘public function’ theory" recognizes the existence
of "narrow circumstances" where state action arises from the
"‘exercise by a private entity of powers traditionally exclu-
sively reserved to the State’") (emphasis added); see also,
e.g., 1 Ivan E. Bodensteiner and Rosalie Berger Levinson,
State and Local Government Civil Rights Liability § 4
(2009)(footnotes omitted).

In the end, however, "there is ‘no specific formula’ for
determining whether state action is present. . . . ‘What is fairly
attributable [to the state] is a matter of normative judgment,
and the criteria lack rigid simplicity.’" Holly, 434 F.3d at 292
(quoting, in part, Brentwood, 531 U.S. at 295).

Dr. Philips appears to rely upon the close nexus analysis in
asserting the presence of state action. (See, e.g., Ap’ant’s Br.
at 2 ("Dr. Philips’s complaint pleaded a sufficiently close
nexus between the government and Defendants/Appellees’
decision to suspend his privileges."); id. ("In evaluating the
sufficiency of Dr. Philips’s complaint, the district court was
required to . . . determine whether Dr. Philips pleaded a suffi-
ciently close nexus between the state and PCMH . . . ."); id.
at 19, 20, 21, 26). Labels aside, however, the thrust of Dr.
Philips’ argument is, essentially, that inasmuch as the Board
of Trustees was appointed exclusively by state actors, and the
Board terminated his privileges, the Board should be deemed
a state actor.

In Moore, a physician instituted an action against Williams-
burg Regional Hospital ("WRH"), a private non-profit hospi-
tal, and its agents for suspending his staff privileges. As noted
in Moore:
12 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
Previously, the hospital was Williamsburg County
Memorial Hospital and was organized as a tax
exempt Regional Health Services District under S.C.
Code § 44-7-2010 et seq. It became a private hospi-
tal on October 1, 2001, when the assets of Williams-
burg County Memorial Hospital Public Service
District were transferred to defendant corporation
WRH in accordance with South Carolina law. See
S.C. Code § 4-9-82.

Id. at 179 (footnote omitted).7

The physician asserted satisfaction of the state action
requirement based upon the fact that the hospital Board of
Directors that terminated him was composed of individuals
nominated by the county delegates to the state legislature and
ratified by the Governor, with two county representatives
serving as ex-officio nonvoting members of the Board, and
because WRH receives state and county funds and funds
through Medicaid and the South Carolina State Plan under
Title XIX of the Social Security Act as a public hospital.

Despite the government-controlled appointment process,
the court, in an opinion authored by Judge Wilkinson, con-
cluded more was necessary for state action:

Plaintiff contends . . . that this case is distinguish-
able from Modaber because government funding is
not the only factor that establishes a nexus between
7
South Carolina Code section 4-9-82(A) provides as follows:
(A) The governing body of any hospital public service district is
authorized to transfer its assets and properties for the delivery of
medical services upon assumption by the transferee of the
responsibilities of the district for the delivery of medical services
as set forth in the legislation creating the hospital public service
district.
S.C. Code Ann. § 4-9-82 (emphasis added).
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 13
WRH’s action and the state. Here, in addition, the
Board of Directors is nominated by the county dele-
gates to the state legislature and approved by the
Governor, and two government officials (the county
supervisor and a county representative) serve as ex-
officio members of the Board.

These additional facts, however, do not make the
state responsible for WRH’s privileging decisions.
The Governor’s involvement with the Board ends
after he approves the members, and plaintiff has not
presented any evidence that the Governor has used
his authority to influence privileging decisions. The
county representatives may attend the board meet-
ings, but they do not have voting rights and were not
present for the consideration of plaintiff’s suspen-
sion. In fact, the members of the Board who voted
were three local bankers and a school principal.
Therefore, it cannot be said that the Governor or the
county representatives were responsible for WRH’s
decision to uphold plaintiff’s suspension. As in
Freilich[ v. Upper Chesapeake Health, Inc., 313
F.3d 205, 214 (4th Cir. 2002)], "the State plays no
role whatsoever in the actual decision as to whether
or not to terminate or reappoint any particular physi-
cian." 313 F.3d at 214 n.3; . . . . Therefore, WRH’s
suspension of plaintiff’s privileges is not state action.

Moore, 560 F.3d at 179-80 (citation omitted); see also, e.g.,
Patrick v. Floyd Med. Ctr., 201 F.3d 1313, 1316 (11th Cir.
2000); Crowder v. Conlan, 740 F.2d 447, 453 (6th Cir. 1984).8
8
Like the district court, we do not perceive the three-part inquiry in
Modaber to assist Dr. Philips’ state action argument. First, healthcare ser-
vices are not understood to constitute traditional powers reserved to the
state. Second, Dr. Philips does not allege that Pitt County shares with
PCMHI in the rewards and responsibilities emanating from the Hospital’s
operation. Third, Dr. Philips likewise does not allege that the termination
of his privileges by PCMHI was at Pitt County’s behest.
14 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
Although Pitt County and another state actor exercise
exclusive authority to appoint members of the Board, Dr.
Philips’ complaints nowhere allege that the appointing gov-
ernmental entities played any role in the specific decision to
terminate his privileges. Moreover, once appointed, a member
of the Board is protected from undue influence by the
appointing authority in that a Board member may only be
removed for cause, which, as earlier noted, is defined and lim-
ited.

Pitt County did retain a measure of control over a number
of matters at PCMHI. That control is largely embodied in the
reverter provision which helps assure that PCMHI meets Pitt
County’s objectives of care for the indigent, payment to the
County of specified monetary obligations, and the continua-
tion of the Hospital. PCMHI, however, remains free to man-
age the Hospital and run the entirety of its operations.

Indeed, there is no allegation of Pitt County’s involvement
in the decisions that led to Dr. Philip’s alleged deprivations.
The decision in Moore suggests no basis for an exception here
to the general rule that the governmental entity must play a
role in the specific decision that led to the deprivations com-
plained of by an aggrieved person. See, e.g., Pariser v. Chris-
tian Health Care Sys., Inc., 816 F.2d 1248, 1252 (8th Cir.
1987) ("Here, Pariser’s complaint identified no nexus
between the various forms of government involvement with
the hospital that it catalogued and the hospital’s decision to
suspend Pariser’s privileges, and therefore its allegations,
even when taken to be true, did not establish state action.").

Dr. Philips makes passing reference to labels, besides close
nexus, appearing in state action jurisprudence, such as "ent-
wine[ment,]" "intertwine[ment,]" and "joint participation."
(See, e.g., App’ant’s Br. at 20, 21, 23, 25). Regardless of the
category referenced, Brentwood teaches that the totality of the
circumstances in this setting is determinative and that all
roads lead back to a finding of state action "if, though only if,
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 15
there is such a ‘close nexus between the State and the chal-
lenged action’ that seemingly private behavior ‘may fairly be
treated as that of the State itself.’" Id. at 295 (citation omit-
ted). Emphasizing the same point a different way, the major-
ity opinion stated that "[t]he judicial obligation is . . . to assure
that constitutional standards are invoked ‘when it can be said
that the State is responsible for the specific conduct of which
the plaintiff complains . . . .’" Id. at 295 (citation omitted)
(emphasis in part original and added).

Close nexus or "pervasive entwinement" id. at 298, was
present in Brentwood. In that case, a voluntary statewide asso-
ciation of schools, incorporated to regulate interscholastic ath-
letic competition among its members, drew its membership
from 290 public and 55 private schools. In Brentwood, unlike
PCMHI and its Board of Trustees in this action, the associa-
tion was "not an organization of natural persons acting on
their own;" rather it was an organization "of schools, and of
public schools to the extent of 84% of the total." Id. Further,
each public school was represented by its principal or a fac-
ulty member who in turn voted to select the association’s gov-
erning council and board composed of principals and
superintendents, all of whom the Court viewed as acting
within the scope of their official duties as public school
employees. Id. at 298-300. Those two factors played a signifi-
cant role in the conclusion that "[t]he nominally private char-
acter of the [a]ssociation [wa]s overborne by the pervasive
entwinement of public institutions and public officials in its
composition and workings . . . ." Id. at 298.

Such is not the case here where there is no allegation that
the members of the Board of Trustees are employees of, or
controlled in the ordinary course of their decision making by,
Pitt County. Instead, the Board of Trustees is at the helm of
a private, non-profit organization, with Pitt County retaining
enough control to assure the Hospital’s critical healthcare
mission is continued indefinitely, with the receipt of some
state and federal funds, but without concern as to the day-to-
16 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
day operation of the facility. Based upon the foregoing discus-
sion, the district court did not err in concluding at the pleading
stage that state action was absent.

The parties have not cited our decision many years ago in
Eaton v. Grubbs, 329 F.2d 710 (4th Cir. 1964), perhaps
because this area of the law has undergone a transformation
in many respects since 1964.9 In Eaton, three African-
American physicians and two of their patients instituted a
class action to enjoin the James Walker Memorial Hospital
("JWMH") and its administrator from continuing certain
racially discriminatory practices.

As outlined in Eaton, JWMH was chartered as a corpora-
tion. Under the chartering act, it was run by a self-
perpetuating board initially elected by the city and county.
The city and county donated to JWMH a new hospital build-
ing and the land upon which it stood. The conveyance was
restricted to use and maintenance as a hospital for the benefit
of the city and county with a reverter, as here, to those gov-
ernmental units in the event of abandonment or a use incon-
sistent with the restriction. The city and county also regularly
9
It is worth noting that the decision in Eaton came as a result of a broad
reading of the then-recent decision in Burton. The decision in DeBauche
observed that, "[i]n its more recent discussion of the subject, the Supreme
Court articulates the numerous limits to . . . [Burton], noting that . . . [the
decision] . . . ‘was one of our early cases dealing with "state action" . . .
and later cases have refined the vague "joint participation" test embodied
in that case.’" DeBauche, 191 F.3d at 507 (quoting Am. Mfrs. Mut. Ins.
Co. v. Sullivan, 526 U.S. 40, 57 (1999)). In Rendell-Baker v. Kohn, 457
U.S. 830, 842 (1982), a decision postdating Burton, the Supreme Court
rejected a state-action finding despite the fact that the state and a private
school were in a mutually beneficial relationship. Lacking was any show-
ing that the governmental entity derived any benefit from the alleged
deprivation, namely, the termination of school personnel. The Supreme
Court stressed that in Burton the governmental entity "profited from the
restaurant’s discriminatory conduct." Id. at 843. There is no allegation that
Pitt County so benefited here from the withdrawal of Dr. Philips’ privi-
leges.
 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL 17
appropriated money for the hospital’s operation, including
contributing a majority of the funds necessary for a new wing.

Of particular significance also was that JWMH was granted
the power of eminent domain. It had exercised that power by
filing a petition to condemn land for use in connection with
a state-financed addition to the hospital facilities. That peti-
tion alleged the hospital was "a municipal corporation, a pub-
lic body." Id. at 713. The New Hanover County Court, in
granting the petition, described the institution as "a public
body, a body corporate and politic." Id. After noting, under
North Carolina law, that the power of eminent domain is gov-
ernmental in nature, it was recognized in Eaton that JWMH
was a body exercising a segment of sovereign authority.

Under these circumstances, it was concluded as follows:

It is not suggested that each of the enumerated fac-
tors has independent potency to invoke the constitu-
tional requirement. It is enough for present purposes
to hold, as we do, that the record in its entirety leads
to the conclusion that the hospital is performing the
state’s function and is the chosen instrument of the
state. Under our constitutional commitment the
James Walker Hospital is therefore bound by the
provisions of the Fourteenth Amendment to refrain
from the discrimination alleged in the complaint.

Id. at 715.

PCMHI does not possess the power of eminent domain.
Nor is it aptly described either as a municipal corporation or
as "a public body, a body corporate and politic." The absence
of these attributes of sovereignty distinguish the comprehen-
sive bundle of state-related characteristics in Eaton from those
present here.
18 PHILIPS v. PITT COUNTY MEMORIAL HOSPITAL
III.

As an alternate ground, Dr. Philips has made reference to
Lebron v. National Railroad Passenger Corp., 513 U.S. 374
(1995). In Lebron, the National Railroad Passenger Corpora-
tion ("Amtrak") was deemed part of the federal government
for First Amendment purposes rather than the private entity
that Congress explicitly endeavored to create. Lebron, 513
U.S. at 400 ("We hold that where, as here, the Government
[1] creates a corporation by special law, [2] for the further-
ance of governmental objectives, and [3] retains for itself per-
manent authority to appoint a majority of the directors of that
corporation, the corporation is part of the Government for
purposes of the First Amendment.").

The district court observed that "PCMH[I] was not created
by special statute." Id. at 13. Dr. Philips does not appear to
contend otherwise, inasmuch as he cites Lebron but once in
his briefing, and he does not point us to any allegation in the
complaint in satisfaction of the special law requirement.

It is plain enough that PCMHI was not created by special
law. Rather, it was created in 1953, presumably at the
instance of Pitt County, under the general nonprofit incorpo-
ration statutes of North Carolina. In 1998, PCMHI filed the
Restated Articles in order to receive conveyance of the Hospi-
tal from Pitt County under the general statute of North Caro-
lina known as the Municipal Hospital Act. Accordingly, the
Lebron test is not met.

IV.

For the foregoing reasons, we affirm the district court’s
judgment.

AFFIRMED