Opinion
Civil Action No. 3:02-CV-1126-N
March 17, 2004
MEMORANDUM OPINION AND ORDER
Before the Court are: (1) Defendant Methodist Hospital of Dallas' Motion for Summary Judgment, filed June 24, 2003; and (2) Defendant Methodist Hospital of Dallas' Amended Motion for Summary Judgment, filed July 18, 2003.
Defendant Methodist Hospital of Dallas ("Methodist Hospital") alleges that summary judgment is appropriate as to all claims by Plaintiff Raymond S. Khouw ("Khouw"), because Khouw permanently resigned from Methodist Hospital under a 1993 Agreement. Because the 1993 Agreement is a valid bar to Khouw's application for clinical privileges, and since such agreement does not violate the Sherman Antitrust Act, Texas antitrust law, or Civil Rights Act of 1964, was not a product of duress, and has not been materially breached by Methodist Hospital, Defendant's Amended Motion for Summary Judgment is granted.
I. BACKGROUND
Dr. Raymond Khouw is a physician with specialties in obstetrics and gynecology. Between 1987 and 1993, Dr. Khouw was a member of the medical staff and had clinical privileges in the areas of obstetrics and gynecology at Charlton Methodist Hospital, which is operated by Defendant Methodist Hospital. In 1991, a lawsuit was filed against Methodist Hospital, four nurses, and Khouw for alleged malpractice committed during a 1989 delivery. Methodist Hospital eventually settled the lawsuit, and a peer review panel determined that Khouw's treatment of the patient was appropriate and within the standard of care of the community. However, Khouw claims that the malpractice lawsuit was a motivating factor in Methodist Hospital's purported animus towards him and led to the investigations which precipitated his suspension in 1993.
In late 1992, Methodist Hospital received complaints from nurses who had worked with Dr. Khouw. According to Methodist Hospital, these nurses raised allegations about Khouw's responsiveness to nursing concerns and compliance with hospital procedures. Methodist Hospital investigated such allegations, during which time Khouw's obstetrical privileges were temporarily suspended. Concerned about loss of patients and professional standing during his suspension, Khouw and his attorney entered into discussions aimed at closing the investigation and preventing Methodist Hospital from reporting its summary suspension in a damaging manner to the Texas Board of Medical Examiners or the National Practitioner Data Bank.
Accordingly, on July 13, 1993, Khouw and Methodist Hospital entered into a Settlement Agreement (the "1993 Agreement") by which Methodist Hospital discontinued its suspension and investigation of Dr. Khouw, agreed upon a proper response to performance-related inquiries, and consented to an appropriate manner to report Dr. Khouw's suspension to the National Practitioner Data Bank. In exchange, Khouw agreed to "voluntarily and permanently resign from the MHD Medical Staff and forego possible legal action against Methodist Hospital.
Khouw alleges that between 1993 and 2003, inquiries concerning his resignation and professional conduct were not handled in the manner required under the 1993 Agreement. Specifically, Khouw claims a doctor at Methodist Hospital dissuaded a patient from continuing treatment by Khouw, improperly delayed responding to third-party inquiries, and allowed third-party representatives to review privileged files. In addition, Khouw states that between 1993 and 2003, the closing of labor and delivery facilities at the Medical Center at Lancaster and at Dallas Southwest Medical Center left him no option but to pursue anew obstetrical privileges at Charlton Methodist Hospital. Accordingly, Khouw reapplied for obstetrical privileges at Methodist Hospital in 2002. His application was denied by letter dated March 14, 2002, based upon Khouw's permanent resignation under the 1993 Agreement. Khouw filed the instant suit on May 29, 2002, alleging that the denial of his application constitutes a restraint of trade and a monopolistic act prohibited by the Sherman Antitrust Act, 15 U.S.C. § 1 and 2, the Texas Antitrust Act, and is the result of race-based discrimination that violates the Civil Rights Act of 1964. Methodist Hospital moves for summary judgment, claiming that all of Khouw's claims are barred by the 1993 Settlement Agreement.
II. ANALYSIS A. "Permanent" Does Not Mean "Temporary"
Methodist Hospital argues that summary judgment is appropriate, because Khouw "voluntarily and permanently resign[ed] from the MHD Medical Staff effective" July 13, 1993 under the 1993 Agreement. Methodist Hospital claims that its actions were based on a contractual agreement and therefore did not violate federal or state antitrust or civil rights laws. In response, Khouw argues that his permanent resignation should not serve as a bar to reapplication, since Khouw did not specifically waive his right to reapply for staff privileges in the 1993 Agreement. Khouw alleges that Methodist Hospital's denial of his 2002 application for privileges was unnecessary under the 1993 Agreement and illegal under federal and state law.In Texas, settlement agreements are interpreted according to ordinary principles of contract law. Shriners Hosp, for Children v. McCarthy Bros. Co., 80 F. Supp.2d 707, 710 (S.D. Tex. 2000) (citing Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990)). When construing a contract, the language used by parties should be accorded a plain, grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); Reilly v. Rangers Mgmt., Inc., 121 S.W.2d 527, 529 (Tex. 1987) (mandating that unambiguous contract provisions be given the plain meaning of the terms). Khouw and Methodist Hospital both appear to concede that the 1993 Agreement is unambiguous; instead, they disagree about the import of the term "permanent" in the contract. The Court agrees that the term at issue is susceptible to only one reasonable interpretation, and therefore the Court must review the contract as a matter of law. See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 465 (Tex. 1998) (a contract is not ambiguous merely because the parties advance conflicting interpretations).
The 1993 Agreement clearly establishes a "permanent" resignation by Khouw. The plain, ordinary meaning of "permanent" is "existing perpetually; everlasting, esp. without significant change." RANDOMHOUSE WEBSTER'S UNABRIDGED DICTIONARY 1442 (2nd ed. rev. 1997); see Summit Nat'l Bank v. Spicer, No. 4:00-CV-1837-Y, 2002 WL 737145, at *3 (N.D. Tex. April 23, 2002) (Means, J.) (citing City of Corpus Christi v. Bayfront Assoc., Ltd., 814 S.W.2d 98, 104 (Tex.App.-Corpus Christi 1991, writ denied)) ("The dictionary is the logical source for the plain, ordinary, and generally accepted meaning of words."). Khouw's interpretation-that a "permanent" resignation is something less than permanent-would render the contract language superfluous, effectively ignoring the inclusion the word "permanent" altogether. Such interpretation is contrary to traditional principles of contract law. See Int'l Turbine Services, Inc. v. VASP Brazilian Airlines, 278 F.3d 494, 497 (5th Cir. 2002) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)) (In Texas, "courts must examine and consider the entire writing and give effect to all provisions such that none are rendered meaningless."). Had the parties intended Khouw's resignation to be temporary, or even to leave the question unanswered, they would not have specifically provided that his resignation was permanent. Accordingly, the language of the contract, if enforceable, would bar Khouw's application.
Although Khouw suggests that "permanent" has a different meaning in the specific contexts of disbarment from legal practice, "permanent disability," "permanent employment," and "permanent injunction," there is no indication that the word "permanent" in the 1993 Agreement was meant to be used in a "technical or different sense" than the common usage. See Heritage Res., Inc., 939 S.W.2d at 121.
B. A "Permanent Resignation " Does Not Violate Antitrust or Civil Rights Law
Khouw argues that the 1993 Agreement is unenforceable because it acts as a prospective waiver of antitrust and civil rights claims. Methodist Hospital is not entirely clear about why it thinks the 1993 Agreement insulates it from liability under the antitrust laws; Khouw, on the other hand, is not entirely clear about why he thinks the 1993 Agreement itself violates the antitrust laws. Khouw initially characterizes his argument as being that the antitrust laws prohibit a prospective waiver of future violations, perhaps because Methodist Hospital pleaded waiver as an affirmative defense. But having initially characterized his argument as dealing with waivers, Khouw then cites cases standing for the unsurprising proposition that private contracts cannot trump the antitrust laws and appears to argue that the 1993 Agreement itself violates the antitrust laws and is unenforceable.
Simpson v. United Oil Co. of California, 377 U.S. 13, 18 (1964) ("Accordingly, a consignment, no matter how lawful it might be as a matter of private contract law, must give way before the federal antitrust policy."); CVD, Inc. v. Raytheon Co., 769 F.2d 842, 855 (1st Cir. 1985) ("Nevertheless, it is clear that the policies expressed in the federal antitrust laws will override any agreement in contravention of those policies, regardless of the agreement's legality under private contract law.").
Initially, then, the Court must consider whether a contract for "permanent resignation" from a hospital staff is a violation of the Sherman Antitrust Act and, consequently, Texas antitrust law. It is axiomatic that "[b]roadly speaking, any bargain or contract which purports to limit in any way the right of either party to work or to do business, whether as to the character of the work or business, its place, the manner in which it shall be done, or the price which shall be demanded for it, may be called a bargain or contract in restraint of trade." 6 WILLISTON ON CONTRACTS § 13:1 (4th ed. 2003). Indeed, in a literal sense, every contract to some degree restrains trade. See Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 60 (1911) (Sherman Antitrust Act is, if read literally, "broad enough to embrace every conceivable contract or combination . . . anywhere in the whole field of human activity"). However, "it is not every agreement in restraint of competition that is prohibited since almost every contract has that effect to some extent." Affiliated Capital Corp. v. City of Houston, 700 F.2d 226, 235 (5th Cir. 1983) (emphasis in original). Instead, a contract must place an unreasonable restraint on competition to violate the Sherman Act. Id.
Neither the parties nor the Court have been able to locate any case law specifically dealing with an antitrust challenge to a permanent resignation of hospital privileges, or for that matter, permanent resignation from any employment. The Court will rigorously avoid the temptation of equating the antitrust analysis of the 1993 Agreement with the analysis of Khouw's antitrust claims on the merits. On the merits, Khouw alleges that Methodist Hospital, in refusing to grant him privileges, has engaged in an unlawful refusal to deal, boycott, and tying arrangement. The focus there is on the hospital's conduct in denying privileges. The issue with the 1993 Agreement is whether the voluntary agreement is an unlawful contract in restraint of trade. The inquiry regarding the 1993 Agreement need not involve the factual issues of market definition and the like pertinent to Khouw's claims on the merits.
This is at least an indication of the novelty of Khouw's arguments, if not an indication of their merits.
The closest analogy to Khouw's claims regarding the 1993 Agreement that the Court has identified is a noncompetition agreement. Noncompetes ancillary to a permissible agreement are not per se illegal under the antitrust laws. 11 PHILLIP E. AREEDA, ANTITRUST LAW ¶ 1908a (1998). Settlements are one type of transaction to which noncompetes can be ancillary. Id. ¶ 1908c. The Court thus holds that the 1993 Agreement is not per se illegal and should be analyzed under the rule of reason. A permanent resignation appears to be less of a danger under the antitrust laws than a noncompete agreement, as the employee is not removed from the market, but is simply no longer employed with his prior employer and is otherwise free to compete. In most circumstances, then, the restraint on competition is much less with a permanent resignation than with a noncompete.
Summary judgment can be appropriate for rule of reason cases. 2 id. ¶ 308h. In a conspiracy claim, evidence of the parties' improper motive is crucial:
That being the case, the absence of any plausible motive to engage in the conduct charged is highly relevant to whether a "genuine issue for trial" exists within the meaning of Rule 56(e). Lack of motive bears on the range of permissible conclusions that might be drawn from ambiguous evidence: if petitioners had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, the conduct does not give rise to an inference of conspiracy.Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 596-97 (1986). Here there is absolutely no evidence of any economic motive to engage in an unlawful conspiracy. Khouw offers no argument of any economic incentive for Khouw and Methodist Hospital to enter into the 1993 Agreement in order to injure competition. Instead, "their conduct is consistent with other, equally plausible explanations": Khouw and Methodist Hospital wanted to get divorced and bring an end to the Hospital's investigations into Khouw's medical practices. Accordingly, "the conduct does not give rise to an inference of conspiracy." Id. Khouw has thus failed to show the existence of any fact issue regarding the unenforceability of the 1993 Agreement due to alleged antitrust violations.
Having determined that the 1993 Agreement itself does not violate the antitrust laws, the Court must now consider the impact of that agreement on Khouw's present claims under the antitrust laws. It is not entirely clear how Methodist Hospital thinks the existence of the 1993 Agreement insulates it from Khouw's claims. Although Methodist Hospital pleaded release and waiver as affirmative defenses, it does not articulate its motion for summary judgment in terms of release or waiver. Similarly, it does not characterize its argument in terms of estoppel or specific performance of the 1993 Agreement. The argument appears to be that if Methodist Hospital simply takes actions vis-a-vis Khouw that are consistent with a contract with Khouw that is itself permissible under the antitrust laws, Khouw has no claim against Methodist Hospital for violation of the antitrust laws. Although this comes close to the "it's just not right" form of argument, the Court with some reluctance agrees. On these facts, the Court holds that no claim for violation of the antitrust laws will lie for conduct in conformity with a valid contract that itself does not violate the antitrust laws.
Khouw's argument under the Texas antitrust laws likewise fails. Nafrawi v. Hendrick Medical Center, 676 F. Supp. 770, 774 (N.D. Tex. 1987); Winston v. American Medical Int'l, Inc., 930 S.W.2d 945, 951 (Tex.App.-Houston [1st Dist] 1996, no writ).
Khouw also argues that the 1993 Agreement is unenforceable as an invalid waiver of future civil rights claims, citing Alexander v. Gardner-Denver Co., 415 U.S. 36, 51-52 (1974). As indicated above, Methodist Hospital did plead waiver as an affirmative defense. See Answer to Plaintiffs First Amended Complaint at 7. In its amended motion for summary judgment, however, Methodist Hospital also was somewhat vague about exactly how it thought the 1993 Agreement precludes Khouw's civil rights claims, as with its antitrust arguments. It appears that Methodist Hospital argues, at least in part, that its actions were based on a bona fide assertion of its contractual rights, and thus were not discriminatory: "Consequently, Methodist Hospital's actions in refusing to give the Plaintiff an application were based on a contractual agreement and could not be violative of the antitrust or discrimination laws." Brief in Support of Amended Motion for Summary Judgment at 6. This argument is made more explicitly in the Reply. See Defendant Methodist Hospitals of Dallas' Reply at 14.
To the extent Methodist Hospital moved for summary judgment on the basis that its reliance on the 1993 Agreement was a "legitimate nondiscriminatory reason offered by [Methodist Hospital] for refusing [Khouw] an application," id., Khouw's argument about waivers of future claims being improper simply misses the point. Khouw likewise fails to offer any summary judgment proof that the Hospital's reliance on the 1993 Agreement was pretextual. Under the familiar burden — shifting framework, see McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), absent evidence that the Hospital's explanation was pretextual, the Hospital is entitled to summary judgment on Khouw's discrimination claims.
Accordingly, neither the antitrust nor the civil rights laws preclude the Hospital's reliance on the 1993 Agreement.
C. The Agreement Was Not a Product of Duress
Khouw argues that the 1993 Agreement is unenforceable because it was a product of duress. He claims that he entered into the 1993 Agreement only because he was denied the right to proper administrative hearings and that the length of his suspension caused him to lose patients and professional status. However, a showing of duress requires more. In Texas, economic duress exists only if the party shows (1) a threat to do something that the threatening party has no legal right to do; (2) illegal exaction or fraudulent deception; (3) imminent restraint such as to destroy free agency without adequate means of protection; and (4) the claimant's financial distress was caused by the party accused of duress. McCallum Highlands Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir. 1995) (citing Simpson v. MBank Dallas, N.A., 724 S.W.2d 102 (Tex.App.-Dallas 1987, writ ref'd n.r.e.).
Even should Khouw establish that Methodist Hospital had no legal right to continue his suspension under the hospital bylaws and therefore Khouw's resignation was exacted by improper means, he has failed to show that the restraint was such that it destroyed Khouw's free agency without means of protection. See ABB Kraftwerke Aktiengesellschaft v. Brownsville Barge Crane, Inc., 115 S.W.3d 287, 294 (Tex.App. Corpus Christi 2003, pet. filed) (a claim of economic duress cannot lie simply because of the necessities of the purported victim or on fear of what a third party might do). In Texas, "economic coercion exists only if the target of such coercion has no alternative but to submit to it." Lee v. Wal — Mart Stores, Inc., 34 F.3d 285, 290 (5th Cir. 1994) (citing Tower Contracting Co. v. Burden Bros., Inc., 482 S.W.2d 330, 336 (Tex.Civ.App.-Dallas 1972, writ ref'd n.r.e.)).
Here, however, Khouw had any number of options available at the time of his voluntary resignation, including awaiting the results of the hospital investigation, filing suit, and refusing to sign the contract until more attractive terms were presented. In fact, Khouw, represented by counsel, himself offered to resign-apparently unprompted by Methodist Hopsital. The final version of the 1993 Settlement Agreement was negotiated and jointly drafted by counsel for Methodist Hospital and counsel for Khouw. Although Khouw was undoubtedly prompted to sign the 1993 Agreement by the economic pressure of his suspension, "the mere fact that a person enters into a contract as a result of the pressure of business circumstances, financial embarrassment, or economic necessity is not sufficient [to establish duress]." Chouinard v. Chouinard, 568 F.2d 430, 434 (5th Cir. 1978)
Moreover, Khouw accepted the benefits of the 1993 Agreement for almost a decade before raising his claim of duress and even requested reaffirmation of the agreement when he believed that Methodist Hospital was not abiding by its provisions. The Fifth Circuit has made clear that, "delay in raising a claim of duress in addition to the existence of a negotiated agreement between parties represented by counsel is compelling evidence that there was in fact no duress." McCallum Highlands, LTD, 66 F.3d at 93 (citing Palmer Barge Line, Inc. v. Southern Petroleum Trading Co., 776 F.2d 502, 506 (5th Cir. 1985)). Accordingly, Khouw has failed to raise a material issue of fact suggesting that he signed the 1993 Agreement under duress.
D. Methodist Hospital Did Not Materially Breach the 1993 Agreement
Finally, Khouw contends that Methodist Hospital is estopped from raising the 1993 Agreement as a defense because of material breaches by the hospital. Khouw alleges that a doctor discussed the details of Khouw's resignation with hospital personnel; a doctor dissuaded a patient from continuing treatment with Khouw; the hospital delayed responding to inquiries about Khouw's work history; and the hospital improperly invited a third party to contact the hospital with further inquiries. It is clear that a party that materially breaches a contract cannot attempt to later enforce it against the other party. MJR Corp. v. BB Vending Co., 760 S.W.2d 4, 21 (Tex.App.-Dallas 1988, writ denied). However, there is no summary judgment evidence to suggest that the doctors alleged to have breached the agreement were bound by such agreement, nor that their breach constitutes a material breach by Methodist Hospital. In addition, the 1993 Agreement contains no language addressing the amount of time that Methodist Hospital has to respond to a third-party inquiry. The length of delay by Methodist Hospital in responding to the three requests raised by Khouw did not exceed three months in any instance, which does not constitute the type of delay that supports a finding of material breach. Also, the language Khouw relies upon to suggest breach, a boilerplate signoff phrase which stated "should you require further information, please feel free to contact me," does not constitute a breach sufficient to invalidate the contract. Even were the contract materially breached by Methodist Hospital, Khouw continued to accept the benefits of the 1993 Agreement and reaffirmed the agreement after two of the incidents that he now claims constitute material breach. Khouw has failed to show material breach of the 1993 Agreement; accordingly, the agreement may be enforced, and Methodist Hospital may properly reject Khouw's application.III. CONCLUSION
Because Methodist Hospital and Dr. Raymond Khouw entered into a valid agreement for Dr. Khouw's permanent resignation, the agreement is not improper under antitrust or civil rights laws, was not the product of duress, and was not materially breached by Methodist Hospital, Methodist Hospital was permitted to reject Khouw's application for clinical privileges. Accordingly, summary judgment is appropriate as to all claims by Khouw.