United Tort Claimants v. Quorum Health Res., LLC (In re Otero Cnty. Hosp. Ass'n, Inc.)

514 B.R. 315

In re OTERO COUNTY HOSPITAL ASSOCIATION, INC., Debtor.United Tort Claimants, as Individuals,¹ Plaintiffs,

v.Quorum Health Resources, LLC, Defendant.

Bankruptcy No. 11–11–13686 JL.

Adversary Nos. 13–00007, 12–1204j, 12–1205j, 12–1206j, 12–1207j, 12–1208j, 12–1209j, 12–1210j, 12–1211j, 12–1212j, 12–1213j, 12–1214j, 12–1215j, 12–1216j, 12–1217j, 12–1218j, 12–1219j, 12–1220j, 12–1221j, 12–1222j, 12–1223j, 12–1235j, 12–1238j, 12–1239j, 12–1240j, 12–1241j, 12–1242j, 12–1243j, 12–1244j, 12–1245j, 12–1246j, 12–1247j, 12–1248j, 12–1249j, 12–1251j, 12–1252j, 12–1253j, 12–1254j, 12–1255j, 12–1256j, 12–1257j, 12–1258j, 12–1259j, 12–1260j, 12–1261j, 12–1271j, 12–1276j, 12–1278j.

United States Bankruptcy Court, D. New Mexico.

Signed July 25, 2014.

Lisa K. Curtis, Curtis and Lucero, Albuquerque, NM, Bernard R. Given, II, Loeb & Loeb LLP, Los Angeles, CA, Victor F. Poulos, Las Cruces, NM, for Plaintiffs.

Frank Alvarez, Hermes Sargent Bates, LLP, Dallas, TX, William W. Drury, John A. Klecan, Renaud Cook Drury Mesaros, P.A., Joshua Daniel Rogers, Kunz Plitt Hyland & Demlong, Phoenix, AZ, Paul M. Fish, Albuquerque, NM, Joe L. McClaugherty, Tamara Safarik, McClaugherty & Silver PC, Santa Fe, NM, Christina Gratke Nason, Hermes Sargent Bates, LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on the cross motions for summary judgment filed by Plaintiffs United Tort Claimants (together “UTC”) and Defendant Quorum Health Resources, LLC (“QHR”). See Docket Nos. 161, 162, 168, 186, 176, 177, 189, and 194. UTC seeks a determination that QHR owed a duty to the UTC claimants and breached that duty by allowing Dr. Christian Schlicht to perform experimental back surgeries at a hospital in Alamogordo, New Mexico. QHR seeks to establish that it did not owe a duty to the claimants and is therefore not liable in this case. A trial on the issue of liability is set to commence on September 2, 2014. After considering the cross motions, the responses, and replies, and the supporting papers, and being otherwise sufficiently informed, the Court finds that fact issues exist as to whether QHR owed a duty to UTC. Both motions for summary judgment are therefore DENIED.

SUMMARY JUDGMENT STANDARDS

Summary judgment, governed by Fed.R.Civ.P. 56, will be granted when the movant demonstrates that there is no genuine dispute as to a material fact and that the movant is entitled to judgment as a matter of law. SeeFed.R.Civ.P. 56(a), made applicable to adversary proceedings by Fed.R.Bankr.P. 7056. “[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and ... [must] demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary judgment, the Court must “examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.” Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir.1995) (quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990)).

“[A] party opposing a properly supported motion for summary judgment may not rest on mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial” through affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Furthermore, New Mexico Local Bankruptcy Rule 7056–1(c) provides that the party opposing summary judgment must: 1) list the material facts as to which the party contends a genuine fact exists; 2) “refer with particularity to those portions of the record upon which the opposing party relies;” and 3) “state the number of the movant's fact that is disputed.” NM LBR 7056–1(c). Properly supported material facts set forth in the movant's motion are “deemed admitted unless specifically controverted” by the party opposing summary judgment. NM LBR 7056–1(c).

APPLICATION OF SUMMARY JUDGMENT STANDARDS TO THE PENDING MOTIONS

Consistent with the 2010 amendments to Fed.R.Civ.P. 56, the Court used a flexible approach in examining the summary judgment papers, which included voluminous briefs and exhibits. See Martin v. Performance Boat Brokerage.com, LLC, 973 F.Supp.2d 820, 824 (W.D.Tenn.2013) (noting that “the 2010 amendment to Rule 56 introduce[d] flexibility in place of the bright-line rules”) (internal quotations omitted); Charles Alan Wright, et al, 10A Fed. Prac. & Proc. Civ. § 2721 (3d ed. 2009) (“The court and the parties have great flexibility with regard to the evidence that may be used on a Rule 56 proceeding.”).

To determine which facts are not in genuine dispute, the Court disregarded legal conclusions which appeared in either party's statement of material facts. In addition, when a party introduced a new fact in its response to the opponent's statement of material facts without including such fact in the party's own statement of material facts, the Court generally disregarded it. Exceptions were made, however, when the new fact introduced in the response was necessary to give context to the original fact. The Court considered documents which may or may not be admissible at trial when both parties referenced the documents in their papers in a manner that presumes the Court would consider the evidence, such as arguing about a document's meaning or import. Finally, the Court finds the facts identified in this opinion for purposes of its ruling on the instant cross motions only. Such facts will not be treated as established in the case.

FACTS NOT SUBJECT TO MATERIAL DISPUTE

1. Debtor Otero County Hospital Association, Inc. owns a hospital located in southern New Mexico known as Gerald Champion Regional Medical Center (the “Hospital”). See generally QHR's Memorandum in Support of Motion for Summary Judgment Based on Scope of Duty Defined by the Agreement (Docket No. 162) (“QHR's Motion”), ¶ 6; UTC's Opposition to Motion for Summary Judgment Based on Scope of Duty Defined by the Agreement (Docket No. 168) (“UTC's Response”), p. 2.

2. At all times material to this litigation, the Hospital had a Board of Directors (the “Board”). See QHR's Motion, ¶ 7; UTC's Response, p. 7. The Board adopted corporate bylaws (the “Hospital Bylaws”). See generally QHR's Motion, ¶ 9; Corporate Bylaws of Otero County Hospital Association d/b/a Gerald Champion Regional Medical Center attached as Exhibit 5 to QHR's Motion (Docket No. 162–5).

3. On November 30, 2005, QHR—a hospital management company—and the Hospital entered into an Agreement for Hospital Administrative Services (the “Agreement”). See QHR's Motion, ¶ 1; UTC's Response, p. 2; Agreement for Hospital Administrative Services attached as Exhibit 1 to QHR's Motion (Docket No. 162–1).

4. One of QHR's strengths, according to its internal operating manual, “is its expertise in virtually all areas of hospital operations and management.” See Memorandum in Support of United Tort Claimants' Motion for Partial Summary Judgment (Docket No. 177) (“UTC's Motion”), ¶ 1; Excerpt from manual titled “Operating Practices: QHR Management Division” filed under seal as Exhibit 3 in connection with UTC's Motion (Docket No. 180) (the “Operating Practices Manual”), p. 4 of 12. Such statement appears in a section of the Operating Practices Manual setting forth the procedure to be used in providing “Consulting Services.” Id.

5. The Agreement was to expire on December 15, 2011, unless otherwise provided therein. See QHR's Motion, ¶ 2; UTC's Response, p. 2. The Agreement was in effect at all times material to the claims asserted by each UTC claimant. See QHR's Motion, ¶ 3; UTC's Response, p. 2.

6. The relevant terms of the Agreement, as identified by QHR and UTC, are as follows: ²

(a) QHR was required to provide key executives to the Hospital, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”). ³

(b) QHR was required to “abide by all policies and procedures reasonably established by the Hospital.” ⁴

(c) QHR agreed “to comply with the requirements of the Hospital's compliance program in carrying out its duties under th[e] Agreement, to bring items of potential noncompliance to the Board when actually discovered by QHR (and of which QHR had actual notice) and ... to take corrective action prescribed by the Board.” ⁵

(d) The Hospital, through its Board, was required to exercise ultimate control over its policies and operation and retained ultimate responsibility for all duties vested in the Hospital by applicable law.⁶

(e) QHR had no right to direct the Hospital or its employees in the performance of their medical judgments or duties.⁷

(f) QHR was to be the agent of the Hospital solely to perform the non-medical administrative services identified in the Agreement.⁸

(g) The Hospital retained responsibility for all matters requiring professional medical judgment. QHR retained no responsibility for such judgments and was not in any way responsible for the credentialing of any doctors.⁹

7. Under the Hospital Bylaws, the Board was to “delegate to the medical staff the responsibility and authority to investigate and evaluate all matters relating to medical staff membership status, clinical privileges, and corrective action....” See QHR's Motion, ¶ 8; Hospital Bylaws, Section 7.3–1.

8. The Hospital Bylaws also state that the medical staff and other professionals providing patient care were required to “conduct and be accountable to the [B]oard for conducting activities that contribute to the preservation and improvement of the quality and efficiency of patient care provided in the [H]ospital.” See QHR's Motion, ¶ 9; Hospital Bylaws, Section 8.2. Under the Hospital Bylaws, such activities included:

(a) Review and evaluation of the quality of...