On appeal from the Superior Court, Chancery Division, Bergen County.
The opinion of the court was delivered by Morton I. Greenberg, P.J.A.D.
This matter comes on before the court on appeal from a judgment invalidating a resolution adopted by defendant Valley Hospital, a community hospital in Ridgewood, Bergen County. The consequence of the judgment was to compel the hospital to admit plaintiff physicians to its active medical staff.
This case is traceable to December 6, 1977 when plaintiff Lawrence J. Berman, M.D., a physician associated with the Paterson Clinic, wrote to the hospital and requested that he be appointed to its active medical staff. An appointee to the active staff has unlimited admission privileges in the hospital. On December 14, 1977, following a three-month freeze in admissions to the active staff adopted in October 1977, the trustees of the hospital, who are responsible for the policies governing its operation, adopted a resolution limiting future appointments to the active staff to physicians maintaining an office within the primary service area of the hospital. The resolution further provided that physicians who had been in private practice in Bergen, Passaic or Morris Counties in New Jersey or Rockland County in New York for more than two years immediately preceding the date of application were not eligible for appointment
unless the applicant's specialty was in a field of medicine for which the hospital had a previously determined need. The resolution did not affect admission to the courtesy medical staff whose members have limited privileges to practice in the hospital. On January 6, 1978 Berman's request for appointment was denied because he had been in private practice for more than two years within the excluded area.
In August 1980 Berman again applied for active staff admission. A few months later Samuel A. Cassell, M.D., another physician with the Paterson Clinic, requested that his courtesy staff privileges obtained in 1979 be changed to active staff membership. Like Berman he had been in private practice for more than two years within the excluded area. Inasmuch as both Berman and Cassell were ineligible under the December 14, 1977 resolution, their applications were denied but pursuant to the hospital's by-laws they administratively appealed the denials.
Their appeals were heard by an ad hoc committee of the medical staff. At the hearing plaintiffs' medical credentials and competence were conceded. Thus the issue before the committee was whether plaintiffs were qualified in a particular specialty for which there was a predetermined need. The hearing was not concerned with any question of the validity of the resolution as that matter was reserved. The ad hoc committee recommended that plaintiffs not be admitted to the active staff, a recommendation which, after administrative hospital appeals, was followed by the trustees who on January 27, 1982 denied plaintiffs' applications.
On March 18, 1982 plaintiffs brought this action in the Superior Court, Chancery Division, against the hospital and the trustees. Plaintiffs charged that defendants acted arbitrarily and capriciously in rejecting their applications, used improper eligibility requirements to exclude them, arbitrarily applied and enforced the eligibility requirements for admission to the active staff, wrongfully prevented legitimate competition from plaintiffs
and breached their fiduciary duty to the public. Plaintiffs further asserted defendants exercised unlawful monopolistic control over the hospital, attempted to monopolize trade and compete unfairly with plaintiffs and impaired and interfered with plaintiffs' ability to conduct their practices and pursue their livelihood. Relief was sought under the hospital's by-laws, statutory law, common law and public policy. Defendants filed an answer denying that plaintiffs were entitled to relief.
On October 29, 1982 the trial judge directed a bifurcation of the trial. The initial trial was to be concerned with the validity of the resolution of December 14, 1977 and the propriety of the denial of plaintiffs' applications. It was anticipated that the second trial would deal with the issues of unfair competition, monopoly, tortious interference with plaintiffs' rights and damages. Only the first trial has been held.
The record developed in this matter is extensive. Plaintiffs are licensed physicians in New Jersey practicing internal medicine. Berman has a subspecialty in nephrology and Cassell has a subspecialty in pulmonary medicine. Both are board certified in their specialties and neither's competency is questioned. They are associated with the Paterson Clinic with offices in Passaic and Bergen Counties. Doctors practicing at the hospital are organized into a medical staff which has adopted by-laws establishing categories of staff membership including active and courtesy members. Active members have offices and active practices in the hospital's primary service area and are ...