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HERBERT v. NEWTON MEM. HOSP.

July 26, 1996

ROBERT A. HERBERT, M.D., Plaintiff,
v.
NEWTON MEMORIAL HOSPITAL, STEPHEN LANDAUER, M.D., DONALD DELONG, M.D., ADA VILLAFANIA, M.D., DENNIS COLLETTE, Defendants.



The opinion of the court was delivered by: BASSLER

 BASSLER, DISTRICT JUDGE:

 Defendants Newton Memorial Hospital (the "Hospital"), Stephen Landauer, M.D. *fn1" , Donald DeLong, M.D., Ada Villafania, M.D. (collectively, the "Defendant Doctors") and Dennis Collette ("Collette") move for summary judgment pursuant to Federal Rule of Civil Procedure 56(c). This Court's jurisdiction is pursuant to 28 U.S.C. § 1332(a) (diversity of citizenship). For the reasons set forth below, the Court grants Defendants' motion and dismisses the Complaint with prejudice.

 I. BACKGROUND

 Plaintiff, Dr. Robert Herbert ("Dr. Herbert"), is a medical doctor who practices anesthesiology. (Complaint P 2). In 1987, Dr. Herbert was granted staff privileges in anesthesiology at the Hospital. The Defendant Doctors also held staff privileges at the Hospital during the time period pertinent to this lawsuit. (Id. PP 4-6). At all relevant times, Collette was the President and Chief Executive Officer of the Hospital. (Id. P 7).

 The parties' dispute involves a contract, entitled the Professional Practice Asset Purchase Agreement (the "Agreement"), between Dr. Herbert and Dr. Donald W. Milne ("Dr. Milne") by which Dr. Milne agreed to buy certain assets of Dr. Herbert's practice. (See Professional Practice Asset Purchase Agreement, plaintiff's Opposition Brief E1-23). Dr. Herbert alleges that the Defendant Doctors and Collette tortiously interfered with the Agreement by refusing to entertain Dr. Milne's application for staff privileges.

 Dr. Herbert first considered selling his medical practice in January 1994. (Dr. Herbert Dep. 48:13-15). Accordingly, in early 1994, Dr. Herbert contacted Dr. Madeline Cosman ("Dr. Cosman"), a medical practice broker. (Id.)

 It was not until June 1994, however, that Dr. Herbert was certain he wanted to sell his practice and relocate to California. *fn2" (Id. 48:2-5). Dr. Cosman evaluated Dr. Herbert's practice and placed advertisements in medical journals requesting inquiries from potential purchasers. (Dr. Herbert Dep. 48:12 - 49:9).

 In connection with Dr. Cosman's evaluation of Dr. Herbert's practice, Dr. Herbert completed a "Preliminary Practice Analysis," in which Dr. Herbert was asked to share his impressions of his practice. (See Francis J. Vernoia Aff. Ex. 22). Dr. Herbert indicated that he "worked at the Hospital only," that "all anesthesia machines equipment [were] owned by [the] hospital," that "mostly all" of his patients were new patients, that he did not treat any patients in his own office, that he practiced in a "loose association with 3 others," that the majority of patients are "randomly given" to him, and that he had a patient list with 4,000 to 5,000 names on it. (Vernoia Aff. Ex. 22 at 1-3).

 Dr. Donald Milne ("Dr. Milne") was one of the approximately 150 doctors who inquired regarding the sale of Dr. Herbert's practice. (Cosman Dep. 115:11 - 115:16). On July 1, 1994, Drs. Milne and Herbert entered into the Agreement, whereby Dr. Milne agreed to purchase certain of Dr. Herbert's assets. (Vernoia Aff. Ex. 15). The Agreement listed the sale assets as follows:

 
a. a practitioner referral list;
 
b. goodwill;
 
c. billing records;
 
d. a covenant not to compete;
 
e. rights to telephone numbers.

 (Agreement P 1).

 The Agreement also specifically excluded certain assets from the sale. These were:

 
a. Dr. Herbert's personal cash;
 
b. accounts receivable;
 
c. Dr. Herbert's diplomas and personal memorabilia;
 
e. Dr. Herbert's automobiles.

 (Agreement P 3). The Agreement provided for a maximum sale price of $ 400,000. (Agreement P 4(A)). $ 200,000 of this sum was contingent upon Dr. Milne generating $ 300,000 or more in billings in each of the two years after Dr. Milne's starting date. (Id. P 4(B)). The purchase price was allocated, as follows: Goodwill: $ 100,000 Referral List: $ 50,000 Consultation Agreement: $ 100,000 Covenant Not To Compete: $ 150,000

 (Agreement P 5). Dr. Herbert's contractual consultation duties consisted of introducing Dr. Milne to colleagues at the Hospital, training Dr. Milne in billing techniques, teaching Dr. Milne the local mores of the call and coverage schedule at the Hospital and generally using his best efforts to secure a transition of the practice to Dr. Milne. (Agreement P 7(B)).

 The Agreement provided that it would be null and void if Dr. Milne failed to get temporary hospital privileges to practice anesthesia at Newton Memorial Hospital in Newton, New Jersey. (Agreement P 24).

 Dr. Herbert did not inform anyone at the Hospital of his intention to relocate or sell his practice until July 7, 1994. On that day, he entered the Hospital's operating room area and said to Dr. Landauer, "I've decided that I'm going to be leaving. This is Dr. Milne. I've sold him my practice. He's going to take over for me." (Dr. Herbert Dep. 84:16-25). According to Dr. Herbert, Dr. Landauer became enraged and demanded to know if Dr. Herbert had sold his practice for money. (Dr. Herbert Dep. 85:9-21).

 On July 7, 1994, Dr. Herbert also told Dr. Villafania of his decision to relocate. According to Dr. Herbert, Dr. Villafania was upset over the news of Dr. Herbert's departure, particularly as it might affect her plans to vacation in December. (Dr. Herbert Dep. 92:4-12). Dr. Landauer, according to Dr. Milne, made it "quite clear" that if Dr. Milne had a contract with Dr. Herbert, he would not receive a position on the Hospital. (Dr. Milne Dep. 29:10 - 30:9); (Dr. Landauer Dep. 55:15-22 ("I did not want to have a contractual relationship, I did not want to have any binding relationship between Dr. Milne and Dr. Herbert and the reason for that was, there were enough reasons that I did not trust what Dr. Herbert might be doing, especially given the events of that day which changed rather dramatically and rather suddenly and therefore if he did have a relationship with Dr. Herbert I would like to know what it was so that we as a department could ascertain what if anything might be the impact of Dr. Herbert in the future.")).

 On the evening of July 7, 1994, Dr. DeLong and his wife took Dr. Milne out to dinner. According to Dr. Milne, he was asked questions throughout the evening as to whether he and Dr. Herbert had a contract to purchase Dr. Herbert's practice. (Dr. Milne Dep. 34:2-8).

 On July 8, 1994, Dr. Herbert met with Dr. Landauer. According to Dr. Herbert, Dr. Landauer told him that "if [Dr. Milne] pays money to you and if you don't resign, [Dr. Milne] will not get on staff." (Herbert Dep. 117:21-22).

 In or around July 8, 1994, Dr. Herbert also informed Dr. Landauer that he would not resign from the Hospital, but rather would apply for a leave of absence. (Id.).

 By letter dated July 12, 1994, Dr. Herbert formally applied for a leave of absence from the Hospital. Dr. Herbert stated the reason for his application: "The reason for this leave of absence is the fact that my wife is undergoing a complicated pregnancy and she is alone without family or close friends in California." (Letter, dated July 12, 1994, from Dr. Herbert to Stephen Landauer, M.D., Plaintiff's Opposition Brief at E-24); (see also Dr. Herbert Dep. at 82:18 - 83:1 ("I had planned to move to California with my wife assuming everything was working out well with the baby. If there had been a problem with the baby, I didn't know what was going to happen. I didn't know if she was going to have--what her state of mind would be. Q: You wanted to leave your options open so you could return? A: Correct.")

 Dr. Herbert was granted a leave of absence on July 18, 1994. (See Medical Executive Committee Notes, dated July 18, 1994, Plaintiff's Opposition Brief at E-26 ("Robert A. Herbert, M.D., requested a nine (9) month leave of absence to be with his wife who lives in California. There was some discussion about the circumstances surrounding his departure. The Committee agreed that the leave of absence should be effective July 19, 1994. This does not need to go to the Board Executive Committee for ratification. Dr. Landauer noted that a locum tenens *fn3" Anesthesiologist is being sought.")) During his leave of absence, the Hospital was obligated to allow Dr. Herbert to resume his position on the Hospital staff if he chose to return. (See Medical and Affiliate Staff By-Laws, Article III, Section 8; Plaintiff's Opposition Brief at E-59).

 Over the weekend of July 9 to 10, 1994, Dr. Landauer discussed staffing decisions with Drs. DeLong and Villafania. The Defendant Doctors agreed that they could not recommend granting temporary staff privileges while Dr. Herbert was on a leave of absence. (Landauer Dep. 62:22-25 ("I'm saying that we did not need manpower while we had four members of the anesthesia department.")). *fn4"

 Dr. Milne told Dr. Landauer that he was "willing to come on as staff of the Hospital in a role similar to what the rest of them [i.e., Dr. Herbert and the Defendant Doctors] had within the Department," and not as a "local tenant [i.e., a temporary replacement]." (Dr. Milne Dep. 29:17-21).

 Dr. Milne submitted a formal application for staff privileges on July 14, 1994. (Letter from Dr. Donald Milne to Mr. Dennis Collette, dated July 14, 1994; Vernoia Aff. Ex. 28). On July 20, 1994, the Hospital's Department of Anesthesiology Credentials Committee met and discussed staffing the department. At the time, a pending state regulation would have required that each hospital have a "pediatric anesthesiologist" on staff. (Joseph M. Gorrell Aff. Ex. V). The minutes of the meeting contained the following recommendation to the Hospital's President regarding the Department's staffing needs:

 
1. If possible, we should wait until we hear from State about pediatric anesthesiologist regulation before we consider others.
 
2. Until we see how the effects of [Dr. Herbert's] leave of absence affects service, the department feels we can temporize. It would create disharmony to have too large a staff and decrease the ability to keep our skills finely tuned. A decrease in cases per person would decrease the skill level.

 (Department of Anesthesiology Credentials Committee Minutes dated July 20, 1994; Plaintiff's ...


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