Outcome: Very favorable
The issue in this case was whether a physician should be allowed to make truthful statements about the financial solvency of a publicly held corporation that owned a hospital in which the physician held medical staff privileges.
The AMA believes that physicians should be entitled to express their opinions on matters affecting public health and the health of their patients, without fear that such expression will subject them to the burdens of an unfounded lawsuit.
Michael Fitzgibbons, MD, an infectious disease specialist practicing in Santa Ana, California, was a past chief of staff of the Western Medical Center-Santa Ana (“WMCSA”). He remained on the medical staff executive committee during the incident that led to the lawsuit. Integrated Healthcare Holdings, Inc. (“IHHI”) was a publicly owned investment company, organized to own and manage health care facilities.
During 2004, Tenet Healthcare Corporation, then the WMSCA owner, sought to divest itself of its Orange County, California hospitals, including WMCSA. Tenet entered into an agreement to sell those hospitals to IHHI, which had been incorporated for that purpose. Both the Orange County Board of Supervisors and the California Senate held formal hearings to investigate the proposed acquisitions. These hearings were reported in the Orange County Register, the Orange County Weekly, and the Los Angeles Times. Eventually, the hospitals were sold, the California hospital licensing board approved the acquisitions, and IHHI began to operate them.
Shortly after closing the deal, IHHI reported to the SEC that it had received a notice of default on two loans that it had received to fund the acquisitions. The effects of the claimed defaults were to suspend IHHI’s ability to obtain further loans, increase the interest rate on its outstanding loans, and make immediately due and payable almost $64 million in debt. The SEC filing was the subject of a critical article in the May 17, 2005 Orange County Register.
Dr. Fitzgibbons, through an e-mail sent to other physicians on the WMCSA medical staff, criticized the acquisitions and expressed doubts about the financial viability of IHHI. Most of the information in the e-mail came from the Orange County Register article, which in turn came from IHHI’s own SEC filing. Ultimately, the e-mail found its way into the hands of IHHI.
Based on Dr. Fitzgibbons’ e-mail, IHHI sued him for: (1) defamation, (2) intentional interference with a contractual relationship, (3) negligent interference with a contractual relationship, (4) breach of contract, (5) breach of the duty of good faith and fair dealing, and (6) violation of the California unfair business practices statutes. Dr. Fitzgibbons filed a special motion to strike the complaint under the California anti-SLAPP statute. Cal. Code Civ. Proc. §425.16.
The trial court denied the special motion to strike under the anti-SLAPP statute, and it also awarded IHHI $1,925 in attorney’s fees and costs. Dr. Fitzgibbons appealed the denial of his special anti-SLAPP motion.
On June 14, 2006, the Court of Appeal reversed, finding that IHHI had failed to demonstrate a probability of success. It directed the lower court to grant Dr. Fitzgibbons’ motion to strike under the anti-SLAPP statute, and it awarded him his costs on appeal.
Litigation Center involvement
The Litigation Center and the California Medical Association filed an amicus curiae brief in the California Court of Appeal to support Dr. Fitzgibbons.
Outcome: Very unfavorable
The issue in this case was whether a nonprofit hospital had to disclose various of its financial documents to members of the public who ask to see them.
The AMA believes that physicians have both the right and the responsibility to participate in activities contributing to the improvement of their community and the betterment of public health.
Knapp Medical Center (KMC) was organized as a privately owned corporation under the Texas Nonprofit Corporations Act. KMC signed an agreement to be purchased by South Texas Health System (STHS), a subsidiary of Universal Health Services, Inc. (UHS).
Several physicians on the KMC medical staff have openly questioned whether the sale would be in the public interest. In essence, the physicians have said that the KMC management “deliberately weakened the hospital by doing away with key medical procedures and demoralizing the spirit of staff so that it was ripe for sale.” The physicians also assert that KMC unduly enriched its administrators, and they suspect that those administrators may be receiving special favors from STHS or UHS to facilitate the transaction.
In an attempt to learn more about KMC and the contemplated sale, the physicians asked KMC to provide them with board minutes and other financial information. KMC refused, arguing that because it is privately owned it does not have to make such a disclosure. KMC also contended that the dissident physicians have an ownership interest in a physician-owned hospital that competes with KMC, and it might harm KMC to produce the documents.
In response, the physicians hired an attorney, Jeffrey C. Grass, to represent them in their battle with KMC. Mr. Grass sent KMC a letter demanding an inspection of KMC’s records. He contended that KMC was required to produce documents under a provision of the Texas Nonprofit Corporations Act, which required a Texas nonprofit corporation to make its records available for inspection by the general public. KMC refused the request, arguing that it was excused from the disclosure obligation by an exception in the Nonprofit Corporations Act. Mr. Grass asserted otherwise.
KMC sued Mr. Grass, seeking a declaratory judgment as to its obligations to make disclosure to him and his clients. The trial court found that KMC was subject to the disclosure requirements under the Texas Nonprofit Corporations Act and ruled in favor of Mr. Grass. KMC appealed to the Texas Court of Appeals.
On June 6, 2013, the Court of Appeals, by a split decision, reversed the trial court. It held that the public contributions to KMC were made through a foundation that was legally distinct from KMC, and this separateness was sufficient to exempt KMC from complying with the corporate disclosure law. Mr. Grass and his clients asked the Texas Supreme Court to hear the case, but the Supreme Court declined jurisdiction. Grass has moved for rehearing of the denial.
Litigation Center involvement
The Litigation Center, along with the Texas Medical Association, filed an amicus brief in the Texas Court of Appeals, supporting the physicians’ right to access the hospital’s documents. In addition, the Litigation Center and TMA also contributed to the physicians' legal expenses.
The Litigation Center also filed an amicus brief in support of the petition in the Texas Supreme Court for rehearing.