Patrick v. Burget – Oral Argument – February 22, 1988

Media for Patrick v. Burget

Audio Transcription for Opinion Announcement – May 16, 1988 in Patrick v. Burget

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William H. Rehnquist:

We’ll hear argument next in number 86-1145, Timothy A. Patrick versus William M. Burget.

Mr. Lyon, you may proceed whenever you’re ready.

Barbee B. Lyon:

Thank you, Mr. Chief Justice, and may it please the Court.

The question before this Court today is whether the State of Oregon has authorized these defendants to monopolize a part of the practice of medicine in the relevant market and whether it has actively supervised their doing so.

This was an action for treble damages under the Sherman Act, Sections 1 and 2.

Plaintiff is a physician, a surgeon in Astoria.

The defendants also are physicians.

There was an economic rivalry between plaintiff and defendants that went back for ten years before the events in this case.

The defendants are associated with the clinic known as the Astoria Clinic.

They have associated with them three-fourths of the physicians in the relevant market.

There is one hospital in the relevant market.

Dr. Patrick is a surgeon, and if you are a surgeon, you must have access to a hospital in order to practice that branch of medicine.

Dr. Patrick lost his privileges at the hospital and he alleged that he was deprived of those privileges by defendants using their power, their dominant power over the hospital, on the staff of the hospital, and over the committees of the hospital.

He alleged that they did so for an anticompetitive motive, and that it was anticompetitive conduct.

That they did not do so for medical, ethical or professional reasons.

The jury agreed with him after a three-week trial and awarded treble damages.

The trial judge upheld the verdict and entered judgment accordingly.

The Court of Appeals, however, reversed.

The Ninth Circuit held that although there was sufficient evidence of the defendants’ anticompetitive motive and sufficient evidence of their conduct, nevertheless what they did, unprofessional as it might have been, was immunized from antitrust laws by reason of the State action doctrine.

Did the State action doctrine protect and defend what they did?

The State action doctrine, as announced by this Court, has as its principles, its purpose, the resolution of principles of Federalism on the one side with State law on the other.

It draws a balance between the Federal antitrust laws and State policies which may be anticompetitive.

As announced by this Court, there are two branches to the State action doctrine, two tests.

The first is whether or not the challenged restraint is one which is clearly articulated by the State and affirmatively expressed as a State policy.

The second branch of the test is whether or not it is actively supervised by the State itself.

Turning to the second of these first, was this conduct of defendants’ actively supervised by the State of Oregon?

The defendants, the hospital, its staff and committees are all private parties.

They are not agencies of the State of Oregon.

They are not subject to the State Administrative Procedure Act.

There is no State statute providing any State agency which reviews what they do, authorizes any State agency to reverse what they do.

Barbee B. Lyon:

There is no State statute giving a right of appeal to any particular court under any form of procedure.

Sandra Day O’Connor:

Is there no mechanism in Oregon in your view for a judicial review of the deprivation of the privilege to restore that privilege?

Barbee B. Lyon:

Certainly no clear review.

There have been only two cases in which the State of Oregon Supreme Court considered whether or not it had such power.

In both cases, it expressly said that it did not decide whether it had the power or not.

Sandra Day O’Connor:

So perhaps that power exists?

Barbee B. Lyon:

Perhaps that power might exist.

Sandra Day O’Connor:

It wasn’t pursued by your client here?

Barbee B. Lyon:

That is correct, Your Honor.

Sandra Day O’Connor:

So we don’t know.

Barbee B. Lyon:

That is correct, Your Honor.

Sandra Day O’Connor:

Now, I guess there is a State action for interference with business relations?

Barbee B. Lyon:

That is.

That is a private tort action remedy that is available under State law.

Sandra Day O’Connor:

And that also was not pursued?

Barbee B. Lyon:

That was pursued.

That was our State law count that was tried in this particular case, and we want a verdict on that with punitive damages.

Sandra Day O’Connor:

Is that a form of State supervision in a sense, do you think, to provide that kind of an action?

Barbee B. Lyon:

Your Honor, this Court has never so held.

It would strike me as anomalous to say that because private conduct, because a State provides a forum in which litigants can sue each other and redress their private grievances, that doesn’t amount to State action.

For example, the State provides a forum for people who have a dispute over a breach of contract or a tort.

That does not mean the State is actively supervised in what they do.

The standard that this Court has announced is whether there is a pointed reexamination of what goes on in the challenged restraint to see that it does not unnecessarily interfere with the policies of the antitrust laws.

This Court has never held that judicial review of this type is that kind of pointed reexamination of the anticompetitive conduct.

And least of all, I should suggest, should the Court announce that as a principle for the first time in a case where the State Supreme Court does not even know whether it has jurisdiction to consider these kinds of issues.

When Dr. Patrick was confronted with what was being done to him in Astoria, there was really nothing he could do.

The one thing that occurred to him to do was to at least ask the hospital to appoint a neutral panel to consider the charges that were made against him.

He offered to submit to whatever decision the panel and the hospital would make if they would only appoint a neutral panel.

He said if they only would do that, that would avoid a lot of controversy and a lot of expense.

He renewed that request twice.

Barbee B. Lyon:

It was denied.

There was no place else to turn to and this is how this case arose.

The Court of Appeals purported to find active supervision in three ways.

First of all, the results of a peer review decision in a State hospital are to be reported to the Board of Medical Examiners which is the State licensing authority for physicians.

Yet, there is nothing in the Statute, and counsel concedes, I understand, that the State Board of Medical Examiners has no power to reverse or interfere with any decision made by the State Board of Medical Examiners.

It can only make decisions about the medical license to practice medicine in the State of Oregon.

Next, the Court of Appeals said there was adequate State supervision because the State Health Division licenses hospitals.

And there is a statute that requires the trustees or the governing body of a hospital to see to it that there are procedures in place for peer review.

The Court of Appeals said that because the Health Division had the authority to see that the governing body adopted procedures, that amounted to State supervision.

There is no evidence in this case that the State Health Division has ever intervened in this case in any way.

There’s no evidence that it’s ever intervened in any peer review proceeding in any way.

There are no reported decisions of any case in which it has ever intervened.

Thurgood Marshall:

Mr. Lyon, what supervision does the State of Oregon maintain over this group, the peer group?

Barbee B. Lyon:

I maintain none at all, Your Honor.

None at all.

Thurgood Marshall:

Is there anything in the Statute about it?

Barbee B. Lyon:

I say there isn’t, Your Honor.

Thurgood Marshall:

Is there anything in any rule about it, State rule?

Barbee B. Lyon:

No rules that I know of, Your Honor.

Thurgood Marshall:

It’s your position that they just turn it over to the peer committee and forget about it?

Barbee B. Lyon:

That’s true, Your Honor.

As far as administering it.

What the State does, however, there is another statute that says that the people who participate in peer review are immune from liability for whatever they do in peer review, provided they act in good faith.

I contend that by the inclusion of that, the State contemplates the possibility that defendants might abuse this position, might abuse the peer review procedures for their own motive, and therefore it leaves to the person who is the victim of that, the right to sue for damages for the peoples’ bad faith.

That is the remedy.

Thurgood Marshall:

It is a State created body?

Barbee B. Lyon:

The peer review committee is, Your Honor–

Thurgood Marshall:

It is a State-created body by statute, isn’t it?

Barbee B. Lyon:

–The peer review committees are not creatures of Statute.

The Statute requires hospitals to see it that the physicians are organized in a way that they review each other’s procedures.

Thurgood Marshall:

With or without the approval of the State–

Barbee B. Lyon:

The State does not intervene in the appointment of these committees in any way.

Thurgood Marshall:

–Did the State create it?

Is the peer group created by the State?

Barbee B. Lyon:

It doesn’t seem to me that it is, because the hospital creates them.

Thurgood Marshall:

I’m not interested in your views.

I’m interested in facts.

Barbee B. Lyon:

It is the hospital that creates the peer review committees, Your Honor.

Thurgood Marshall:

And the State has no regard to that at all?

Barbee B. Lyon:

It has no authority to mandate–

Thurgood Marshall:

Does the State supervise the hospital?

Barbee B. Lyon:

–The State Health Division has supervisory authority over the hospital.

Thurgood Marshall:

Well, why wouldn’t that give them authority over the peer committee?

Barbee B. Lyon:

Because all that the State statute gives the Health Division the power to do is to see to it to assure that the trustees have adopted procedures for peer review.

It does not give them the power to engage in what this Court has referred to previously as appointed reexamination of what goes on in peer review applying the rules to a particular case.

Thurgood Marshall:

That’s what worries me, that the State does have supervision.

Convince me that it’s not.

Barbee B. Lyon:

There’s been no reported case, there’s no evidence in this record that any agency of the State ever did anything, there’s no reported case in which any State agency has ever intervened in any way in any peer review decision in any matter in the State of Oregon.

The first branch of the state action doctrine is that the challenged restraint must be one which is clearly articulated and affirmatively expressed as State policy.

The Court of Appeals declared that in this case this particular conduct was indeed clearly authorized by State policy.

By that, the Court of Appeals was referring to the Statute which required hospitals to have peer review procedures in place.

There is nothing in the Statute that indicates that the State of Oregon ever intended these physicians or any other physicians to monopolize any branch of the practice of medicine within the State of Oregon.

The only purpose stated for this Statute was to improve patient care, to reduce mortality, to promote patient welfare.

It does not follow that because the State requires peer review for the purpose of patient care, that authorizes people to abuse that procedure for their own anticompetitive purposes.

That is the mistake that the Court of Appeals made.

You can tell that from the Statute itself, from the articulated purposes, and second of all, you can tell that from the fact that the State itself contemplated, as I said, that this power might be abused and it left the defendants, those who did abuse it, to the liability that they would encounter in an action for damages such as this or one under State procedure.

The irony of this case is that if this sort of behavior is allowed to take place under the guise of the state action doctrine under the state action immunities, it will lead to exactly the opposite result of that which the State contemplated.

If the more powerful cannot compete by being good, then they can drive out those who are better and yet do not have the power to resist the influence in this particular case.

There was testimony in this case that Dr. Patrick was the better surgeon in Astoria.

He is the one who is now deprived of practice.

Barbee B. Lyon:

The weaker, the less competent is the one who has succeeded and the practice of medicine has declined.

That is not State policy; that is contrary to State policy and is not one that this Court should declare–

Sandra Day O’Connor:

Mr. Lyon, do you think that in order to fit under the Parker-Brown exception, there has to be a cadre of State officials that actually review each decision of the peer review committee and have the chance to second guess those committees?

Barbee B. Lyon:

–Well, certainly not each decision has to be reviewed.

Obviously the vast majority of these decisions will never be challenged.

But I submit that there needs to be some sort of procedure in place, whether it is judicial, administrative, or otherwise, by which–

Sandra Day O’Connor:

Did you look at the AMA filed brief in this case?

Barbee B. Lyon:

–Yes, I did, Your Honor.

Sandra Day O’Connor:

And do you think the alternative recommendations given in that brief are satisfactory in your view?

Barbee B. Lyon:

No, Your Honor, I don’t think–

Sandra Day O’Connor:

Why not?

Barbee B. Lyon:

–I beg your pardon?

Sandra Day O’Connor:

Why not?

Barbee B. Lyon:

Because unless there is a procedure in a case whereby the particular result in a particular case can be challenged, can be reviewed by the State to see that the State policy is being carried out, the State policy of bettering patient care, of reducing mortality, then without a system in place for permitting that, then there is no way for the… as this Court said… the pointed reexamination of each case, of the events that go on to take place.

I don’t recall all of the details of the AMA proposals, but I do not believe they provided for that.

The Court of Appeals also held that the evidence that was admitted with respect to the activities of one of the defendants, Dr. Russell, who was a member of the Board of Medical Examiners, that his conduct also was state action, and that invalidated the verdict in this particular case.

We challenge that particular holding for several reasons.

First of all, we did not sue the State Board of Medical Examiners in this case.

We sued them previously for violations of the Civil Rights laws, and for violation of the Oregon Administrative Procedures Act, but that case was over.

This was an action for treble damages for Dr. Patrick’s loss of his hospital privileges and the destruction of his practice in Oregon.

The particular defendant in question, the evidence of what happened before the Board of Medical Examiners was part of something that had begun years before, continued through that proceeding, and continued after.

It was evidentiary.

It displayed the entire course of conduct and was admissible for that purpose, and for no other.

We did not seek damages.

The damages that we sought were for injury to his business and property, which derived from the loss of his hospital privileges afterwards.

Dr. Russell furthermore had disqualified himself at the beginning of the proceedings and under Oregon law, he was therefore entirely without authority to act in any way thereafter.

Because of all of those reasons, the evidence of his conduct was admissible, should have been admitted, and the case should not have been reversed on that account.

That’s all I have, Your Honor, unless you have any further questions.

William H. Rehnquist:

Thank you, Mr. Lyon.

We’ll hear now from you, Mr. Triplett.

Thomas M. Triplett:

Thank you, Mr. Chief Justice, may it please the Court.

Oregon, like many States, in the mid-70s was faced with a malpractice crisis.

The cost of insurance premiums for doctors was spiraling, the loss of doctors from practicing because of the lack of coverage was increasing, and indeed, the human tragedy visited by malpractice was evident to all.

The State of Oregon recognized that it had to address this malpractice crisis in a multifaceted way.

It first armed the governing board of the hospitals of each private hospital with a substantial degree of direction and authority.

They were compelled not to simply accept a doctor because they had a license to practice in the State, but rather to make a more discriminating choice of whether they had the skill and training to receive credentialing in the specific areas in which they sought to practice.

They were compelled to establish standards for the review of doctors by doctors.

And indeed they were compelled to put doctors together in a group of peer review for the purpose of reducing morbidity mortality and to improve patient care.

They took another step during the 70s.

The Board of Medical Examiners was armed with substantial authority.

One of the key portions of that authority was that its proceedings would be absolutely and totally confidential.

The wisdom of that choice was demonstrated in this record.

The number of complainants before the Board of Medical Examiners rose from 300 to 1500 per year once this confidentiality provision was written.

They granted immunity to complainants.

They went further.

They compelled doctors to report on other doctors.

They didn’t say report in the event a doctor is not good.

They stated report in the event that he is or may not be competent to practice.

They compelled hospitals to report in the same sort of way.

They established procedures for reexamination of doctors who were accused of practicing inappropriately.

They compelled medical malpractice insurers to report every single claim against a doctor to the Board of Medical Examiners.

Antonin Scalia:

Was it the State policy to reduce the number of doctors practicing in the State.

Thomas M. Triplett:

The net effect of that policy would be to reduce those doctors who ought not continue to practice.

So the net effect is that indeed marketplace access was being limited or correspondingly, the door out was being opened.

Antonin Scalia:

I think all that you’ve described shows that there’s been State action, but as I understood the State action defense in antitrust law, it was that this particular result which the Federal antitrust law declares to be unlawful, if that result is declared to be lawful by the State, then it’s all right.

So if the Federal antitrust law would forbid price fixing but the State says, we want price fixing, then the Federal Government would leave it alone.

Now, the trouble with all you’ve said is I don’t see how this shows any State policy that would allow doctors to monopolize the practice.

If the State said, we want doctors to be able to exclude, there are too many doctors in the area, then I’d agree that there was a State action defense.

Thomas M. Triplett:

The State did direct hospitals to cause doctors to review doctors at the hospital level.

The net effect of doctors reviewing doctors for purposes of determining whether they retained their privileges within a hospital would inexorably be the exclusion of doctors from the privilege to practice.

Thomas M. Triplett:

That has, as a by-product–

Antonin Scalia:

Because of their incompetency.

Because of their incompetency, not because of their competitiveness.

Thomas M. Triplett:

–That’s right, because of their incompetence.

But you have to realize that for years, doctors were accused of the conspiracy of silence.

No one reported on another doctor.

It was an old boy school, if you will.

This system compelling competitors to report on competitors, compelling competitors to judge competitors, was an express statement of the Oregon legislature that we must get on with excluding doctors from practice who are incompetent.

That the marketplace dynamics of what do you charge simply don’t work.

This is not the sale of an apple.

It is the sale of a service where the patient doesn’t know what they’re getting.

Thurgood Marshall:

Does that apply to all doctors or just surgeons?

Do all doctors–

Thomas M. Triplett:

All doctors who are members of the medical–

Thurgood Marshall:

–Normally do all doctors have to have hospital contacts in order to practice.

Thomas M. Triplett:

–No.

Thurgood Marshall:

They do?

Thomas M. Triplett:

They do not.

Thurgood Marshall:

That’s what I thought.

Thomas M. Triplett:

There are a number of–

Thurgood Marshall:

But surgeons do.

Thomas M. Triplett:

–That is correct.

They have to be credentialed.

Thurgood Marshall:

Well, shouldn’t we make a difference there?

Thomas M. Triplett:

The doctors who are not part of a medical staff are subject to the ongoing review of the Board of Medical Examiners, and upon complaint by a private citizen, complaint of a fellow practitioner, or any other person, they will then inspect the practice of that doctor to determine whether he or she should continue to practice medicine in the State of Oregon.

John Paul Stevens:

May I ask if a peer review committee determines that a doctor is not fit to practice in a particular hospital, does the committee have any duty to institute proceedings to exclude the doctor from the practice of medicine?

Thomas M. Triplett:

The hospital has the responsibility if there is an adverse determination in peer review to report that to the Board of Medical Examiners.

The Board of Medical Examiners under the Statute has now received the report of substandard care and under the Oregon laws, they are obligated to look into that matter.

They have an investigative staff, a full time staff of 18 people to go and look and see what the problem is and to determine whether further action is required, such as depriving that doctor of the right to practice in the State of Oregon.

Or they can also make a determination–

John Paul Stevens:

Did that happen in this case?

Thomas M. Triplett:

–Excuse me?

John Paul Stevens:

Did that happen in this case?

Thomas M. Triplett:

No, because Dr. Patrick resigned before any decision was made by the Hearing Committee of the Hospital.

John Paul Stevens:

He resigned from what?

Thomas M. Triplett:

He resigned privileges from the Hospital.

He left the hospital prior to the time that the Administrative Committee of the Hospital had made a decision.

William J. Brennan, Jr.:

Mr. Triplett, was there evidence that Dr. Patrick had performed some 2,000 or 3,000 operations?

Thomas M. Triplett:

Two thousand… twenty-five hundred.

William J. Brennan, Jr.:

Over what period of time–

Thomas M. Triplett:

Over a period of approximately ten years.

William H. Rehnquist:

–But Mr. Triplett, even if he had resigned his privileges at the hospital, if he got adverse peer review recommendations, wouldn’t that lead the State Examining Board to inquire into his competency to continue to practice?

Thomas M. Triplett:

There was no report that I am aware of made subsequent to his resignation from the hospital to the Board of Medical Examiners that would then invoke their authority.

William H. Rehnquist:

In other words, they wouldn’t act on the report that was sent to them by the peer review committee to look into his fitness to continue practicing?

I thought you certainly would.

Thomas M. Triplett:

Let me explain.

The Oregon Statute provides that once the hospital has made a final determination with respect to the privileges or credentials of a doctor and those determinations are adverse, they are compelled to forward those to the Board of Medical Examiners for their review.

If a doctor goes through peer review and indeed he is found to be a satisfactory doctor, no report goes to the Board that he’s satisfactory.

The process requires a final resolution by the hospital.

We in this case urge that indeed the duty of exhaustion of remedies applied and that Dr. Patrick should have been required to complete the hearing process before his peers.

If he was unsatisfied with that, to proceed to the Board of Directors of the hospital who under the peer review process set forth in the by-laws would have an independent look, not merely at the question of the facts but of the procedure followed.

John Paul Stevens:

Mr. Triplett, you’re explaining why you think he should have exhausted before he filed a lawsuit against your clients.

But the question I was trying to seek an answer to is, if the real purpose of peer review is to get rid of incompetent doctors, and if you found a doctor that you think is so incompetent that he should be denied hospital privileges, why wouldn’t you report that to some public authority instead of just closing the file because he says, well, I’ll resign from your hospital?

Can he avoid disciplinary proceedings by simply resigning from the hospital, if the Statute has the purpose you describe?

Thomas M. Triplett:

He ought not to.

John Paul Stevens:

Well, then why did he?

Thomas M. Triplett:

Your Honor, in this case, the decision to bring him to a hearing was made in March of 1981 by the Executive Committee of the Hospital.

Fourteen days later, this lawsuit was filed.

The process of the ad hoc hearing before the hospital didn’t commence until six months later.

The allegations of the complaint asserted that at least one of the defendants had previously engaged in misconduct by reporting to the Board of Medical Examiners.

Thomas M. Triplett:

Now, I put it to you in the context of having been sued and accused of impropriety in reporting to the Board, do you exacerbate the circumstance.

I think what happened here–

John Paul Stevens:

I suppose you don’t if you’re interested in defending a lawsuit, but if you’re interested in getting rid of incompetent doctors, I think you do.

I think it’s rather clear.

If this is a public body seeking to get, as you describe it, actively supervised by the State, it seems to me they should perform that mission.

Thomas M. Triplett:

–I can report to you that with respect to the Snodgrass incident which is the one that triggered the hospital peer review, that that was reported.

I can also advise you that when the Board of Medical Examiners reviewed Dr. Patrick’s practice in 1980, and announced a decision in regard to it just one year prior to the commencement of the hospital-based review of both prior and subsequent events to the Board of Medical Examiners, that they reviewed his entire practice, issued a formal reprimand with respect to abandonment of a patient, which Dr. Patrick acknowledged was fair.

He disagreed with their opinion as to how he had handled other cases which involved essentially misdiagnoses, or cases in which wisdom would have suggested that the patient be sent to a tertiary care hospital, a hospital that had the capability of handling that patient’s problems.

This hospital unfortunately had no pathologist on staff, had no radiologist that was there on a permanent basis, had only an anesthetist, and yet some of the most exotic vascular and thoracic surgery was being performed by this doctor in that hospital.

Many people described him as a marvelous physician from the elbows down.

And that his problem indeed was judgmental and ego.

That he ought not to have been performing these procedures in this rural community.

Antonin Scalia:

We had a jury trial about that.

I gather the jury apparently who heard all of this pretty much thought this was a pretty good doctor and that the reason he had been excluded was because of the anticompetitive behavior of his peers and not because of his inabilities.

To the extent that that’s a question that’s still at issue in this lawsuit, I presume that’s how that jury saw it.

Thomas M. Triplett:

There’s no question that that’s how the jury saw it.

Antonin Scalia:

I think that the state action claim you’re making goes beyond what our cases have held.

Can you give us another state action case where we have not said that the State approves the result with the Federal law determines to be unlawful, that is, in Parker v. Brown, the Federal law says no price fixing; the State says we want price fixing.

Now, this is not that case.

The Federal law says no anticompetitive exclusion of doctors.

The State here hasn’t said we want anticompetitive exclusion of doctors.

Your argument is a little different.

It’s sort of a Federal preemption argument in reverse.

That is, if we apply the antitrust laws, we will be impinging upon the State policy of assuring competent doctors.

Now, maybe that’s a good argument, but I don’t know of any other case where we have used that preemption in reverse so to speak.

Thomas M. Triplett:

I know the Court has debated whether the issue here is exemption or preemption.

I won’t engage in that colloquy.

I think that if you look at two of the Court’s most recent decisions, that they come closer to the mark.

In Town of Hallie, there was no direct statement in the enabling legislation by the State that the town of Hallie should engage in a tie-in arrangement in which it would predicate the availability of its solid waste disposal system upon those in an unannexed area using their garbage haulers.

There was no indication that the State directly intended the restraint that was imposed.

Thomas M. Triplett:

I think that what the Court said there is, if it is reasonably foreseeable that an anticompetitive restraint will arise, that is sufficient.

And I think as well, when you look at what happened in Southern Motor Freight, there a group of–

Antonin Scalia:

Before you go on, would you use the same language here?

It’s reasonably foreseeable because of this law that doctors would exclude a competitor?

Thomas M. Triplett:

–Yes.

Antonin Scalia:

For the reasons done here?

Thomas M. Triplett:

For good, bad or indifferent reasons.

Antonin Scalia:

That’s reasonably foreseeable.

Thomas M. Triplett:

Yes.

Sandra Day O’Connor:

Mr. Triplett, it seems to me that under Oregon’s law, the only thing that’s reasonably foreseeable is that peer review action might take place in good faith.

There is a law in Oregon that does not extend immunity to people in peer review processes that’s taken in bad faith.

So it would seem to me that at best, you could characterize the State policy of Oregon as allowing or making it reasonably foreseeable that some doctors would be disciplined and removed from practice by action taken in good faith.

And I might ask you also to comment on whether that doesn’t in fact parallel the law the Federal Government has now enacted authorizing only good faith action?

Thomas M. Triplett:

My analysis of the Oregon Statute which is a Statute that addresses the question of immunity, not the question of the evidentiary privilege, and there is no exception in Oregon with respect to whether you are entitled to the type of information that was obtained here.

That view with respect to the immunity in good faith.

Good faith I presume means not arbitrary or capricious, means that you have substantial evidence for what you have done, which is the equivalent of… is the opposite side of arbitrary and capricious.

Antonin Scalia:

Excuse me.

I think you can be arbitrary and capricious and be acting in entirely good faith.

We reverse Federal agencies all the time for action that’s arbitrary and capricious.

I don’t think we’re saying that the action was in bad faith.

If it’s bad faith, it’s arbitrary and capricious but vice versa is not true.

Thomas M. Triplett:

Well, I’m not so sure.

Antonin Scalia:

It needs something more than that, doesn’t it?

Thomas M. Triplett:

My view of the language of the Oregon Statute is this.

It is sending a clear signal that the State through its State process will remedy, will supervise and remedy the peer review process in the event any participant steps out of line.

John Paul Stevens:

Well, what is the remedy as a matter of State law.

Just a lawsuit, you mean?

Thomas M. Triplett:

Well, there are a host of remedies.

I categorically disagree with counsel that there a not an absolute right to review of a hospital-based decision.

John Paul Stevens:

You mean the Board could direct the Hospital to reinstate a doctor?

Thomas M. Triplett:

The State Court can direct.

John Paul Stevens:

If the doctor brings a lawsuit.

Thomas M. Triplett:

If he asks for judicial review of the decision.

William H. Rehnquist:

Under a particular statute or just your right to sue anybody?

Thomas M. Triplett:

Yes.

No, distinctly not.

Section 41.675(5) which is cited in our brief along with the legislative history that relates to it.

And that Section was enacted in order to clarify the type of evidence that a doctor would have available in the event he sought judicial review of loss of privileges.

And so we cite the Court to that Statute.

Secondly, there are other remedies–

William H. Rehnquist:

Is that the one, is that Statute in so many words authorize judicial review?

Thomas M. Triplett:

–That is my view of it.

William H. Rehnquist:

But I’m just asking you.

Thomas M. Triplett:

Yes.

William H. Rehnquist:

If it authorizes it in so many words.

There shouldn’t be two different views of the answer to that question.

Thomas M. Triplett:

The reason that there has been fuzziness about is there judicial review is that in the Straube case, the Court of Appeals of the Supreme Court of Oregon said, we need not decide whether there is a right of review.

And then in their footnote, they then proceeded on to review on the basis of was there due process and was there substantial evidence to support the conclusion.

In a footnote right where they said we need not decide this issue, they quote the new Statute which is the Statute which imposed upon hospitals the obligation to have fair proceedings for review of doctors.

And so I believe it is very clear that there is a right of judicial review of peer review decisions.

Secondly,–

Byron R. White:

But Mr. Triplett, the requirement for State action?

That just sort of wipes it off the books.

If the supervision requirement is satisfied just by the ability to bring a lawsuit and have an adjudication, it certainly doesn’t amount to much, does it?

Thomas M. Triplett:

–Well, I guess it depends on what the definition of active versus passive is.

Let me put it this way.

How do you establish a structure for review?

That’s a very difficult problem.

To what extent do we say to the Oregon Legislature, establish a massive mechanism.

Why not leave it to the Courts to determine if fair process has been followed?

Thomas M. Triplett:

Now that indeed is the issue here.

Our people are accused of engaging in misconduct during the peer review process.

The Court of Oregon is perfectly capable of supervising that, giving the sort of check that Hallie seems to say is appropriate.

I view the second component as evidentiary.

I think that’s what Hallie says.

It is a double check on whether you are conforming with State law.

And if in the supervision, they find that someone is not complying–

John Paul Stevens:

May I ask, is there a State law that prescribes the procedures to be followed at a peer review proceeding?

Sort of a miniature administrative procedure act or something like that?

Thomas M. Triplett:

–No.

The hospital has, and it’s in evidence,–

John Paul Stevens:

But there’s no State law that says how these proceedings shall be conducted?

Thomas M. Triplett:

–It says you shall have one that is written and that–

John Paul Stevens:

Does it say what the burden of proof is, or what the grounds are for disqualification?

Thomas M. Triplett:

–No.

But then what happens–

John Paul Stevens:

What kind of evidence is received?

Or who can testify?

Does it have any of that kind of thing?

Thomas M. Triplett:

–In the by-laws, the answer is, yes.

John Paul Stevens:

By-laws of the hospital?

Thomas M. Triplett:

By-laws of the hospital.

And the by-laws of the hospital are subject to review by the Health Division of the State of Oregon.

John Paul Stevens:

Can the Health Division of the State of Oregon tell them to rewrite the by-laws?

Thomas M. Triplett:

Yes.

John Paul Stevens:

The by-laws on peer review can?

Thomas M. Triplett:

Yes.

The Statute is very clear that the Health Division of the State of Oregon has total authority over hospitals within the State.

They are charged with the responsibility of auditing compliance with their rules.

They are a receiver of–

John Paul Stevens:

Have they adopted any rules relating to peer review commissions?

Thomas M. Triplett:

–They have granted authority to the–

John Paul Stevens:

They have authority to adopt these rules.

Have they adopted any rules?

Thomas M. Triplett:

–They have adopted rules where a complaint has been filed by any person who believes there’s been a violation of the Health Rules, which includes the entire peer review section that apply to hospitals, which grants to them total access to all hospital records to determine whether there’s been a violation of the Act.

John Paul Stevens:

That’s not a rule describing how a peer review shall be conducted.

Thomas M. Triplett:

There is also a provision that they shall use the rules of the Joint Commission on Hospital Accreditation or they adopt their own and they are subject to review by the State of Oregon Health Division for conformance with the State law.

John Paul Stevens:

And does that Division have the right to reverse a decision of a peer review committee to deny hospital privileges?

Thomas M. Triplett:

The Statute says that in event of a violation of any health statute, that the Division will report that to the District Attorney and obtain an injunction against continued or perpetuation of that practice.

So I think the answer is, yes, Your Honor.

Sandra Day O’Connor:

Mr. Triplett, are there any instances cited to us where either the State Health Division or the Board of Medical Examiners have actually intervened in cases to assure a correction of substantive abuses like those alleged here in the process, or directed procedural changes to avoid problems?

Thomas M. Triplett:

The only evidence in the record at all of an interface between the Board and the problems of Dr. Patrick are that it did–

Sandra Day O’Connor:

Any one else?

Thomas M. Triplett:

–We weren’t dealing with any one else in this case, so I can’t answer that.

But with respect to Dr. Patrick it did in one instance involving the Partridge case refer that to a county medical society for review retaining supervisory authority over it to determine whether indeed further action was required to be taken.

They did, when we reported a limitation as applies to Dr. Patrick when he was put on probation because of thoracic problem and put on probation for six months.

We reported that.

They wrote back and said we’re watching, we want to know what the outcome of that is.

And so there is an interface that is taking place because of the reporting requirements.

And their duties as the Board of Medical Examiners to monitor all medical practitioners within the State.

Thurgood Marshall:

Well, counsel, after the final action is taken by the review committee, what are the steps that would mean administrative review, specific, if you please?

Thomas M. Triplett:

All right.

After the committee completes its review, it makes a recommendation.

That recommendation is to the Executive Committee of the Hospital.

And it can recommend any one of a number of things.

Loss of specific credentials, loss of the right to practice in the hospital, a corrective program of education.

It makes its recommendation to the Executive Committee.

Thurgood Marshall:

What next?

Thomas M. Triplett:

Then the Executive Committee, if it concurs in the recommendation, then passes it on to the Governing Board of the Hospital, 18 people, 16 of the 18–

Thurgood Marshall:

What next?

Thomas M. Triplett:

–not being doctors.

Thurgood Marshall:

What next?

Thomas M. Triplett:

They then will hear the case both to determine whether there has been procedural due process–

What next?

Thomas M. Triplett:

–What next is if discipline is issued, it is then reported to the Board of Medical Examiners.

Thurgood Marshall:

And what appeals from that?

Thomas M. Triplett:

You have either the right to have a Court review under OS.41.

Thurgood Marshall:

I’ve never understood a Court review to be an administrative review.

Thomas M. Triplett:

I’m just saying.

You either have the right of a review by a Court which is contemplated under–

Thurgood Marshall:

What is the administrative review?

Thomas M. Triplett:

–Administrative review that is available is that when the Board of Medical Examiners receives the report, they are obligated to investigate the circumstances.

Thurgood Marshall:

And then what?

Thomas M. Triplett:

They can take further action.

But I think it is contemplated that the action that they would take is to determine whether the license should be retained.

At the same time, Dr. Patrick, if he believed that the process was inappropriate, had the right to file his own complaint with the Board of Medical Examiners, assert that my clients had engaged in unprincipled activities, and they would then review his complaint.

And if they concurred, I’m sure that the hospital’s decision would be reversed.

Thank you.

William H. Rehnquist:

Thank you, Mr. Triplett.

Mr. Lyon, you have 12 minutes remaining.

Barbee B. Lyon:

Thank you, Your Honor.

It is no remedy for Dr. Patrick that he could have complained to the Board of Medical Examiners of the conduct of defendants and maybe lead to ultimately perhaps for the defendants losing their license to practice medicine in the State of Oregon.

That is not a review of what happened in this particular case and it gives him no remedy at all for what happened to him at the Hospital.

What counsel is avoiding saying is that the Board of Medical Examiners has no power to do anything about peer review in this case or in any other case.

What counsel has done is to argue the policy, but the policy has already been established by the State law.

William H. Rehnquist:

Mr. Lyon, what is the point then of the requirement in the Statute that the hospital report disciplinary actions to the State Medical Examiner?

Barbee B. Lyon:

That is because the function of the State Board of Medical Examiners is to pass on the qualification of physicians to have a state license to practice medicine within the State.

Obviously, if a hospital disciplines a physician, terminates their privileges, the same grounds that justified that may be grounds for taking away the license of that physician.

William H. Rehnquist:

Under your view of that, the fact that your client had resigned from the Hospital facilities wouldn’t have prevented the State Medical Board from going ahead to look into his fitness to practice?

Barbee B. Lyon:

Oh, not at all.

Barbee B. Lyon:

Not at all.

In fact, of course, and the evidence showed that the defendants had brought him before the State Board of Medical Examiners once before that led to a letter of reprimand.

When the circumstances of the letter of reprimand came out, the State Board of Medical Examiners revoked the letter.

John Paul Stevens:

Does the State Board have any power to compel a hospital to allow a doctor to have staff privileges?

Barbee B. Lyon:

No, Your Honor, none at all.

And it’s never been done.

And I don’t understand counsel to say that it does, either.

The policy which counsel argues, on the one hand urging that this is necessary to protect peer review, is a policy that has already been addressed by the State of Oregon, by the legislatures of most States and by the Congress.

There is a balance to be drawn and that balance has already been struck by every legislative body that has looked into it, and this Court should not need to second guess that.

Counsel focuses on the fact that Dr. Patrick resigned from his hospital privileges.

Bear in mind that he did not have any kind of an administrative remedy through any State body.

The hospital was a coconspirator.

The hospital was a defendant in this case which settled just before the eve of trial.

There is no precedent of this Court which requires a plaintiff in an antitrust suit to go through a procedure established by one of the defendants who is a coconspirator and indeed a defendant in the case.

William J. Brennan, Jr.:

You say the hospital settled?

Barbee B. Lyon:

Yes, Your Honor.

William J. Brennan, Jr.:

This case?

Barbee B. Lyon:

Yes, Your Honor.

He resigned because he knew that under medical practice that the result would be a foregone conclusion and that if his privileges were revoked by this committee, he would not be able to practice in any other hospital and he would not be able to get malpractice coverage.

That was in mitigation of damages.

He did, after this, continue to work at a small hospital.

If he had not done what he did, the damages would have been even greater because his practice would have been damaged even more than it was.

I do object to counsel’s continuing to argue the merits of this case when counsel says, for example, that… to argue the merits of whether Dr. Patrick’s practice was sufficient or not when counsel says that he was practicing some exotic surgery… that is counsel’s interpretation.

I do not even believe that was the interpretation by the witness on which he is relying.

And the testimony that he’s talking about when he says that was a criticism that was made by consultant to the Board of Medical Examiners against the defendant, the surgeon in the Astoria Clinic equally with the defendant.

Thurgood Marshall:

Wasn’t all that decided by the jury?

Barbee B. Lyon:

That’s correct, Your Honor.

Thurgood Marshall:

Well, what business is it of ours?

Barbee B. Lyon:

It is none, Your Honor.

And I’m glad you said that, Your Honor.

Barbee B. Lyon:

As for Oregon Or.

Rev.

Stat. 41.675, which counsel tells the Court creates right of judicial review.

What the Statute is is a statute that–

William H. Rehnquist:

What page are you reading from?

Barbee B. Lyon:

–I’m reading from page 46 of their brief, Your Honor.

All this Statute is is a statute that has to do with the evidentiary privileges.

And what it says is that the State, the evidentiary statute that says this evidence is not admissible does not apply,

“in a judicial proceeding in which a health care practitioner contests the denial, restriction or termination of clinical privileges by a health care facility. “

From that evidentiary statute, he would elaborate and invent a judicial remedy.

It doesn’t exist.

We say that that statute is consistent with exactly what happened in this case.

You have a State statute that says that defendants are liable for damages if they act in bad faith.

You have another evidentiary statute that says that the evidence is admissible in such a proceeding where a practitioner contests what happened with him.

That statute is consistent with our bringing this action.

It does not create an administrative procedure which takes away our right under the antitrust laws.

Antonin Scalia:

Except you’re exaggerating the State law in the same manner that your opponent is, that is to say, there isn’t a State statute that says you’re liable for damages if you act in bad faith, is there?

Barbee B. Lyon:

That is correct, Your Honor.

Antonin Scalia:

There is one that says you’re not liable for damages if you act in good faith.

Barbee B. Lyon:

That’s correct, Your Honor.

I will rest with the inference that’s drawn from that Statute.

Antonin Scalia:

That’s the same kind of inference he’s trying to draw.

It’s rather curious that you should fight fire with fire.

Barbee B. Lyon:

Yes, Your Honor.

One last point.

The two cases of the Oregon Supreme Court, both cases in which the Court refused to decide whether it had any authority to do anything about these at all.

One of those cases was a mandamus case where the plaintiff brought an action under the State provisions of mandamus.

Mandamus has always been said by the Oregon Supreme Court to be an extraordinary remedy only available for a clear breach of duty and is one that is disfavored in the law.

Even with that, the Court said that it did not know whether that remedy existed.

If this Court is going to find for the first time that that kind of review is a sufficient State action, if the Court is going to find that judicial review is sufficient supervision of this kind of conduct, it should at least not make that principle for the first time in a case where the State Supreme Court does not even know that it has that power.

Barbee B. Lyon:

I have nothing further unless the Court has questions.

William H. Rehnquist:

Thank you, Mr. Lyon.

The case is submitted.