IN THE CIRCUIT COURT OF MOBILE COUNTY, ALABAMA

RADIATION THERAPY                              *

ONCOLOGY, P.C.,

KENNETH ELLINGWOOD, M.D.,              *

GREGORY COTTER, M.D.

and ROD KRENTEL, M.D.                           *

v.                                                                     *          CIVIL ACTION NO.: CV-01-2850-RGK

PROVIDENCE HOSPITAL;                         *

SETON MEDICAL MANAGEMENT,

INC., MICHAEL MESHAD, M.D.               *

And THADDEUS BEEKER, M.D.

ORDER

            Defendant, Providence Hospital, an Alabama non-profit corporation, operates a hospital in Mobile County, Alabama. Plaintiff physicians practice radiation oncology as Radiation Therapy Oncology, P.C. They are members of the staff of Providence and utilized equipment owned by Providence. In January 2001 the Board of Directors of Providence Hospital decided to transfer the cancer program, including the radiation oncology equipment, out of the hospital and to Seton Medical Management, Inc., an office-based medical practice affiliated with Providence. Plaintiffs no longer have access to the equipment and, therefore, are unable to practice radiation oncology at Providence.

            Plaintiffs contend that Providence's act constitutes the breach of a contract between Providence and Plaintiffs created by the Medical Staff Bylaws of Providence Hospital. Assuming, without deciding, that Plaintiffs have some contractual rights arising out of the Medical Staff Bylaws, the Court finds that no such rights were violated here.

            Providence is incorporated under the provisions of the Alabama Nonprofit Corporation Act, which Act provides, in §10-3A-34(a), Code of Alabama, that all corporate powers of a nonprofit corporation "shall be managed under the direction of a board of directors." These corporate powers include the power to sell, convey, transfer or otherwise dispose of all or any part of its property or assets. The Corporate Bylaws of Providence Hospital contain substantially identical provisions.

            Providence contends that the power of its Board of Directors to make business decisions is not limited by the Medical Staff Bylaws. This position finds support in a number of cases, particularly Mahan v. Avera St. Luke's, 621 N.W. 2d 150 (S.D. 2001). There, the hospital closed the medical staff with respect to new physicians seeking to do certain orthopedic procedures, in the hospital. That action was challenged by a group of orthopedic surgeons on the hospital staff who had hired a new orthopedic surgeon. They claimed that the Board violated their contractual rights under the medical staff bylaws. The trial court "concluded that the Board had breached its contract with the medical staff when it closed the staff to the named procedures without first consulting the staff," and enjoined the action of the hospital.

            On appeal, the Supreme Court of North Dakota recognized that, under North Dakota law, medical staff bylaws become an enforceable contract between the hospital and its physicians. It quoted provisions of the North Dakota nonprofit corporation statute and of the hospital corporate bylaws, both of which are substantially identical to those before this Court.

            The North Dakota Court said that the trial court "failed to give sufficient weight to the fact" that the staff bylaws are, under the nonprofit corporation statute, derived from the corporate bylaws. "The former derives its power from the latter," and cannot "somehow override the specific authority" granted to the Board of Directors.

            That Court recognized that "some of the business decisions made by the Board will undoubtedly impinge upon matters that relate to or affect the medical staff of the hospital," but that fact "does not give the staff authority to override a valid business decision made by the Board." Finally, "the courts should not interfere in the internal policies and decision making of a private, nonprofit hospital corporation when those decisions are made pursuant to its Corporate Bylaws."

            Such is the case here. This Court should not and will not interfere in the internal policies of a private, nonprofit hospital corporation nor in the making of a valid business decision by its Board of Directors. There being no genuine issue as to any material fact, Providence is entitled to judgment as a matter of law. It is so ordered, the parties to bear their own costs.

            Done at Mobile, this 12th day of August, 2003.

                                                                        ROBERT G. KENDALL

                                                                        Circuit Judge