Marquez et al v. Schlicht, D.O. et al

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: OTERO COUNTY HOSPITAL Case No. 11-11-13686 JL
ASSOCIATION, INC.,
Debtor.
UNITED TORT CLAIMANTS, as
Individuals,1
Plaintiffs,
Consolidated Misc. Adv. No. 13-00007
Adversary Nos:
v. 12-1204j through 12-1216j,
12-1208j through 12-1223j,
12-1235j, 12-1238j through
12-1249j, 12-1251j through
12-1261j, 12-1271j, 12-1276j and
12-1278j.
QUORUM HEALTH RESOURCES, LLC,
Defendant.
MEMORANDUM OPINION
THIS MATTER is before the Court on the cross motions for summary judgment filed by
Plaintiffs United Tort Claimants (together “UTC”) and Defendant Quorum Health Resources,
LLC (“QHR”). See Docket Nos. 161, 162, 168, 186, 176, 177, 189, and 194. UTC seeks a
determination that QHR owed a duty to the UTC claimants and breached that duty by allowing
Dr. Christian Schlicht to perform experimental back surgeries at a hospital in Alamogordo, New
Mexico. QHR seeks to establish that it did not owe a duty to the claimants and is therefore not
liable in this case. A trial on the issue of liability is set to commence on September 2, 2014.
1 The “United Tort Claimants” consist of all of the plaintiffs in the adversary proceedings listed in the
Order Establishing Master Docket for Consolidated Matters, entered August 15, 2013 in Consolidated
Misc. Adv. No. 13-00007. The Court consolidated such adversary proceedings for purposes of
conducting a single trial on liability.
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After considering the cross motions, the responses, and replies, and the supporting papers, and
being otherwise sufficiently informed, the Court finds that fact issues exist as to whether QHR
owed a duty to UTC. Both motions for summary judgment are therefore DENIED.
SUMMARY JUDGMENT STANDARDS
Summary judgment, governed by Fed.R.Civ.P. 56, will be granted when the movant
demonstrates that there is no genuine dispute as to a material fact and that the movant is entitled
to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary
proceedings by Fed.R.Bankr.P. 7056. “[A] party seeking summary judgment always bears the
initial responsibility of informing the ... court of the basis for its motion, and ... [must]
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). In considering a motion for summary judgment, the Court must “examine the
factual record and reasonable inferences therefrom in the light most favorable to the party
opposing summary judgment.” Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th
Cir. 1995) (quoting Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F2d 1238, 1241
(10th Cir. 1990)).
“[A] party opposing a properly supported motion for summary judgment may not rest on
mere allegation or denials of his pleading, but must set forth specific facts showing that there is a
genuine issue for trial” through affidavits or other supporting evidence. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 256 (1986). Furthermore, New Mexico Local Bankruptcy Rule 7056–
1(c) provides that the party opposing summary judgment must: 1) list the material facts as to
which the party contends a genuine fact exists; 2) “refer with particularity to those portions of the
record upon which the opposing party relies;” and 3) “state the number of the movant‟s fact that
is disputed.” NM LBR 7056-1(c). Properly supported material facts set forth in the movant‟s
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motion are “deemed admitted unless specifically controverted” by the party opposing summary
judgment. NM LBR 7056-1(c).
APPLICATION OF SUMMARY JUDGMENT
STANDARDS TO THE PENDING MOTIONS
Consistent with the 2010 amendments to Fed.R.Civ.P. 56, the Court used a flexible
approach in examining the summary judgment papers, which included voluminous briefs and
exhibits. See Martin v. Performance Boat Brokerage.com, LLC, 973 F.Supp.2d 820, 824
(W.D.Tenn. 2013) (noting that “the 2010 amendment to Rule 56 introduce[d] flexibility in place
of the bright-line rules”) (internal quotations omitted); Charles Alan Wright, et al, 10A Fed. Prac.
& Proc. Civ. § 2721 (3d ed.2009) (“The court and the parties have great flexibility with regard to
the evidence that may be used on a Rule 56 proceeding.”).
To determine which facts are not in genuine dispute, the Court disregarded legal
conclusions which appeared in either party‟s statement of material facts. In addition, when a
party introduced a new fact in its response to the opponent‟s statement of material facts without
including such fact in the party‟s own statement of material facts, the Court generally
disregarded it. Exceptions were made, however, when the new fact introduced in the response
was necessary to give context to the original fact. The Court considered documents which may
or may not be admissible at trial when both parties referenced the documents in their papers in a
manner that presumes the Court would consider the evidence, such as arguing about a
document‟s meaning or import. Finally, the Court finds the facts identified in this opinion for
purposes of its ruling on the instant cross motions only. Such facts will not be treated as
established in the case.
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FACTS NOT SUBJECT TO MATERIAL DISPUTE
1. Debtor Otero County Hospital Association, Inc. owns a hospital located in
southern New Mexico known as Gerald Champion Regional Medical Center (the “Hospital”).
See generally QHR‟s Memorandum in Support of Motion for Summary Judgment Based on
Scope of Duty Defined by the Agreement (Docket No. 162) (“QHR‟s Motion”), ¶ 6; UTC‟s
Opposition to Motion for Summary Judgment Based on Scope of Duty Defined by the
Agreement (Docket No. 168) (“UTC‟s Response”), p. 2.
2. At all times material to this litigation, the Hospital had a Board of Directors (the
“Board”). See QHR‟s Motion, ¶ 7; UTC‟s Response, p. 7. The Board adopted corporate bylaws
(the “Hospital Bylaws”). See generally QHR‟s Motion, ¶ 9; Corporate Bylaws of Otero County
Hospital Association d/b/a Gerald Champion Regional Medical Center attached as Exhibit 5 to
QHR‟s Motion (Docket No. 162-5).
3. On November 30, 2005, QHR - a hospital management company - and the
Hospital entered into an Agreement for Hospital Administrative Services (the “Agreement”).
See QHR‟s Motion, ¶ 1; UTC‟s Response, p. 2; Agreement for Hospital Administrative Services
attached as Exhibit 1 to QHR‟s Motion (Docket No. 162-1).
4. One of QHR‟s strengths, according to its internal operating manual, “is its
expertise in virtually all areas of hospital operations and management.” See Memorandum in
Support of United Tort Claimants‟ Motion for Partial Summary Judgment (Docket No. 177)
(“UTC‟s Motion), ¶ 1; Excerpt from manual titled “Operating Practices: QHR Management
Division” filed under seal as Exhibit 3 in connection with UTC‟s Motion (Docket No. 180) (the
“Operating Practices Manual”), p. 4 of 12. Such statement appears in a section of the Operating
Practices Manual setting forth the procedure to be used in providing “Consulting Services.” Id.
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5. The Agreement was to expire on December 15, 2011, unless otherwise provided
therein. See QHR‟s Motion, ¶ 2; UTC‟s Response, p. 2. The Agreement was in effect at all
times material to the claims asserted by each UTC claimant. See QHR‟s Motion, ¶ 3; UTC‟s
Response, p. 2.
6. The relevant terms of the Agreement, as identified by QHR and UTC, are as
follows:2
(a) QHR was required to provide key executives to the Hospital, including the
Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”).3
(b) QHR was required to “abide by all policies and procedures reasonably
established by the Hospital.”4
(c) QHR agreed “to comply with the requirements of the Hospital‟s compliance
program in carrying out its duties under th[e] Agreement, to bring items of
potential noncompliance to the Board when actually discovered by QHR (and of
which QHR had actual notice) and … to take corrective action prescribed by the
Board.”5
(b) The Hospital, through its Board, was required to exercise ultimate control
over its policies and operation and retained ultimate responsibility for all duties
vested in the Hospital by applicable law.6
(c) QHR had no right to direct the Hospital or its employees in the performance
of their medical judgments or duties.7
(d) QHR was to be the agent of the Hospital solely to perform the non-medical
administrative services identified in the Agreement.8
(e) The Hospital retained responsibility for all matters requiring professional
medical judgment. QHR retained no responsibility for such judgments and was
not in any way responsible for the credentialing of any doctors.9
2 Each party claims, at one point or another, that the excerpts from the Agreement appearing in the
opposing party‟s summary judgment papers are taken out of context. Though this opinion only
summarizes those contract terms identified by the parties, the Court read and considered the entire
Agreement and is familiar with New Mexico law regarding contract construction.
3 See UTC‟s Motion, ¶ 1; Agreement, Section 2.1.1.
4 See UTC‟s Motion, ¶ 3; Agreement, Section 3.1.
5 See UTC‟s Motion, ¶ 16; Agreement, Section 3.5.
6 See QHR‟s Motion, ¶ 5; Agreement, Section 1.1.
7 See QHR‟s Motion, ¶ 5; Agreement, Section 1.2.
8 Id.
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7. Under the Hospital Bylaws, the Board was to “delegate to the medical staff the
responsibility and authority to investigate and evaluate all matters relating to medical staff
membership status, clinical privileges, and corrective action….” See QHR‟s Motion, ¶ 8;
Hospital Bylaws, Section 7.3-1.
8. The Hospital Bylaws also state that the medical staff and other professionals
providing patient care were required to “conduct and be accountable to the [B]oard for
conducting activities that contribute to the preservation and improvement of the quality and
efficiency of patient care provided in the [H]ospital.” See QHR‟s Motion, ¶ 9; Hospital Bylaws,
Section 8.2. Under the Hospital Bylaws, such activities included:
(a) Review and evaluation of the quality of patient care (generally on a
retrospective basis) through a valid and reliable patient care audit procedure.
(b) On-going monitoring of patient care practices through the defined functions of
the medical staff, the other professional services[,] and the [H]ospital
administration.
(c) Delineation of clinical privileges for members of the medical staff
commensurate with individual credentials and demonstrated ability and judgment
and assignment of patient care responsibilities to other health care professionals
consistent with individual qualification and demonstrated ability.
(d) Provision of continuing professional education, shaped primarily by the needs
identified through the review and evaluation activities.
(e) Review of authorization of the [H]ospital‟s resources to provide for their
allocation to patients in need of them.
(f) Such other measures as the [B]oard may, after considering the advice of the
medical staff, the other professional services and the hospital administration,
deem necessary for the preservation and improvement of the quality and
efficiency of patient care.
Id.
9 See QHR‟s Motion, ¶ 5; Agreement, Section 4.2.
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9. The Hospital‟s medical staff issued their own bylaws acknowledging and
implementing their responsibility for patient care. See QHR‟s Motion, ¶ 10; UTC‟s Response, p.
3; 2006 Medical Staff Bylaws attached as Exhibit 6 to QHR‟s Motion (Docket No. 162-6); 2007
Medical Staff Bylaws attached as Exhibit 7 to QHR‟s Motion (Docket No. 162-7).
10. QHR employed the Hospital‟s CEO and CFO. See UTC‟s Motion, ¶ 1;
Agreement, Section 2.1.1.
11. The CEO was responsible for the day-to-day operations of the Hospital. See
UTC‟s Motion, ¶ 5; Deposition of QHR CEO Robert James Heckert attached as Exhibit 7 to
UTC‟s Motion (Docket No. 177-2) (the “Heckert Deposition”) at 26:20 - 26:23.
12. It is the understanding of James Heckert, a CEO of the Hospital, that as a hospital
administrator or CEO of the Hospital, he has a duty to avoid or prevent risk of injury to the
patients. See UTC‟s Motion, ¶ 6; Heckert Deposition at 22:14 - 22:18.
13. The Hospital‟s Board generally relied on and followed the recommendations from
the CEO or other consultants obtained by QHR. See UTC‟s Motion, ¶ 2; Deposition of Harry
Jarvis attached as Exhibit 1 to UTC‟s Motion (Docket No. 177-1) (the “Jarvis Deposition”) at
36:2 - 36:24.
14. The Hospital‟s Organizational Chart10 reflects that nearly all Hospital employees,
including the Senior Vice President of Medical Staff Affairs, were listed below the CEO. See
UTC‟s Motion, ¶ 5; QHR‟s Opposition to UTC‟s Motion for Partial Summary Judgment (Docket
No. 189) (“QHR‟s Response”), ¶ 5; GCRMC Organizational Chart attached as Exhibit F to
QHR‟s Response (Docket No. 189-6), p. 2-13 of 45; GCRMC Organizational Chart attached as
Exhibit 5 to UTC‟s Motion (Docket No. 177-2). The Organizational Chart proffered by QHR
10 QHR and UTC proffered different versions of the Organizational Chart. The Court considered only
those portions of the separate Organizational Charts which were the same.
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reflects that the Board is listed above the CEO. See QHR‟s Response, ¶ 5; GCRMC
Organizational Chart attached as Exhibit F to QHR‟s Response (Docket No. 189-6).
15. The Hospital had a policy regarding the issuance of temporary privileges to
practice medicine at the Hospital (Policy # MS-C-9140). Pursuant to that policy, a doctor may
only be granted temporary privileges at the Hospital after he or she has submitted a complete
application package, including the following documents:
(a) Completed application and curriculum vitae (CV).
(b) Written request for temporary privileges, including reason for request.
(c) Response from the national practitioner data bank.
(d) Completed request for clinical privilege form.
(e) Malpractice liability insurance face sheet and claims verification from the
insurance company.
(f) A copy of New Mexico driver‟s license.
(g) Copy of DEA [certificate].
(h) Copy of New Mexico board of pharmacy [certificate].
(i) AMA profile.
(j) Response from three professional references.
(k) Medical degree.
(l) Copy of other certifications (i.e. PALS, NRP).
See UTC‟s Motion, ¶ 7; QHR‟s Response, ¶ 7; Hospital‟s Policy # MS-C-9140 attached as
Exhibit 9 to UTC‟s Motion (Docket No. 177-2), p. 31-32 of 45.
16. QHR has internal educational materials regarding the temporary privileging of
doctors at a client hospital, though it is unclear from the evidence before the Court when the
materials were disseminated or whether they were used in connection with the Hospital. See
UTC‟s Motion, ¶ 10; QHR‟s Response, ¶ 9; Excerpts from QHR‟s PowerPoint presentation titled
“Avoiding Liability Issues in Credentialing” attached as Exhibit P to QHR‟s Response (Docket
Nos. 189-16 – 189-18) (the “Educational Materials”).
17. QHR‟s Educational Materials set forth a client hospital‟s duty with respect to
privileging, stating that the “[client hospital] … (through its credentialing bodies, and ultimately
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its Board) owes a duty to its patients to use reasonable care to insure that practioners granted
hospital privileges are competent, and to supervise the medical treatment provided by members
of its medical staff.” Id.
18. The Educational Materials contain bullet points stating that temporary privileges
should be “avoid[ed] where possible” because there is “[n]ot enough information to act on,” and
that “[o]nce they‟re „in,‟ [it is] hard to get them „out.‟” Id. The Educational Materials also warn
that temporary privileges “[s]hould not be used for convenience while an application is being
processed.” Id.
19. The Hospital also had a policy (Policy # MS-C-9000) stating that any new
procedures performed at the Hospital must be separately credentialed. See UTC‟s Response, p. 4
of 12; Hospital‟s Policy # MS-C-9000 attached as Exhibit 8 to UTC‟s Response (Docket No.
168-2), p. 22 of 47. The policy stated:
Procedures[] which have not been performed at Gerald Champion Regional Medical
Center[] previously must be credentialed separately. The credentialing process for new
procedures will include a review by the Medical Executive Committee and the Chief
Nursing Officer.
Id.
20. On or about July 24, 2006, the Hospital entered into an employment agreement
with Christian Schlicht, M.D. (“Dr. Schlicht”) to provide medical services in the specialty of
anesthesia and pain management. See UTC‟s Response, p. 4 of 12; Physician Employment
Agreement attached to UTC‟s Response as Exhibit 13 (Docket No. 168-2), p. 35-38 of 47. CEO
Sue Johnson-Phillippe, then an employee of QHR, signed the employment agreement on behalf
of the Hospital. Id.
21. In August, 2006, Dr. Schlicht was granted temporary privileges to practice at the
Hospital. See UTC‟s Motion, ¶ 8; QHR‟s Response, ¶ 8; Letter granting Dr. Schlicht temporary
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privileges attached as Exhibit 10 to UTC‟s Motion (Docket No. 177-2) (the “Letter Granting
Temporary Privileges”), p. 34 of 45.
22. The Letter Granting Temporary Privileges - which specifically referenced Policy
# MS-C-9140 - is dated August 9, 2006 and was signed by the Hospital‟s Chief of Staff, Frank
Bryant, M.D. (“Dr. Bryant”) and QHR‟s employed CEO, Sue Johnson-Phillippe. Id. According
to QHR, the date on the Letter Granting Temporary Privileges is a typographical error; QHR
contends the letter was more likely signed on August 29, 2006. See QHR‟s Response, ¶ 8(b);
Physician‟s Employment Agreement attached as Exhibit L to QHR‟s Response (Docket No. 189-
12) (noting that Dr. Schlicht‟s employment was to commence on August 21, 2006).
23. As of August 9, 2006, the Hospital had not received copies of Dr. Schlicht‟s
photo ID or medical degree, nor had it received responses from Dr. Schlicht‟s professional
references. See UTC‟s Motion, ¶ 8; QHR‟s Response, ¶ 8 (failing to deny that those items were
missing and admitting that the Hospital received all of the items required by Policy # MS-C-
9140 by August 28, 2006); Gerald Champion Regional Medical Center Appointment Summary
Sheet attached as Exhibit 12 to UTC‟s Motion (Docket No. 177-3), p. 2 of 43.
24. Two of the physicians who were asked to provide references for Dr. Schlicht
indicated that they did not have enough information to recommend that he receive privileges to
perform minimally invasive spine surgical procedures. See UTC‟s Motion, ¶ 12; Responses
from Dr. Schlicht‟s references attached as Exhibit 15 to UTC‟s Motion (Docket No. 177-3), p.
14-25 of 43.
25. QHR‟s Operating Practices Manual required the CEO to review any physician
employment agreement - including Dr. Schlicht‟s contract - with QHR‟s regional office prior to
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presenting it to the Board. See UTC‟s Motion, ¶ 14; Operating Practices Manual filed under seal
as Exhibit 17 in connection with UTC‟s Motion (Docket No. 180), p. 8 of 12.
26. For the first year of Dr. Schlicht‟s tenure at the Hospital, David Masel, M.D., a
board-certified spine surgeon, was appointed as Dr. Schlicht‟s proctor. See UTC‟s Motion, ¶ 15;
QHR‟s Response, ¶ 14.
27. On July 10, 2007, Dr. Masel submitted the results of his one-year evaluation of
Dr. Schlicht.11 See UTC‟s Motion, ¶ 15; UTC‟s Response, ¶ 14. In response, Dr. Schlicht sent a
letter dated July 21, 2007 to the “Administration” of the Hospital to “directly and unequivocally
refute [Dr. Masel‟s] statements” that Dr. Schlicht was “perform[ing] experimental surgery.” See
UTC‟s Motion, ¶ 15; Letter dated July 21, 2007 from Dr. Schlicht attached as Exhibit 18 to
UTC‟s Motion (Docket No. 177-3), p. 40-41 of 43.
28. On September 14, 2007, insurer Molina Healthcare of New Mexico (“Molina”)
sent a letter to Mary Harding, the Hospital‟s RN Risk Manager. See UTC‟s Motion, ¶ 17; Letter
from Molina dated September 14, 2007 attached as Exhibit 19 to UTC‟s Motion (Docket No.
177-3), p. 43 of 45. The letter resulted from Molina‟s Internal Quality of Care review process in
the case of a certain back surgery procedure performed by Dr. Schlicht. Id. Molina assigned the
case a severity Level of IV, which indicates a “[g]ross and flagrant violation of acceptable
medical practice, or service standard.” Id. The letter states that the “provider does not appear to
have been credentialed to perform this second surgery,” and that “[p]erforming … [the] surgery
appears to be outside the practitioner‟s scope of practice.” Id.
29. By September 21, 2007, QHR‟s regional office in Texas was aware of Molina‟s
September 14, 2007 letter addressing its concerns over a surgery performed by Dr. Schlicht. See
11 QHR claimed the evaluation was privileged and declined to produce it during discovery. It was not
submitted to the Court in connection with the summary judgment papers.
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UTC‟s Motion, ¶ 18; QHR‟s Response, ¶ 17; Summary of QHR‟s Monthly Operation Review
filed under seal as Exhibit 20 in connection with UTC‟s Motion (Docket No. 180), p. 11-12 of
12. The “Dr. Schlicht/Molina issue” was identified as one of five “major issues” to be discussed
at a Monthly Operating Meeting in September, 2007. Id.
30. QHR‟s on-site team at the Hospital was also aware of the Dr. Schlicht/Molina
issue. See UTC‟s Motion, ¶ 21; QHR‟s Response, ¶ 19. James Richardson, the Hospital‟s CEO
and a QHR employee, became aware of the September 14, 2007 letter from Molina shortly after
it was sent. Id. Mr. Richardson became concerned about Dr. Schlicht when Molina suspended
his insurance-related privileges (as distinguished from his Hospital privileges). Id.
31. The Dr. Schlicht/Molina issue was not referenced in the minutes of the Board
meeting held on September 26, 2007.12 See UTC‟s Motion; ¶¶ 19-20; Board of Directors
minutes dated September 26, 2007 attached as Exhibit 22 to UTC‟s Motion (Docket No. 177-4)
p. 8-12 of 46. At the meeting, the Board approved the purchase of an “additional spine
instrument” for the surgical department, which cost $54,000. Id.
32. Dr. Schlicht was allowed to continue to perform spinal surgery at the Hospital on
patients who were not insured by Molina after Molina raised its concerns in the September 14,
2007 letter. See UTC‟s Motion, ¶ 22; QHR‟s Response, ¶ 20.
33. In October, 2007, CEO James Richardson exchanged a series of letters with
Molina in which he took issue with Molina‟s assessment in the September 14, 2007 letter. See
UTC‟s Motion, ¶ 24; QHR‟s Response, ¶ 22; Fax Cover Sheet attached as Exhibit 25 to UTC‟s
Motion (Docket No. 177-4), p. 32 of 48; Letters from Mr. Richardson to Molina attached as
12 QHR contends that the Board was aware of the letter from Molina and that the issue was discussed at
the Board meeting, notwithstanding the fact that the minutes do not reference such a discussion. Because
QHR offered evidence to support this assertion, fact issues remain as to whether QHR made the Board
aware of the letter from Molina.
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Exhibit HH to QHR‟s Response (Docket No. 189-38). A letter Mr. Richardson signed demanded
that Molina remove the suspension of Dr. Schlicht‟s insurance-related privileges until Molina
completed a full inquiry into the matter and promised that Dr. Schlicht would refrain from
performing surgeries on Molina insureds in the meantime. Id. When Molina failed to timely
remove the suspension, Mr. Richardson sent a letter demanding that Molina take immediate
action “to prevent aggressive legal and regulatory action against Molina.” Id.
34. In a follow-up letter dated December 21, 2007, Molina informed Mr. Richardson
that, after reviewing the case further, it considered the matter closed. See QHR‟s Response, ¶ 16;
Letter from Molina dated December 21, 2007 attached as Exhibit DD to QHR‟s Response
(Docket No. 189-34). The letter also stated that Molina made an administrative decision not to
cover minimally invasive spinal surgery unless it was performed by a doctor who completed a
residency in either neurosurgery or orthopedics. Id. There is no evidence before the Court that
Dr. Schlicht completed either residency.
DISCUSSION
In each complaint, UTC claims, among other things, that QHR was negligent in the
hiring, privileging, and supervision of Dr. Schlicht. By its motion for summary judgment, QHR
seeks to establish that it had no right or responsibility to engage in such activities under the
Agreement and therefore owes no duty to UTC. UTC disagrees, arguing that because QHR
actually did privilege, hire, and supervise Dr. Schlicht, QHR owes a duty to the claimants under
ordinary tort principles and under the more stringent doctrine of “corporate negligence,” which
applies primarily to hospitals. The Court will address each argument below.
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I. New Mexico law regarding negligence and duty
Under New Mexico law,13 a civil negligence claim generally “requires the existence of a
duty from a defendant to a plaintiff, breach of that duty, which is typically based upon a standard
of reasonable care, and the breach being a proximate cause and cause in fact of the plaintiff‟s
damages.” Herrera v. Quality Pontiac, 134 N.M. 43, 47-48, 73 P.3d 181, 185-86 (2003). See
also Ross v. City of Las Cruces, 148 N.M. 81, 84, 229 P.3d 1253, 1256 (Ct. App. 2009) (“The
elements of a negligence claim are (1) the existence of a duty running from the defendant to the
plaintiff; (2) a breach of that duty based on a reasonable care standard; and (3) the breach of duty
is both the proximate and in-fact cause of the plaintiff's damages.”). “Negligence is generally a
question of fact…. A finding of negligence, however, is dependent upon the existence of a duty
on the part of the defendant.” Herrera, 134 N.M. at 48, 73 P.3d at 186. Whether a duty exists is
a question of law to be decided by the courts based on established legal policy. Rodriguez v. Del
Sol Shopping Center Associates, L.P., 326 P.3d 465, 476 (N.M. 2014). See also Solon v. WEK
Drilling Co., Inc., 113 N.M. 566, 571, 829 P.2d 645, 650 (1992) (“It is thoroughly settled in New
Mexico … that whether the defendant owes a duty to the plaintiff is a question of law.”).
“An actor ordinarily has a duty to exercise reasonable care when the actor‟s conduct
creates a risk of physical harm.” Restatement (Third) of Torts: Liability for Physical and
Emotional Harm § 7 (2010).14 The mere existence of an injury does not automatically give rise
13 Because the injuries and acts of which UTC complains occurred primarily in New Mexico, it is
appropriate for the Court to apply New Mexico tort law. See Torres v. State, 119 N.M 609, 613, 894 P.2d
386, 390 (1995) (The New Mexico Supreme Court “generally . . . applies the law of the state in which the
wrongful conduct occurred.”) (internal citations omitted); Terrazas v. Garland & Loman, Inc., 140 N.M.
293, 296, 142 P.2d 374, 377 (Ct. App. 2006) (“In determining which jurisdiction‟s law should apply to a
tort action, New Mexico courts follow the doctrine of lex loci delicti commissi - that is, the substantive
rights of the parties are governed by the law of the place where the wrong occurred.”) (internal citations
omitted).
14 The New Mexico Supreme Court adopted Restatement (Third) of Torts: Liability for Physical and
Emotional Harm § 7, along with comment j of that section, in Rodriguez v. Del Sol Shopping Center
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to a duty, however. “A relationship must exist that legally obligates the defendant to protect the
plaintiff‟s interest.” Johnstone v. City of Albuquerque, 140 N.M. 596, 600, 145 P.3d 76, 80 (Ct.
App. 2006).
Traditionally, the duty component in New Mexico negligence cases involved two
concepts: foreseeability and policy. See Herrera, 134 N.M. at 52, 73 P.3d at 190 (observing that
“New Mexico has adopted and applied for decades the majority view of Palsgraf, that a
negligent actor only owes a duty to those whose injuries are a foreseeable result of the
negligence[,]” and stating further that “[t]his court has consistently relied on the principle of
foreseeability, along with policy concerns, to determine whether a defendant owed a duty to a
particular plaintiff or class of plaintiffs”).15 The New Mexico Supreme Court recently
reevaluated the duty analysis in Rodriguez v. Del Sol Shopping Center Associates, L.P., 326 P.3d
465 (N.M. 2014). Del Sol overruled several prior cases holding that foreseeability considerations
can support a court‟s determination that no duty exists or that an existing duty should be limited.
Instead, the determination of whether a duty exists must be based on policy considerations. Del
Sol, 326 P.3d at 474 (concluding that “courts must articulate specific policy reasons, unrelated to
foreseeability considerations, when deciding whether a defendant does or does not have a duty or
that an existing duty should be limited”). “[F]oreseeability is not a factor” in determining
whether a duty exists. Id. at 474.
Associates, L.P., 326 P.3d 465 (N.M. 2014), which is discussed in more detail below. That entire section
provides:
(a) An actor ordinarily has a duty to exercise reasonable care when the actor‟s conduct creates a
risk of physical harm.
(b) In exceptional cases, when an articulated countervailing principle or policy warrants denying
or limiting liability in a particular class of cases, a court may decide that the defendant has
no duty or that the ordinary duty of reasonable care requires modification.
Id.
15See also Chavez v. Desert Eagle Distributing Co., 141 N.M. 116, 120, 151 P.3d 77, 81 (Ct. App. 2006)
(“In New Mexico, the question of whether a common law duty exists requires consideration of both
foreseeability and policy.”).
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Although the ultimate determination of whether a defendant owes a duty to a plaintiff is a
question of law, fact questions relating to the Court‟s consideration of duty, such as “the
relationship of the parties, the nature of the plaintiff‟s interest[,] and the defendant‟s conduct,”
may affect that determination. Johnstone, 140 N.M. at 600, 145 P.3d at 80. See also R.A. Peck,
Inc. v. Liberty Fed. Sav. Bank, 108 N.M. 84, 89, 766 P.2d 928, 933 (Ct. App. 1988) (observing
that “where the facts and circumstances of the relationship between the parties are at issue . . .
existence of a duty may become a mixed question of law and fact . . .”) (internal citation
omitted). For example, whether a hospital owes a duty to its patients is a question of law, but
whether a particular plaintiff was a patient of the hospital is a question of fact. See Eckhardt v.
Charter Hosp. of Albuquerque, Inc., 124 N.M. 549, 558, 953 P.2d 722, 731 (Ct. App. 1997)
(stating that “Plaintiff‟s case presents circumstances in which the question of whether Charter
owed her a duty depends on the existence of particular facts[,]” so that “the existence of a duty
owed by Charter to Plaintiff depended on whether Plaintiff was a Charter patient . . .”).
II. Whether QHR‟s duties are limited by the terms of the Agreement
QHR contends any duty it owed in connection with this case is expressly defined and
limited by the terms of the Agreement. Since, according to QHR, it was not required or allowed
to privilege or supervise doctors under the Agreement, QHR argues that it owes no duty with
respect to those activities. Under the facts of this case, the Court disagrees that the Agreement is
dispositive of whether QHR owes a duty to UTC.
In Klopp v. Wackenhut Corp., 113 N.M. 153, 160, 824 P.2d 293, 300 (1992), the New
Mexico Supreme Court made clear that “[t]he tort liability of an employee or an agent for an
omission is determined by the law of negligence and is not limited to the affirmative obligations
of the contract of service.” There the plaintiff sued Wackenhut Corporation (“Wackenhut”), the
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company hired by an airline to provide security personnel to operate its airport security station
(which included a metal detector), for personal injuries after she tripped over the base of the
metal detector. Wackenhut did not own or design the security station. Under its contract with
the airline, Wackenhut was not permitted to change the configuration of the security station, nor
did it in fact change the configuration. The plaintiff was not a party to that contract. The New
Mexico Supreme Court acknowledged that Wackenhut “certainly had a greater duty to
passengers than merely to search for weapons” but found that its duty was “limited by the extent
of its control over the chattels in its custody or over the area that it occupied.” Klopp, 113 N.M.
at 161, 824 P.2d at 301. The court ultimately found that Wackenhut had no liability to the
plaintiff because, under the contract, it lacked any control over the configuration of the security
station. Id.
Because Klopp limited Wackenhut‟s duty based on the extent of its control, and because
it was prohibited from exercising control by the contract, QHR reasons that the Court should
look solely to the Agreement between the Hospital and QHR to determine whether QHR owes a
duty to the Hospital‟s patients. This argument fails for two reasons. First, the duties imposed by
tort law are not limited to those imposed by contract. See Klopp, 113 N.M. at 160, 824 P.2d at
300 (observing that the trial court‟s rationale for determining that Wackenhut‟s only duty was “to
prevent deadly or dangerous weapons from being carried aboard an airliner” “confuse[s] duties
imposed on an employee or agent by contract (e.g., to provide airport security) and duties
imposed by the law of negligence.”).
Second, although both Wackenhut and QHR lacked the authority under their respective
contracts to control the alleged tortious conduct, QHR misses a key distinction between these
cases. Unlike in Klopp, where it was undisputed that Wackenhut did not modify the security
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station or its configuration, here UTC alleges that QHR actually controlled and actively
participated in the privileging and supervision of Dr. Schlicht. QHR in effect argues that if the
Agreement prevented it from privileging and supervising doctors - but QHR in fact undertook
such actions - the Agreement nevertheless relieves QHR from liability. Such a result is not
consistent with the holding of Klopp. If Wackenhut had in fact modified the base of the metal
detector contrary to the terms of its contract and thereby created a risk of physical harm, the case
would have produced a different result. QHR‟s tort duty to the Hospital‟s patients is therefore
not solely defined by its contractual obligations to Hospital.16
Because the question of duty is policy driven, QHR also argues that the public policy
favoring freedom of contract weighs in favor of concluding that QHR did not owe a duty to the
Hospital‟s patients. This argument would be more persuasive if, like many cases cited in QHR‟s
brief, the Hospital was seeking to assert a tort claim predicated upon the contract or a third party
was essentially seeking to assert a contract claim dressed in tort clothing. Here, however, the
UTC claimants were not parties to QHR‟s Agreement with the Hospital, nor are they seeking to
sue for breach of contract. The public policy favoring freedom of contract therefore does not
apply here; as strangers to the Agreement, the UTC claimants did not exercise any freedom in
negotiating its terms.
The Court concludes that, to the extent QHR owes a duty to UTC, such duty is not
limited or defined by QHR‟s Agreement with the Hospital. Under the facts of this case, QHR‟s
duty to UTC should be defined by the tort law of negligence.
16If QHR owes a duty to UTC, whether QHR complied with the Agreement may have some probative
value in determining whether QHR breached that duty; however, the Agreement itself would not define
the standard of care owed under the duty. See Grassie v. Roswell Hosp. Corp., 150 N.M. 283, 258 P.3d
1075, 1093 (Ct. App. 2011) (expressing “doubt that the Agreement by itself can or should be used to set
the definitive standard of conduct against which the Hospital‟s action must be measured….The
Agreement is evidence of a standard the Hospital set for itself. But a failure to follow it may or may not
be negligent….”).
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II. Whether QHR owed a duty under ordinary negligence principles
UTC appears to argue that QHR owes a duty to the claimants under two theories: 1)
ordinary negligence by a corporation; and 2) corporate negligence, which the Court discusses in
more detail below.17 For ordinary negligence claims, “[a]ssuming other policy considerations
are satisfied, a duty to exercise ordinary care, where one otherwise would not exist, may arise
when a person voluntarily undertakes a course of conduct.” Davis v. Board of County Com'rs of
Dona Ana County, 127 N.M. 785, 792, 987 P.2d 1172, 1178.18 The Restatement (Third) of Torts
likewise provides that a person who undertakes to act may be liable to third parties for
negligence in the performance of that act.19 Because QHR is a corporation, QHR‟s duty would
ordinarily arise through the conduct of its employees and agents. See Baker v. Hedstrom, 309
P.3d 1047, 1056 (N.M. 2013) (stating that “[b]ecause corporations act through their employees,
corporations may be held vicariously liable for the negligence of their employees who injure
17 Though UTC does not present these as separate theories in its summary judgment papers, it cites cases
relating to both corporate and ordinary negligence claims. Based on its review of the case law, the Court
is convinced that they provide separate bases for liability.
18 See also Calkins v. Cox Estates, 110 N.M. 59, 63-64, 792 P.2d 36, 40-41(1990) (noting that “when a
landowner undertakes to provide a common area for the use of his tenants, he [or she] undertakes to
maintain it in a reasonably safe condition”); Cobos v. Dona Ana County Housing Authority, 126 N.M.
418, 425-426, 970 P.2d 1143, 1149-1150 (holding that once a county voluntarily undertakes a subsidized
private housing program, it assumes a duty of care to perform safety inspections in connection with the
housing).
19The Restatement (Third) of Torts, § 43 Duty to Third Parties Based on Undertaking to Another,
provides:
An actor who undertakes to render services to another and who knows or should know that the
services will reduce the risk of physical harm to which a third person is exposed has a duty of
reasonable care to the third person in conducting the undertaking if:
(a) the failure to exercise reasonable care increases the risk of harm beyond that which
existed without the undertaking,
(b) the actor has undertaken to perform a duty owed by the other to the third person, or
(c) the person to whom the services are rendered, the third party, or another relies on the
actor‟s exercising reasonable care in the undertaking.
New Mexico courts have not expressly adopted this section of the Restatement. The New Mexico
Supreme Court recognizes that the Restatement of Torts, though not binding, is “merely persuasive
authority entitled to great weight.” Gabaldon v.Erisa Mortgage Co., 128 N.M. 84, 90, 990 P.2d 197, 203
(1999) (internal citations omitted).
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someone while in the course and scope of their employment”) (citing Restatement (Third) of
Agency § 2.04).
Here, UTC claims that QHR owes the patients a duty because QHR undertook to exercise
the Hospital‟s duties in running the hospital, including the privileging and supervision of Dr.
Schlicht. These issues, as well as various others which define the contours of the parties‟
relationship, are in material dispute. Fact issues remain, for example, as to whether QHR pushed
the Hospital to hire Dr. Schlicht and whether, and to what extent, QHR exercised control over or
otherwise participated in the priviledging of Dr. Schlicht. It is unclear from the evidence before
the Court whether QHR‟s employed CEO - who signed the letter granting temporary privileges
to Dr. Schlicht - was just a scrivener, or whether she was responsible for or participated in the
decisions to recruit or privilege Dr. Schlicht. There is conflicting evidence as to when the letter
was sent. QHR contends it was sent after the Hospital received Dr. Schlicht‟s full application;
UTC contends the temporary privileges were granted before he submitted about half of the
required paperwork.
Fact issues also exist regarding QHR‟s role in the Dr. Schlicht/Molina issue. The facts
not subject to genuine dispute show that the CEO communicated with Molina regarding Dr.
Schlicht‟s insurance-related privileges and that QHR‟s regional team was informed about the
issue. The Court needs more evidence regarding the facts and circumstances surrounding these
events. It is unclear, for example: (1) whether the CEO himself advocated on behalf of Dr.
Schlicht or whether the Hospital‟s Board or medical staff fully controlled the demands on and
negotiations with Molina; (2) whether the CEO informed the Board about the Dr.
Schlicht/Molina issue; (3) whether QHR‟s regional team acted on its awareness of the Dr.
Schlicht/Molina issue; and (4) whether, and to what extent, QHR was involved in the decision to
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allow Dr. Schlicht to continue to perform surgeries after Molina revoked his insurance-related
priviledges. Facts relating to the Hospital‟s organizational structure are also in material dispute,
including whether the Hospital‟s medical staff acted independently of the CEO in making
decisions concerning the quality of patient care.
Clarification of fact issues is necessary to determine whether to impose a duty on QHR as
a matter of law based on the nature of the activities QHR undertook to perform and its
relationship with the Hospital. See Provencio v. Wenrich, 2150 N.M. 457, 261 P.3d 1089, 1094
(2011) (noting that whether a defendant owes a duty “depends on the nature of the activity in
question, the parties‟ general relationship to the activity, and public policy considerations[;]” and
that policy considerations, in turn, are “answered by reference to legal precedent, statutes, and
other principles of law.”) (internal quotations omitted); Eckhardt v. Charter Hosp. of
Albuquerque, Inc., 124 N.M. 549, 559, 953 P.2d 722, 732 (finding that whether the defendant
owed a duty was dependent upon the existence of particular facts). The Court will therefore not
make a determination on summary judgment as to whether QHR owed a duty under ordinary
negligence principles.
III. Whether QHR owed a duty under corporate negligence principles
The second theory under which UTC intends to proceed is corporate negligence, which
imposes a specialized and more stringent duty on hospitals in situations where they may not face
liability under ordinary negligence principles. Under the doctrine of corporate negligence, also
known as “hospital corporate negligence” or “corporate liability,” hospitals owe a direct,
independent duty of care “to the patient to review and supervise the medical care administered to
the patient.” Malanowski v. Jabamoni, 293 Ill.App.3d 720, 728, 688 N.E.2d 732, 738 (Ct. App.
1997). The theory “is predicated on the hospital‟s own negligence, not the negligence of the
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physician.” Id. New Mexico law recognizes the doctrine of corporate negligence. See Diaz v.
Feil, 118 N.M. 385, 389, 881 P.2d 745, 749 (Ct. App. 1994) (“[I]t is beyond question in New
Mexico that a hospital owes an independent duty of care to patients at the hospital.”) (internal
citations omitted); Eckhardt, 124 N.M. at 559, 953 P.2d at 732 (noting that “the doctrine of
corporate negligence may impose liability on a hospital for the negligent granting of staff
privileges or the negligent supervision of treatment”) (internal citation omitted).20
Several policies reasons exist for imposing a direct duty on hospitals to patients to
exercise ordinary care in granting staff privileges to doctors. First, patients tend to look to the
hospital itself - rather than the individual doctors practicing within the hospital - as their health
care provider while receiving treatment at the hospital. See Malanowski, 293 Ill.App.3d at 728,
688 N.E.2d at 738 (explaining that “hospitals today assume a much greater role in coordinating
the total health care of patients, leading the public to rely on the hospital, itself, as the heath care
provider”).21 Next, the doctrine allows a patient to hold a hospital liable “when the physicians
who allegedly caused the injuries were independent contractors rather than employees, rendering
the theory of respondeat superior inapplicable.” Harris v. Extendicare Homes, Inc., 829
F.Supp.2d 1023, 1029 (W.D. Wash. 2011). Finally, “the hospital is in a superior position to
supervise and monitor physician performance and is, consequently, the only entity that can
20See also Archuleta v. Taos Living Center, LLC, 971 F.Supp.2d 1066, 1079 (D.N.M. 2011)
(acknowledging that “New Mexico courts have found that a hospital owes a duty to act with reasonable
care in furnishing services to patients.”) (internal citations omitted); UJI 13-1119(B) (committee
comment) (recognizing the “theory of hospital liability generally known as corporate negligence, which
arises when the hospital has failed to take reasonable steps to determine the qualifications or competency
of a practitioner to whom it has granted clinical privileges”)
21See also, Martin C. McWilliams, Jr. & Hamilton E. Russell, III, Hospital Liability for Torts of
Independent Contractor Physicians, 47 S.C.L.Rev. 431, 473 (1996) (explaining that “the hospital itself
has come to be perceived as the provider of medical services. According to this view, patients come to the
hospital to be cured, and the doctors who practice there are the hospital‟s instrumentalities, regardless of
the nature of the private arrangements between the hospital and the physician. Whether or not this
perception is accurate seemingly matters little when weighed against the momentum of changing public
perception and attendant public policy.”).
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realistically provide quality control … and protect their patients.” Insinga v. LaBella, 543 So.2d
209, 212-213 (Fla. 1989).
Based on the Court‟s review of the case law, it is not clear whether the doctrine of
corporate liability should be extended to a hospital management company such as QHR. If QHR
performed those duties that would subject the Hospital to corporate liability, and if the same
policy reasons that establish a duty under the doctrine of corporate negligence apply to QHR,
then it may be appropriate to extend the doctrine to QHR. As discussed above, however, the
evidence before the Court does not clearly define the nature of the parties‟ relationship or the
nature of the actions QHR undertook in its administrative or management role. The Court
therefore declines to determine whether QHR owes a duty under the theory of corporate
negligence on summary judgment.
IV. Whether QHR owed a duty under state and federal regulations
UTC also references 42 C.F.R. § 482 and Section 7.7.2 of the New Mexico
Administrative Code in its motion, presumably to demonstrate that QHR owes a tort duty to
patients based on the regulations governing hospitals and their CEOs. The language of the
regulations appears in UTC‟s statement of material facts and then briefly in its reply in support
of its motion for summary judgment. In general, the Court disregards legal conclusions that
appear in a party‟s statement of material facts as well as legal arguments that appear for the first
time in a reply. Because neither party really briefed the issue of whether the regulations give rise
to a tort duty on the part of QHR to UTC, the Court declines to reach it at this stage in the
proceeding.
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CONCLUSION
Based on the foregoing, the cross motions for summary judgment will be denied. The
Court will enter a separate order consistent with this memorandum opinion.
________________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: July 25, 2014
COPY TO all attorneys of record associated with Consolidated Misc. Adv. No. 13-00007,
including:
Tamara Safarik & Joe L. McClaugherty
P.O. Box 8680
Santa Fe, NM 87504-8680
John A. Klecan
One North Central, Suite 900
Phoenix, AZ 85004
Lisa Curtis
301 Gold Avenue SW #201
Albuquerque, NM 87102
Bernard R Given, II
10100 Santa Monica Blvd., Suite 2200
Los Angeles, CA 90067-4120
Paul M Fish
P.O. Box 2168
Albuquerque, NM 87103-2168
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