Medical Staff Bylaws: The Court of Appeals Unravels a Tangled Web

March 16, 2005

Author(s): Michael S. Cohen, James Fabian

Reproduced with permission from BNA’s Health Law Reporter, Vol. 14, No. 8, February 24, 2005. Copyright © 2005 by The Bureau of National Affairs, Inc., (800) 372-1033,

As any hospital president, department chair, medical director, or administrator knows, the decision to recommend denial, curtailment, or termination of a physician’s medical staff privileges ranks among the most difficult decisions he or she may ever have to make professionally. This is not only because such a decision may adversely impact a physician’s livelihood, but an adverse privileges decision can be extremely divisive within the hospital community, putting members of administration, the medical staff, and other support staff on opposite sides of a contentious battle, and requiring many of them to participate in adversarial hearings and possibly litigation. The drain on hospital resources, both financial and human, is also typically great, with prolonged internal due process hearings, an administrative adjudication, and frequently a civil lawsuit. These “physician v. institution” lawsuits are typically the end game in an arduous battle, and such actions have typically asserted claims for money damages based on contract as well as tort theories. These claims have frequently been advanced not only against the institutions themselves, but against individual physicians and administrators as well, when they have been involved in the peer review and decision-making process. The potential exposure to monetary liability for participating in a privileges determination has clearly given hospital administrators pause in deciding whether to participate in this arduous and disruptive process.

On November 18, 2004, the New York Court of Appeals issued an opinion that will make the decision to deny, curtail, or terminate a physician’s medical staff privileges somewhat easier for hospitals in New York State, as that threat of monetary liability has been significantly reduced, if not altogether eliminated. In Mason v. Central Suffolk Hosp.,[1] the Court of Appeals held that a physician does not possess an action for damages based on a hospital’s alleged violation of medical staff bylaws unless unambiguous language in those bylaws creates a right to that relief.

The Mason decision is the first time since its 1996 decision in Gelbard v. Genesee Hosp.[2] that the Court of Appeals addressed the remedies available to a physician aggrieved by a hospital’s unfavorable decision respecting his or her medical staff privileges, and more specifically, the interplay between the equitable remedies afforded by Public Health Law (“PHL”) Sections 2801-b and 2801-c and those that may exist under common law.

Most important, this decision resolves, once and for all, a question which the Court of Appeals had not previously decided, but with respect to which a rather large, and somewhat misguided body of caselaw had developed within the Appellate Divisions throughout New York — namely, whether medical staff bylaws constitute a contract between a hospital and the members of its medical staff, such that a physician aggrieved by an adverse privileges determination might recover damages for the alleged breach of those bylaws. The court has now made it clear: absent special circumstances medical staff bylaws do not constitute a contract between a hospital and its staff physicians, and a damages claim for breach of bylaws may be brought only in those rare instances where the bylaws make clear that a hospital has chosen to expose itself to liability for breach — such as where the institution grants privileges for a fixed period of time and agrees not to withdraw or diminish those privileges except for specified cause. In the typical circumstance, however, medical staff bylaws are simply a set of procedural rules governing the relationship among staff physicians, and setting forth procedures governing disciplinary proceedings — they are not the product of a bargained-for exchange between hospital and physician. Accordingly, no damages claim may be predicated on their alleged breach.

Physicians’ Rights at Common Law and the Remedies Created by Public Health Law Sections 2801-b and -c

Prior to the enactment of PHL Section 2801-b, the common law provided no remedy to a physician aggrieved by an adverse appointment or privileges decision.[3] Indeed, at common law physicians served entirely at the pleasure of the hospital, and could mount no challenge “contest[ing] the denial or termination of professional privileges....”[4] Thus, the “[d]enial of staff privileges, for whatever reason or for no reason at all, constituted no legal wrong.”[5]

In response to the perceived harshness of this rule, the New York State Legislature enacted PHL Section 2801-b in 1972, to provide a “limited avenue of recourse by which a physician [can] challenge a hospital’s denial or termination of staff privileges.”[6] Section 2801-b provides, in pertinent part, as follows:

1. It shall be an improper practice for the governing body of a hospital to refuse to act upon an application for staff membership or professional privileges or to deny or withhold from a physician,... staff membership or professional privileges in a hospital, or to exclude or expel a physician,... from staff membership in a hospital or curtail, terminate or diminish in any way a physician’s... professional privileges in a hospital, without stating the reasons therefore, or if the reasons stated are unrelated to standards of patient care, patient welfare, the objectives of the institution or the character or competency of the applicant.

2. Any person claiming to be aggrieved by an improper practice as defined in this section may, by himself or his attorney, make, sign and file with the public health council a verified complaint in writing which shall state the name and address of the hospital whose governing body is alleged to have committed the improper practice complained of and which shall set forth the particulars thereof and contain such other information as may be required by the council.

The limited remedy afforded by the PHL is, therefore, essentially a two-step process. Pursuant to PHL Section 2801-b(2), a physician claiming to be aggrieved by a hospital’s “improper practice” regarding medical staff privileges is required to proceed, in the first instance, before the New York State Department of Health’s Public Health Council (“PHC”). Following review by the PHC, a physician may proceed under PHL Section 2801-c to the Supreme Court to seek injunctive relief compelling the restoration of his or her privileges.[7]

The injunction remedy provided by PHL Section 2801-c is the exclusive remedy for a violation of PHL Section 2801-b. A cause of action for monetary damages for the alleged wrongful denial, curtailment, or non-renewal of privileges in contravention of PHL 2801-b simply does not exist under New York law.[8] It is the inability of physicians to recover damages for a violation of PHL § 2801b that has led to the spate of breach of contract claims based on medical staff bylaws.

Prior Decisions Involving Medical Staff Privileges and Purported Bylaws-Based Contract Claims

Leider and its Immediate Progeny

In Leider v. Beth Israel Hosp. Ass’n,[9] decided in 1962, the Court of Appeals held that a plaintiff surgeon could not maintain an action for both injunctive relief and damages based on a hospital’s alleged deprivation of his rights and privileges as “Adjunct Surgeon” on the hospital’s medical staff. In rejecting plaintiff’s reliance on the defendant-hospital’s constitution and bylaws, and his annual reappointments thereunder, the court held as follows:

The defendant hospital’s constitution and the by-laws of its medical board, when read in context, indisputably establish that the plaintiff, a surgeon, has no vested right to the use of the hospital’s facilities for the care and treatment of his private patients. More specifically, his successive annual appointments effected no contractual relationship with the defendant which prevented its board of trustees from terminating his membership on its medical staff. His exclusion from the staff and the “off-service” privileges, incident to staff membership, including the privileges to care for private patients in the hospital, rested entirely in the discretion of the board of trustees. As the court at Special Term aptly noted, the by-law provision granting such “offservice” privileges to doctors “of the Hospital staff” “cannot derogate from the right of the board of trustees to make annual appointments only, and... can refer only to those physicians and surgeons whom the board... determines annually to reappoint to the hospital’s medical staff “off service” after they have reached the age limits” provided for by the hospital’s constitution. Consequently, the denial to the plaintiff of future courtesy privileges following the termination of his annual employment constituted no legal wrong.[10]

Subsequent decisions appeared to confirm that Leider reflected the Court of Appeals’ view that no contractual cause of action for monetary damages for breach of medical staff or hospital bylaws existed in New York.[11]

Gelbard v. Genesee Hospital

After Leider it was nearly 35 years before the Court of Appeals again addressed the question of whether a physician might sue for damages under a breach of contract theory for violation of medical staff bylaws. In Gelbard v. Genesee Hosp.,[12] the court considered the claim of a physician who complained of a hospital’s decision not to reappoint him to its medical staff. Rather than styling his claim as one for injunctive relief under PHL 2801-c, alleging the hospital’s commission of an “improper practice” under PHL 2801-b, Dr. Gelbard stated a contract theory — claiming that the hospital’s decision not to reappoint him violated the terms of its medical staff bylaws. The relief he sought, however, was not monetary damages, but simply restoration of his staff privileges. The court in Gelbard held that regardless of whether the claim was styled as one under the PHL or for breach of bylaws, the remedy sought — reinstatement —required threshold review by the PHC, because the public policies underlying the creation of the PHC (a body with special expertise in evaluating the propriety of medical staff decisions) would be best served by requiring threshold review. Interestingly, in Gelbard the court recognized and teed up the precise issue it would decide in Mason eight years later, when it noted that because the issue had not been raised by the parties “we do not address whether a breach of contract action can be predicated on a violation of medical staff bylaws.”[13]

Appellate Division Precedent Prior to Mason As noted above, in the initial aftermath of Leider, the Appellate Divisions correctly applied the rule of law apparently laid down by the Court of Appeals, i.e., that medical staff and hospital bylaws did not constitute a contract between physician and hospital. The next relevant case emanating from the Appellate Division was the Second Department’s 1983 decision in Chalasani v. Neuman.[14] In Chalasani, the plaintiff-physician brought an action not for damages, but for an injunction which would prevent the defendant hospital from depriving him of his privileges and medical staff membership in violation of the medical staff bylaws. The hospital moved to dismiss the complaint on the ground that “an alleged ‘violation of Medical Staff Bylaws of the hospital does not give rise to an action against the hospital.”’[15] The Second Department held that plaintiff had stated a viable cause of action for injunctive relief sufficient to withstand dismissal.[16]

In so holding, the Chalasani court relied substantially on the case of Tedeschi v. Wagner College[17] to note that a hospital is bound by its bylaws.[18] The import of the Second Department’s holding in Chalasani was simply that to the extent a hospital fails to comply substantially with its medical staff bylaws, a physician may bring a cause of action seeking injunctive relief to compel compliance, and in the absence of such compliance may be entitled to reinstatement to the medical staff.[19]

Simply put, the Chalasani court’s determination that a hospital has an obligation to follow its own medical staff bylaws did not equate with the notion that such bylaws constitute an enforceable contract that can serve as the basis for an action for damages for breach. Nevertheless, the Chalasani holding was misconstrued by several Appellate Division decisions that, prior to Mason, invoked Chalasani to erroneously recognize a claim for monetary damages for breach of medical staff bylaws.

The first Appellate Division case to stray from Leider and its immediate progeny, and hold unequivocally that medical staff bylaws could form the basis of a claim for damages for breach of contract, was Giannelli v. St. Vincent’s Hosp. & Med. Ctr.[20] There, the plaintiff physician’s first cause of action “charge[d] all defendants with breach of contract in depriving plaintiff of his surgical privileges in violation of the procedures set forth in the hospital bylaws” and sought damages for lost income, lost future income, the value of plaintiff’s medical practice and legal fees.[21] In affirming the denial of summary judgment on this claim on the ground “that the medical staff bylaws may form the basis of a claim, for breach of contract or intentional interference with contractual relations,” the First Department in Giannelli relied upon and cited to Murphy v. St. Agnes Hosp.,[22] Chalasani, and Tedeschi.[23]

As discussed above, however, Chalasani and Tedeschi certainly do not support the proposition for which they were cited by the Giannelli court, namely, that medical staff bylaws constitute a contract which may give rise to an action at law for breach. Likewise, Murphy does not support that proposition. In Murphy, the Second Department held that an Article 78 proceeding was an appropriate vehicle for review of the petitionerphysician’s claim that the respondent hospital had summarily suspended his privileges. In so doing, the court, echoing the notions relied upon by the Tedeschi court, held merely that “[w]hether the appellants’ obligation to comply with the procedures governing disciplinary action set forth in the appellant hospital’s by-laws is grounded in concepts of fundamental fairness, principles of contract law or the law of associations... the appellant’s failure to comply with those procedures requires that petitioner’s summary suspension be annulled.”[24] Thus, Murphy, like Chalasani, represented an application of the Tedeschi rule, requiring substantial compliance with internal procedures and bylaws, and held only that an aggrieved physician may be entitled to relief in the form of an annulment of the action taken in violation of the bylaws. Also like Chalasani, Murphy plainly did not hold, nor even suggest, that medical staff bylaws create a legally-enforceable contract, the breach of which might give rise to a claim for damages.

In view of the foregoing, it was rather apparent that the holding in Giannelli that “medical staff bylaws may form the basis of a claim for breach of contract” was not supported by the prior precedent upon which it purported to rely, and represented a fundamental change in the law. Ironically, it does not appear that the court in Giannelli ever intended to depart so significantly from Chalasani and Murphy. The Giannelli court‘s failure to acknowledge any departure from the prior precedent suggests that it was simply misreading and misapplying Chalasani and Murphy to reach a holding which it did not consider to be unique.

On the heels of Giannelli, several Appellate Division decisions recognized, in the abstract, that a cause of action seeking damages for breach of contract might conceivably be premised on a violation of medical staff or hospital bylaws.[25] The vast majority of these cases, after giving passing recognition to the holding of Giannelli, nevertheless went on to dismiss breach of contract claims predicated on medical staff or hospital bylaws on one of two grounds; (1) that the plaintiff-physician failed to plead the violation of specific provisions of the bylaws and merely was alleging the bad faith or improper termination of staff privileges;[26] or (2) that the claim turned on the propriety of the termination of the physician’s privileges, and the alleged breach of bylaws was secondary.[27]

In so doing, these cases essentially reached the right result – that a hospital should not face monetary liability for damages arising out of an alleged violation of medical staff bylaws – for not quite the right reason. Obviously, the Mason decision has reconciled this by holding definitively that medical staff bylaws cannot serve as the basis for a breach of contract claim for damages.

Mason’s Procedural History, Factual Background

The Mason case certainly did not begin in a manner that would have suggested that it would come to be one of the seminal cases in the area of medical staff privileges. Indeed, for all intents and purposes it was a rather typical medical staff privileges case with a fairly long but generally unremarkable factual background.

Based on the recommendation of an outside expert who reviewed a portion of Dr. Mason’s surgical cases, on February 3, 1998 Dr. Mason was informed that his advanced laparoscopic privileges were summarily suspended pursuant to Central Suffolk Hospital’s Medical Staff Bylaws, and that he was required to seek a concurrent second opinion on surgical indications for all major open resections. That summary suspension was preliminarily upheld by an ad hoc committee, was thereafter sustained by a hearing committee which presided over Dr. Mason’s internal due process medical staff hearing, and was finally affirmed by an appellate review committee of the Hospital’s Board of Directors.

Dr. Mason thereafter filed a complaint with the PHC, alleging that the hospital’s suspension of his advance laparoscopic privileges constituted an “improper practice” under PHL § 2801-b. The PHC upheld the hospital’s action in summarily suspending Dr. Mason’s advanced laparoscopic privileges and, therefore, found no cause to credit Dr. Mason’s complaint.

Dr. Mason thereafter commenced an action in the Supreme Court, Suffolk County seeking to recover monetary damages. The complaint purported to state two causes of action. The first claim was directed against the hospital only, and alleged that the hospital breached the “express and implied” contract between it and Dr. Mason, consisting of the Medical Staff Bylaws, when it “wrongfully and without legitimate cause, summarily suspended Dr. Mason’s privileges.” The second claim was directed against an individually-named physician for his alleged tortious interference with the aforementioned “contract.” This claim was based on that physician’s role in the process that led to the suspension of Dr. Mason’s advanced laparoscopic surgical privileges.

In response to the complaint, defendants served their pre-answer motion to dismiss which argued that neither of the claims asserted were viable as pleaded. In response to that motion, Dr. Mason conceded the correctness of the defendants’ position regarding the legal insufficiency of his original complaint by propounding a proposed amended complaint, and he cross-moved for leave to amend pursuant to CPLR 3025.

By short form order dated June 10, 2002, the Supreme Court denied the hospital’s motion to dismiss, holding that the original complaint stated valid causes of action for breach of contract against the hospital and for tortious interference with contract against the individually-named physician.

Defendants then appealed to the Appellate Division, Second Department. On May 19, 2003 the Second Department unanimously reversed the Supreme Court and dismissed the complaint in its entirety.[28] After noting, in the abstract, that medical staff bylaws might form the basis for a breach of contract claim, the Second Department nevertheless observed that “the plaintiff was damaged by the revocation of his privilege to perform advanced laparoscopic procedures, not by the alleged violation of one or more of the hospital’s... bylaws” and proceeded to find that Dr. Mason’s breach of contract claim was necessarily deficient because “[t]he bylaws give him no right to such privilege.”[29]

Relying on applicable Appellate Division precedent, the Second Department applied the rule that grew out of Giannelli’s misapplication of Tedeschi, and held that “where the claim of a violation of the bylaws is secondary and the gravamen of the plaintiff’s grievance is the suspension of his privileges, his causes of action alleging breach of contract and tortious interference with that contract are barred.”[30] Accordingly, the Second Department—like its counterparts elsewhere in the state—reached the right conclusion but for not quite the right reason.

Dr. Mason thereafter sought leave to appeal to the Court of Appeals, and his application was granted, leading to the court’s decision of November 18, 2004. The parties thoroughly briefed the issues to the court, and the Healthcare Association of New York State (‘HANYS”) submitted a brief amicus curiae, urging the affirmance of the Second Department’s decision which dismissed the complaint. Oral argument was heard on October 12, 2004.

The Court of Appeals’ opinion was handed down on November 18, 2004. It affirmed the dismissal of the complaint, but on grounds different from those invoked by the Second Department – namely, that generic medical staff bylaws do not constitute a contract between physician and hospital that would permit an action for damages for breach based on alleged non-compliance with bylaws in the context of a privileges decision. In so doing, the Court of Appeals eradicated the confusing and misleading line of Appellate Division decisions which had recognized, even in passing, that medical staff bylaws could form the basis for a breach of contract claim, and made it clear that it would only be in rarest and unlikeliest of cases — where the bylaws at issue explicitly create a contractual right to sue for damages — that a physician’s breach of contract claim predicated upon bylaws might survive dismissal.

In reaching its conclusion, the Court of Appeals acknowledged the “mixed and inconsistent results” of the more recent Appellate Division cases which had addressed the question of whether medical staff bylaws constituted a contract. The court noted also that “there appears to be no appellate case in which a damages award for breach of medical staff by-laws has been upheld after trial,” which also apparently gave the court additional comfort in rejecting the litany of appellate decisions which had reached the right result for the wrong reason.

Perhaps the most significant aspect of the Mason decision is its statement of policy:

The decisions of our Court, and many of those of the Appellate Division, are consistent with an important, though generally unexpressed, policy consideration: It is preferable for hospital administrators who decide whether to grant or deny staff privileges to make those decisions free from the threat of a damages action against the hospital. It is not just in a hospital’s interest, but in the public interest, that no doctor whose skill and judgment are substandard be allowed to treat or operate on patients. A decision by those in charge of a hospital to terminate the privileges of, or deny privileges to, a doctor who may be their colleague will often be difficult. It should not be made more difficult by the fear of subjecting the hospital to monetary liability. (Emphasis added).

By this pronouncement, the Court of Appeals finally gave explicit recognition to the vital policy consideration which had plainly been lurking just beneath the surface of those various Appellate Division cases discussed above, and demonstrated a keen recognition of the practical realities of privileges decisions, in which hospitals and administrators are placed in the agonizing position of deciding the professional fate of others. The court noted that these difficult decisions should not be exacerbated by the threat of monetary sanction.

The Court of Appeals looked also to its holdings in the college and university context to resolve the issues presented in Mason. In holding that bylaws do not create a contract between hospital and physician under typical circumstances, the court noted that its decision in Tedeschi “actually supports the rejection of Dr. Mason’s damages claim” because that decision merely required a defendant college to comply with its written guidelines, and in fact dismissed the student-plaintiff’s claim for monetary damages based on the violation of institutional bylaws. The court also cited its opinion in Maas v. Cornell Univ.[31] in which it held that a professor could not sue for breach of contract based on a university’s disciplinary action, before holding that “[w]e see no reason why the by-laws of the hospital here should be read to confer more rights on Dr. Mason than the institutional documents in Tedeschi and Maas did on the plaintiffs in those cases.”[32]

Simply put, the Court of Appeals concluded that since bylaws are not contracts in the college and university setting, there is no reason to deem them contracts in the hospital context — a rather logical conclusion to be sure, and one that defendants had urged the court to reach. Although not cited by the court, this conclusion is buttressed also by the reality that physicians already enjoy greater rights and remedies than non-physicians allegedly aggrieved by institutional bylaws violations– namely, the two-step grievance procedure available under PHL 2801-b and 2801-c.

Impact of Mason Decision Going Forward

The Court of Appeals’ decision in Mason confirms that a claim which aggrieved physicians had been asserting with increasing frequency, is simply not viable. On the other hand, the Mason decision should have little impact on physicians who seek only reinstatement to a medical staff, or other equitable relief regarding an unfavorable privileges decision. The real impact will be felt by those physicians who do not wish to be reinstated, for whatever reason, but prefer an economic recovery.

Prior to the Mason decision, such physicians might arguably possess at least a theoretical right to allege and prove that a privileges decision was in violation of bylaws, and recover contract damages for same. Now, physicians seeking to recover monetary damages against a hospital are unquestionably barred from maintaining a breach of contract claim based on bylaws, unless those bylaws or some other writing (e.g., an employment contract) expressly creates that right. This will surely come as a relief to hospitals, which will no longer face the prospect of damages claims arising out of non-compliance with medical staff bylaws, and the accompanying chilling effect such exposure might have on the exercise of a hospital’s specialized judgment and expertise in the area of medical staff privileges.

Moreover, the policy considerations expressed by the Court of Appeals—though articulated in the context of a contract-based claim—would seem also to cast doubt on the continuing viability of damages claims of any sort against hospitals relating to privileges decisions, be they based in tort, contract, or some other theory. It is noteworthy that the Court of Appeals referred broadly a hospital’s freedom “from the threat of a damages action” and “the fear of subjecting the hospital to monetary liability,” rather then simply the threat of liability for contract damages. This appears to make this important policy consideration equally applicable to actions asserting tort claims against a hospital and its administration, including defamation, tortious interference, and prima facie tort, to name a few. It appears eminently reasonable that the court was intending to state that considering the need for unfettered and candid decision-making in the privileges context, hospitals and physicians should not face any monetary liability arising out of a privileges decision.

Of course the Mason decision does not give hospitals free reign to ignore their own medical staff bylaws, because non-compliance can and often does serve as the basis for a physician’s claim that an adverse privileges decision contravened PHL 2801-b, for which injunctive relief remains available under PHL 2801-c. It appears, therefore, that the court in Mason struck the right balance between the competing interests at issue here — physicians continue to have their statutory remedies and claims under PHL 2801-b and 2801-c to address what they perceive to be improper privileges decisions, the public’s interest in insuring that only competent practitioners remain on staff at hospitals is adequately protected by the right of physicians to gain reinstatement to a medical staff (indeed, no significant public interest would appear to be served by allowing physicians to recover damages), and hospitals avoid the chilling effect of exposure to economic damages claims for alleged bylaws violations.

Although Mason appears to have finally put an end to the issuance of confusing and contradictory appellate opinions in this area, the fact is that Mason represents only the beginning of a new chapter in the area of medical staff privileges. It will certainly be interesting to see how lower courts in New York apply Mason, how creative physicians and their attorneys will be in interpreting and seeking to avoid its holding, and how hospitals facing tort claims arising out of a privileges decisions will endeavor to extend or leverage Mason’s invocation of public policy into pre-discovery dismissal of such claims.

It will also be interesting to see what, if any, impact Mason will have on decisions in this area of the law outside New York. Prior to Mason, numerous state and federal courts outside New York addressed the question of whether medical staff bylaws constitute a contract. Surprisingly, the majority view, contrary to the New York Court of Appeals’ holding in Mason, appears to be that such bylaws do form an enforceable contract between hospital and physician.[33] It is possible the logic and the important underlying policy reasons relied upon by the court in Mason to hold medical staff bylaws do not form a contract may cause those courts in other jurisdictions representing the majority view to rethink their holdings. The Mason decision may also inform the decisions in those jurisdictions that have not squarely addressed this question. Indeed, the characteristics of the physician/hospital relationship in the medical staff bylaws context which led the court in Mason to its conclusion as well as the important goal of achieving candid and effective peer review, were not unique to that case, are not unique to New York, and would seem to apply universally in the physician/hospital context. Thus, it is possible that the impact of the Mason decision may be felt beyond New York.

James Fabian is a partner of Nixon Peabody LLP and chairman of the firm’s Health Services Practice Group, a group comprised of more than 20 full-time healthcare lawyers and 25 adjunct attorneys, resident in numerous offices across the firm. Mr. Fabian and Christopher Porzio represented Central Suffolk Hospital in the underlying litigation and administrative proceeding. Michael S. Cohen is a Nixon Peabody LLP partner and leader of the firm’s Healthcare Litigation Team. Mr. Cohen argued the Mason v. Central Suffolk Hospital case before the Appellate Division, Second Department and the New York Court of Appeals. Christopher J. Porzio is an associate of Nixon Peabody LLP and a member of the firm’s Healthcare Litigation Team.

Copyright © 2005 by the Bureau of National Affairs, Inc., Washington, D.C. 20037 ISSN 1064-2137

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.


  1. ___ N.Y.2d ___, N.Y. Court of Appeals, Dec. November 18, 2004.
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  2. 287 N.Y.2d 691, 695 (1996).
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  3. Guibor v. Manhattan Eye, Ear and Throat Hosp., 46 N.Y.2d 736, 737 (1978).
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  4. Gelbard, 87 N.Y.2d at 695.
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  5. Guibor, 46 N.Y.2d at 737.
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  6. Gelbard, 87 N.Y.2d at 695.
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  7. See Id. at 696 (describing “two-step grievance process by which a physician may obtain injunctive relief requiring the hospital to restore wrongfully terminated staff privileges.”).
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  8. See Moallem v. Jamaica Hosp., 264 A.D.2d 621, 622 (1st Dep’t 1999) (“Where a cause of action is based upon an allegedly wrongful denial of hospital privileges, the aggrieved physician is limited to injunctive relief under Public Health Law § 2801-c and is barred by Section 2801-b from maintaining an action for damages.”); Gelbard v. Genesee Hosp., 255 A.D.2d 882, 885 (4th Dep’t 1998), appeal dismissed, 93 N.Y.2d 916 (1999) (“[T]he injunctive relief in Public Health Law § 2801-c provides the exclusive remedy for plaintiff to challenge the propriety of the Hospital’s termination of his staff privileges”) (citations omitted).
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  9. 11 N.Y.2d 205 (1962).
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  10. Id. at 208-09 (emphasis added).
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  11. See, e.g., Konik v. Champlain Valley Physicians Hosp. Med. Ctr., 88 A.D.2d 678, 679 (3d Dep’t 1982) (“[W]e initially find without merit plaintiff’s contention that the alleged appointment of defendant Bayoumy as chief of the department in violation of the by-laws of [Champlain Valley Physicians Hospital Medical Center] and the regulations of the department constituted a breach of contract for which plaintiff is entitled to money damages from defendants.”); Yates v. Cohoes Mem’l Hosp., 64 A.D.2d 726, 728 (3d Dep’t 1978) (dismissing cause of action seeking money damages for violation of hospital bylaws and citing Leider for proposition that “it has been held that medical staff-bylaws do not give rise to actions against a hospital for alleged violations thereof”); Rockland Physician Assocs., P.C. v. Grodin, 616 F. Supp. 958, 961 (S.D.N.Y. 1985) (“A number of New York cases suggest that provisions in hospital by-laws cannot be equated with provisions in a contract between a hospital and one of its physicians. The primary case cited in this area is Leider....”).
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  12. 87 N.Y.2d 691 (1996).
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  13. Id. at 698.
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  14. 97 A.D.2d 806 (2d Dep’t 1983), rev’d on other grounds, 64 N.Y.2d 879 (1985).
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  15. Id.
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  16. Id.
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  17. 49 N.Y.2d 652 (1980).
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  18. In Tedeschi, the Court of Appeals was merely suggesting that, by whatever the legal theory, a private college or university must comply substantially with its own written rules and guidelines:
    We do not find it necessary in the present case to resolve such problems as may arise out of the different theoretical predicates. Whether by analogy to the law of associations, on the basis of a supposed contract between university and student, or simply as a matter of essential fairness in the somewhat one-sided relationship between the institution and the individual, we hold that when a university has adopted a rule or guideline establishing the procedure to be followed in relation to suspension or expulsion, that procedure must be substantially observed. (Id. at 660 (emphasis added).)
    Significantly, the Court of Appeals in Tedeschi did not hold that the rules or guidelines of a college or university formed an enforceable contract between institution and student, as it in fact dismissed the student’s breach of contract claim for damages. See Id. at 661-62 (“Under the guideline plaintiff was properly suspended but was entitled to review of her suspension by the hearing board and president. So much of the complaint as sought money damages... was properly dismissed, but she was entitled to judgment directing review by that body and that official as the guidelines require.”).
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  19. This accurate interpretation of Chalasani was confirmed by a federal court decision issued from the Southern District of New York, Rockland Physician Assocs., P.C. v. Grodin, 616 F. Supp. 958 (S.D.N.Y. 1985). In the course of reaching its conclusion that “under current New York law, the hospital’s bylaws should not be treated as a contract in the manner urged by plaintiffs,” the court in Rockland observed that the Chalasani decision “concludes only that a cause of action may arise where a hospital violates its by-laws” but that Chalasani “quite clearly does not hold that by-laws are enforceable as contract.” Id. at 962. As noted by the court in Rockland, the Chalasani decision never even uses the word “contract” and makes no reference to contract remedies. Id.
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  20. 160 A.D.2d 227 (1st Dep’t 1990).
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  21. Id. at 229.
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  22. 107 A.D.2d 685, 687 (2d Dep’t 1985).
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  23. See Giannelli, 160 A.D.2d at 232.
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  24. Murphy, 107 A.D.2d at 687.
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  25. See, e.g., Saha v. Record, 177 A.D.2d 763, 764 (3d Dep’t 1991); Chuz v. St. Vincent’s Hosp., 186 A.D.2d 450, 451 (1st Dep’t 1992); Chime v. Sicuranza, 221 A.D.2d 401, 402 (2d Dep’t 1995); Falk v. Anesthesia Assocs. of Jamaica, 228 A.D.2d 326, 329 (1st Dep’t), appeal dismissed without op., 89 N.Y.2d 916 (1996); Gelbard v. Genesee Hosp., 255 A.D.2d 882, 884-85 (4th Dep’t 1998), appeal dismissed, 93 N.Y.2d 916 (1999); Wasserman v. Maimonides Med. Ctr., 268 A.D.2d 425, 426 (2d Dep’t 2000); Giordano v. Victory Mem’l Hosp., 273 A.D.2d 353, 354 (2d Dep’t 2000).
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  26. See, e.g., Wasserman, 268 A.D.2d at 426; Chuz, 186 A.D.2d at 451; Saha, 177 A.D.2d at 765.
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  27. See, e.g., Giordano, 273 A.D.2d at 354; Gelbard, 255 A.D.2d at 884-85; Falk, 228 A.D.2d at 329-30.
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  28. Mason v. Central Suffolk Hosp., 305 A.D.2d 556 (2d Dep’t 2003).
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  29. Id. at 557.
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  30. Id.
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  31. 94 N.Y.2d 87 (1999).
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  32. By relying on Tedeschi and Maas to decide whether a violation of medical staff bylaws can serve as a basis for breach of contract, the Court of Appeals also reaffirmed and reiterated its holdings that college and university guidelines, policies, and procedures also cannot serve as the basis for a damages claim sounding in breach, which should further insulate those institutions from monetary liability in the context of student disciplinary and employment cases relying on a contract theory of recovery.
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  33. See Janda v. Madera Cmty. Hosp., 16 F. Supp. 2d 1181, 1184, 1185 (E.D. Cal. 1998) (noting “the majority of jurisdictions have held that hospital bylaws... are a binding and enforceable contract between the hospital and physicians,” and”[b]y contrast, the minority view is that hospital by-laws do not create a contract per se between the hospital and its medical staff” and collecting cases adopting both views). Kessel v. Mongolia General Hosp., 600 S.E.2d 321, 326 and n.7 (W.Va. 2004) (holding that medical staff bylaws do not constitute a contract, noting the split of authority on the issue, recognizing the majority view that bylaws are a contract and observing that courts adopting the majority view “apply little, if any contract law analysis”); see also Brian Lester, Note, Physician Privileges: Judicial Treatment of the Discharged Physician, 76 Notre Dame L.Rev. 1491, 1492 and n.7 (2001) (noting that “[e]ventually most courts recognized bylaws as a set of en- forceable” and collecting cases representing all views on the issue).
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