Pacific Radiation Oncology, LLC et al v. The Queen's Medical Center et al

Filing 431

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT ON THE COUNTERCLAIM FILED FEBRUARY 25, 2014 [DKT. [175-1]] re 253 Motion for Summary Judgment; re 326 Motion for Leave to Supplement. Signed by JUDGE LESLIE E. KOBAYASHI on 11/30/2014. - Defendants' Motion for Leave to Supplement the Summary Judgment Record with New Material Evidence, filed September 9, 2014,is HEREBY GRANTED; - Plaintiffs' "Mo tion for Summary Judgment on the Counterclaim Filed February 25, 2014 [Dkt. [175-1]]," filed July 28, 2014, is HEREBY GRANTED insofar as this Court GRANTS summary judgment in favor of the PRO Member Physicians as to Counterclaim Count I and in f avor of PRO LLC, PRO Associates, and the PRO Member Physicians as to the portion of Counterclaim Count II based on free-riding;- Plaintiffs' Motion is HEREBY DENIED as to the portion of Counterclaim Count II based on the PRO Member Physician s' self-referral practices; and - Defendants' request for summary judgment pursuant to Fed. R. Civ. P. 56(f)(1) and Local Rule 56.1(i) is HEREBY DENIED. (eps) CERTIFICATE OF SERVICEP articipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

FILED IN THE
UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII

IN THE UNITED STATES DISTRICT COURT

Nov 30, 2014
SUE BEITIA, CLERK

FOR THE DISTRICT OF HAWAII
PACIFIC RADIATION ONCOLOGY,
LLC, a Hawai`i Limited
Liability Corporation, et
al.,

)
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
THE QUEEN’S MEDICAL CENTER, a )
)
Hawai`i Non-Profit
)
Corporation, et al.,
)
)
Defendants.
_____________________________ )

CIVIL NO. 12-00064 LEK-KSC

ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT ON THE
COUNTERCLAIM FILED FEBRUARY 25, 2014 [DKT. 175-1]
On July 28, 2014, Plaintiffs/Counterclaim Defendants
Pacific Radiation Oncology, LLC, a Hawai`i Limited Liability
Corporation (“PRO LLC”), PRO Associates, LLC, a Hawai`i Limited
Liability Corporation (“PRO Associates”),1 John Lederer, M.D.,
Laeton Pang, M.D., Eva Bieniek, M.D., Vincent Brown, M.D.,
Paul DeMare, M.D., and Thanh Huynh, M.D. (all collectively
“Plaintiffs”),2 filed their “Motion for Summary Judgment on the

1

This Court will refer to PRO LLC and PRO Associates
collectively as “the LLCs.”
2

This Court will refer to Drs. Lederer, Pang, Bieniek,
Brown, DeMare, and Huynh collectively as “the PRO Physicians,”
and to Drs. Lederer, Pang, Brown, DeMare, and Huynh collectively
as “the PRO Member Physicians.” Dr. Bieniek is not a member of
PRO LLC, and is not named as a defendant in the Counterclaim.
[Counterclaim, filed 2/25/14 (dkt. no 175-1), at ¶ 7.]

Counterclaim Filed February 25, 2014 [Dkt. 175-1]” (“Motion”).3
[Dkt. no. 253.]

Defendants/Counter Claimants Queen’s Medical

Center, a Hawai`i Non-Profit Corporation (“Queen’s”), Queen’s
Development Corp., a Hawai`i for Profit Corporation (“Queen’s
Corp.”), Noreen D.S.W. Mokuau, William G. Obana, M.D.,
Arthur A. Ushijima, Mark H. Yamakawa, Paula Yoshioka,
Sharlene K. Tsuda, Richard C. Keene, Clinton Yee,
Naleen N. Andrade, M.D., Ernest H. Fukeda, Jr., Robb Ohtani,
M.D., Neil J. Hannahs, Christine M. Gayagas, Peter K. Hanashiro,
Robert K. Nobriga, Eric K. Yeaman, Julia C. Wo,
Caroline Ward Oda, Peter Halford, M.D., Barry Weinman, each
individually and in his or her capacity as Officer and Trustee of
Queen’s Medical Center (collectively “Defendants”),4 filed their
redacted memorandum in opposition to the Motion on
August 25, 2014, and their sealed unredacted memorandum on
September 5, 2014.

[Dkt. nos. 289, 320.]

Plaintiffs filed their

redacted reply on September 2, 2014, and their sealed unredacted
reply on September 10, 2014.

[Dkt. nos. 305, 331.]

This matter came on for hearing on September 15, 2014.
After careful consideration of the Motion, supporting and

3

Plaintiffs filed an errata to the Motion on July 29, 2014.
[Dkt. no. 258.]
4

The Court will refer to the individual defendants, i.e.
all defendants except Queen’s and Queen’s Corp., collectively as
“the Trustee Defendants.”
2

opposing memoranda, and the arguments of counsel, Plaintiffs’
Motion is HEREBY GRANTED IN PART AND DENIED IN PART in that it is
GRANTED as to Counterclaim Count I in favor of the PRO Member
Physicians, and as to the free-riding portion of Counterclaim
Count II in favor of PRO LLC, PRO Associates, and the PRO Member
Physicians, and DENIED in all other respects, as set forth more
fully below.
BACKGROUND
The history of this case is all too familiar to the
parties, and the Court need not repeat it here, except as it may
have bearing on the instant Motion.
On February 25, 2014, Defendants filed their Answer and
Defenses to Amended Complaint for Declaratory and Injunctive
Relief and Damages (“Answer”),5 which included the Counterclaim.
[Dkt. no. 175.]

The Counterclaim asserts the following claims: a

breach of contract claim by the Trustee Defendants against the
PRO Member Physicians (“Counterclaim Count I”); and a claim by
Queen’s alleging unfair methods of competition (“UMOC”), in
violation of Haw. Rev. Stat. § 480-2, against all the LLCs and
the PRO Member Physicians (“Counterclaim Count II”).
Counterclaim Count I alleges that, by bringing the
instant action, the PRO Member Physicians each violated his

5

Plaintiffs filed their Amended Complaint for Declaratory
and Injunctive Relief and for Damages (“Amended Complaint”) on
February 23, 2012. [Dkt. no. 44.]
3

contract with Queen’s in which he agreed to be bound by the
Bylaws of the Medical Staff - Queen’s Medical Center (“the
Bylaws”).6

The Bylaws include a release and immunity from suit

provision, which also includes a covenant not to sue.

The

Trustee Defendants assert that they were intended beneficiaries
of these contracts.

[Counterclaim at ¶¶ 1-4.]

Counterclaim Count II asserts that the PRO Member
Physicians make up PRO Associates, which owns one-third of the
Cancer Center of Hawaii, LLC (“CCH”).

CCH owns and operates two

out-patient radiation oncology facilities, which compete with
Queen’s.

[Id. at ¶¶ 8-10.]

The crux of Counterclaim Count II is

that the PRO Member Physicians improperly used their clinical
privileges at Queen’s, and all the benefits and information
associated therewith, to divert patients from Queen’s to CCHoperated facilities.

It alleges that this constituted a

diversion of Queen’s resources for the PRO Member Physicians’
economic gain.

This caused a detriment to Queen’s economic

interests and violated § 480-2.

[Id. at ¶¶ 12-15.]

In the instant Motion, Plaintiffs ask for summary
judgment in their favor as to both Counterclaim Count I and
Counterclaim Count II.

In their opposition, Defendants submit

6

All citations to the Bylaws refer to the version attached
to Defendants’ Redacted Concise Counterstatement of Facts, filed
8/25/14 (dkt. no. 290) (“Defendants’ CSOF”), as Exhibit 25 to the
Declaration of Claire Wong Black (“Black Declaration”).
4

that this Court should not only deny Plaintiffs’ Motion, but also
award summary judgment in favor of the Trustee Defendants as to
Counterclaim Count I and to Queen’s as to Counterclaim Count II.
DISCUSSION
I.

Motion to Supplement
On September 9, 2014, Defendants filed their Motion for

Leave to Supplement the Summary Judgment Record with New Material
Evidence (“Motion to Supplement”).

[Dkt. no. 326.]

Defendants

ask this Court to consider portions of Marilynn Y. Hata’s
deposition.

[Motion to Supplement, Decl. of Claire Wong Black,

proposed Exh. 34 (Excerpts of 9/4/14 Depo. of Marilynn Y. Hata
(“Defs.’ Excerpts of Hata Depo.”)).]

Plaintiffs filed a

memorandum in opposition to the Motion to Supplement on
September 10, 2014 and another on September 23, 2014.
329, 348.]

[Dkt. nos.

Defendants filed their reply in support of the Motion

to Supplement on October 7, 2014.

[Dkt. no. 364.]

Pursuant to Local Rule 56.1(h), after a party’s
submission of materials with a its concise statement of facts,
“[s]upplemental affidavits and declarations may only be submitted
with leave of court.”

In deciding whether to grant leave to

supplement, this district court considers whether the party
established good cause for the failure to submit the supplemental
documents with its concise statement of facts.

See Painsolvers,

Inc. v. State Farm Mut. Auto. Ins. Co., 732 F. Supp. 2d 1107,
5

1126-27 n.20 (D. Hawai`i 2010) (finding that the plaintiff “has
not established good cause for its failure to timely file this
declaration”).
On August 26, 2014, Plaintiffs served notice of
Ms. Hata’s deposition, and, on August 28, 2014, they served an
amended notice.

[Dkt. nos. 291, 301 (Certificates of Service).]

The deposition took place on September 4, 2014.

Thus, Defendants

had not even received notice of Ms. Hata’s deposition when they
filed their redacted memorandum in opposition to Plaintiffs’
Motion on August 25, 2014.

Ms. Hata is a former employee of

Island Urology, [Defs.’ Excerpts of Hata Depo. at 20,] and she
testified about the referral of Island Urology patients to PRO
Physicians and about the issue of whether they would be treated
at Queen’s or PRO-affiliated facilities.

See, e.g. id. at 20-22.

This Court finds that there is good cause to allow
Defendants to supplement the summary judgment record with
Defendants’ Excerpts of the Hata Deposition.
to Supplement is therefore GRANTED.

Defendants’ Motion

For the sake of

completeness, this Court will also consider Plaintiffs’ Excerpts
of the Hata Deposition.7

7

Defendants submitted further exhibits with their reply in
support of the Motion to Supplement. [Reply in Supp. of Motion
to Supplement, Decl. of Claire Wong Black, Exhs. A-F.] This
Court has only considered Exhibits A through F in deciding
whether to grant the Motion to Supplement. This Court has not
considered in them in ruling on the merits of Plaintiffs’ Motion.
6

This Court now turns to the merits of Plaintiffs’
Motion.
II.

Plaintiffs’ Motion
A.

Counterclaim Count I
In the Motion, Plaintiffs argue that: 1) the Bylaws are

not a contract between Queen’s and the PRO Physicians; and
2) even if the Bylaws are a contract, the filing of this action
did not violate the Bylaws’ immunity provision.
1.

Applicable Law

In ruling on Plaintiffs’ initial motion for a temporary
restraining order and a preliminary injunction, this Court
“concluded . . . that: 1) it has federal question jurisdiction
over Count VII, which alleges that Defendants violated 42 U.S.C.
§ 1320a–7b and that the violation constitutes an actionable claim
under Haw. Rev. Stat. Chapter 480; and 2) it has supplemental
jurisdiction over the remaining claims in the Complaint.”

861 F.

Supp. 2d, 1170, 1183 (D. Hawai`i 2012) (citing 2012 WL 381209, at
*6 (D. Hawai`i Feb. 3, 2012)).8

In Defendants’ appeal from the

Preliminary Injunction Order, the Ninth Circuit held that federal
jurisdiction exists because of the federal due process claim

8

861 F. Supp. 2d 1170 is this Court’s Order Granting in
Part and Denying in Part Plaintiffs’ Motion for Preliminary
Injunction (“Preliminary Injunction Order”), and 2012 WL 381209
is this Court’s Order Granting in Part and Denying in Part
Plaintiffs’ Motion for a Temporary Restraining Order (“TRO
Order”).
7

against Queen’s in Count I.
2014).

555 F. App’x 730, 731 (9th Cr.

Thus, this Court reiterates that it has supplemental

jurisdiction over all of the state law claims in this case,
including Defendants’ claims in the Counterclaim.
“When a district court . . . hears state law claims
based on supplemental jurisdiction, the court applies state
substantive law to the state law claims.”

Mason & Dixon

Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 1060 (9th
Cir. 2011).

This Court will therefore apply Hawai`i case law

regarding contract interpretation to the issues of: whether the
PRO Member Physicians are contractually bound to comply with the
Bylaws; and, if so, what the scope of the immunity provision is.
2.

Whether the Bylaws are Contractual Obligations

When the PRO Member Physicians sought reappointment to
the Queen’s medical staff in 2011, each signed the Queen’s form
Release of Consent, Liability and Practitioners Statement
(“Release Form”) as part of his application.

[Exh. 18, (dkt. no.

322) (“Brown Application”), at 8; Exh. 19 (dkt. no. 322-1)
(“DeMare Application”) at 8; Exh. 20 (dkt. no. 322-2) (“Pang
Application”) at 8; Exh. 22 (dkt. no. 322-3) (“Huynh
Application”) at 8; Exh. 24 (dkt. no. 322-4) (“Lederer
Application”) at 8.]

The form states, in pertinent part:

By applying for renewal of my appointment and
clinical privileges to the Medical Staff at The
Queen’s Medical Center, I:

8

. . . .
2.

Agree to be bound by the terms of the Bylaws
and supporting manuals of the Medical Staff
(Rules and Regulations) and the Hospital
Bylaws and policies as now existing or
hereafter amended . . . .

. . . .
13.

Acknowledge any provisions in Medical Staff
Bylaws for release and immunity from
liability.

See, e.g., Brown Application at 8.
The Release Form expressly identifies the Bylaws and
clearly and unequivocally states that the Bylaws are incorporated
into the signing party’s Release Form.

See Safeway, Inc. v.

Nordic PCL Constr., Inc., 130 Hawai`i 517, 527-28, 312 P.3d 1224,
1234-35 (Ct. App. 2013) (describing analysis of whether another
document has been incorporated by reference into an agreement).
Plaintiffs do not claim that the Bylaws were unavailable to the
PRO Member Physicians.

Further, each of the PRO Member

Physicians acknowledged during his deposition that he agreed to
be bound by the Bylaws when he applied for reappointment.

[Black

Decl., Exh. 14 (Excerpts of 1/28/14 Depo. of Vincent Cook Brown,
M.D. (“Defs.’ Excerpts of Brown Depo.”)) at 32; Exh. 15 (Excerpts
of 1/28/14 Depo. of Paul Arthur DeMare, M.D. (“Defs.’ Excerpts of
DeMare Depo.”)) at 37, 39; Exh. 16 (Excerpts of 3/12/14 Depo. of
Laeton J. Pang, M.D. (“Defs.’ Excerpts of Pang Depo.”)) at 58-59;
Exh. 21 (Excerpts of 7/17/14 Depo. of Thanh Van Huynh, M.D.

9

(“Defs.’ Excerpts of Huynh Depo.”)) at 35; Exh. 23 (Excerpts of
3/12/14 and 3/13/14 Depo. of John L. Lederer, M.D. (“Defs.’
Excerpts of Lederer Depo.”)) at 106.]
This Court finds that there are no disputes of fact as
to this issue.

See Fed. R. Civ. P. 56(a) (stating that a movant

is entitled to summary judgment “if the movant shows that there
is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law”); Miller v. Glenn Miller
Prods., Inc., 454 F.3d 975, 987 (9th Cir. 2006) (“A fact is
material if it could affect the outcome of the suit under the
governing substantive law.”).

This Court therefore concludes

that the Bylaws are incorporated by reference into the Release
Form.

See Safeway, 130 Hawai`i at 527, 312 P.3d at 1234

(“Although it is clear that whether one agreement has
incorporated another has factual components, whether material has
been incorporated presents a question of law.” (citations and
quotation marks omitted)); see also Cho Mark Oriental Food, Ltd.
v. K & K Int’l, 73 Haw. 509, 519, 836 P.2d 1057, 1063 (1992)
(stating that, generally “the construction and legal effect to be
given a contract is a question of law”).

This Court further

concludes that, by signing the Release Form in connection with
his respective application, each of the PRO Member Physicians
agreed to be bound by the Bylaws.

10

Thus, the terms of the Bylaws

are part of the contracts between Queen’s and each of the PRO
Member Physicians.
3.

Scope of the Immunity Provision

The Bylaws state, in pertinent part:
12.3 IMMUNITY FROM LIABILITY
12.3 GRANT OF IMMUNITY AND AUTHORIZATION TO
OBTAIN/RELEASE INFORMATION
By requesting an application and/or applying
for appointment, reappointment, or clinical
privileges, the individual expressly accepts
the conditions set forth in this Section
12.3:
12.3-1

Immunity
To the fullest extent permitted by law,
the individual releases from any and all
liability, extends absolute immunity to,
and agrees not to sue [Queen’s] or the
Board, any member of the Medical Staff
or the Board, their authorized
representatives, and third parties who
provide information for any matter
relating to appointment, reappointment,
clinical privileges, or the individual’s
qualifications for the same. This
immunity covers any actions,
recommendations, reports, statements
communications, and/or disclosures
involving the individual that are made,
taken, or received by [Queen’s], its
authorized agents, or third parties in
the course of credentialing and peer
review activities.

[Bylaws at QMC000052 (emphasis added).]
§ 12.3-1 as “the Immunity Provision.”

11

This Court will refer to

In the Motion, Plaintiffs argue that the scope of the
Immunity Provision is limited to credentialing and peer review.
[Mem. in Supp. of Motion at 11.]
reject that argument.

Defendants urge this Court to

[Mem. in Opp. at 33.]

Defendants’

position emphasizes the “absolute immunity” language, which they
argue prohibits any suit “relating to appointment, reappointment,
clinical privileges, or the individual’s qualifications for the
same.”

Counterclaim Count I asserts that the PRO Member

Physicians breached the covenant not to sue in the Immunity
Provision by filing this action.

[Counterclaim at ¶¶ 2-5.]

This

Court finds that the scope of Immunity Provision is not apparent
from its plain language, and therefore the provision is
ambiguous.

Further, both Plaintiffs’ interpretation of the

Immunity Provision and Defendants’ interpretation are arguably
reasonable.
In considering reasonable interpretations of the
Immunity Provision, this Court must construe the provision
against the drafter - Queen’s - which “would have been in a
better position to know which options were available to
it . . . .”

See Kutkowski v. Princeville Prince Golf Course,

LLC, 129 Hawai`i 350, 360, 300 P.3d 1009, 1019 (2013) (citing
Restatement (Second) of Contracts § 206 (1981); Amfac, Inc. v.
Waikiki Beachcomber Inv. Co., 74 Haw. 85, 110 n.5, 839 P.2d 10,
25 n.5 (1992)).

In Amfac, the Hawai`i Supreme Court noted that

12

“[w]hen the contract has been negotiated between two parties of
equal sophistication and equal bargaining power, the rule of
interpreting ambiguities against the drafter has been held
inapplicable.”

Amfac, 74 Haw. at 110 n.5, 839 P.2d at 25 n.5

(citing Falmouth National Bank v. Ticor Title Ins. Co., 920 F.2d
1058, 1062 (1st Cir. 1990); Missouri Pacific Railroad Co. v.
Kansas Gas & Electric Co., 862 F.2d 796, 800 (10th Cir. 1988)).
It is beyond dispute that the PRO Member Physicians are
educated, sophisticated parties.

However, their agreement to be

bound by the Bylaws is contained in a form release document
prepared by Queen’s.

The PRO Member Physicians could not draft,

negotiate, or bargain the terms in the Release Form and the
Bylaws.

This Court therefore finds that there was unequal

bargaining power between the PRO Member Physicians and Queen’s in
their agreement that the physicians would be bound by the Bylaws.
This Court will apply the rule that ambiguities in the Immunity
Provision - and the Bylaws in general - must be construed against
Queen’s as the drafter of the Release Form and the Bylaws.
The Hawai`i Supreme Court has also recognized that “a
contract should be construed as a whole and its meaning
determined from the entire context and not from any particular
word, phrase, or clause.”

Hawaii Med. Ass’n v. Hawaii Med. Serv.

13

Ass’n, Inc. (“HMA”),9 113 Hawai`i 77, 92, 148 P.3d 1179, 1194
(2006).

This Court must read the Immunity Provision in the

context of the Bylaws as a whole, including the following
provisions:
12.3-5

Legal Actions:
If, notwithstanding this Section, an
individual institutes legal action
challenging any credentialing,
privileging, peer review, or other
action and does not prevail, he or she
shall reimburse [Queen’s] and any member
of the Medical Staff or Board involved
in the action for all costs incurred in
defending such legal action, including
reasonable attorney’s fees and lost
revenues.

. . . .
12.4 ACTIVITIES AND INFORMATION COVERED
12.4-1

ACTIVITIES
The confidentiality and immunity
described by this Article applies to all
acts, communications, proceedings,
interviews, reports, records, minutes,
forms, memoranda, statements,
recommendations, findings, evaluations,
opinions, conclusions or disclosures
performed or made in connection with
this or any other health care facility’s
or organization’s activities concerning
but not limited to:
A.

Applications appointment, or
clinical privileges.

9

This Order refers to Hawaii Medical Services Association,
Inc. as “HMSA.”
14

B.

Periodic reappraisals for
reappointment and clinical
privileges.

C.

Corrective or disciplinary action.

D.

Hearings and appellate reviews.

E.

Quality assurance program
activities.

F.

Utilization and claims reviews.

G.

Profiles and profile analysis.

H.

Malpractice loss prevention.

I.

Other Hospital and staff activities
related to monitoring and
maintaining quality patient care
and appropriate professional
conduct.

[Bylaws at QMC000052-53.]
Reading the Immunity Provision in the context of the
entire Bylaws, including §§ 12.3-5 and 12-4.1, this Court
concludes that the Immunity Provision is not limited to
credentialing and peer review.

Even construing the Immunity

Provisions and other related provisions against Queen’s,
Plaintiffs’ interpretation of the Immunity Provision is too
narrow.

This Court concludes that, in addition to credentialing

and peer review, the Immunity Provision applies to the clinical
privileging process.
While Plaintiffs’ interpretation is too narrow,
Defendants’ is overly broad.

Defendants would have this Court

interpret the Immunity Provision to bar all civil actions related
15

to privileging decisions, even where, as in the instant case, the
privileging decision allegedly violated Queen’s own Bylaws, state
law, and federal law.

First, Hawai`i courts have recognized that

“a court may refuse to enforce contracts that violate law or
public policy” and “‘[i]llegal contracts are generally
unenforcible [sic].’”

Inlandboatmen’s Union of the Pac., Hawai`i

Region, Marine Div. of Int’l Longshoremen’s & Warehousemen’s
Union v. Sause Bros., Inc., 77 Hawai`i 187, 194, 881 P.2d 1255,
1262 (Ct. App. 1994) (some alterations in Inlandboatmen’s Union)
(some citations omitted) (quoting Wilson v. Kealakekua Ranch, 57
Haw. 124, 128, 551 P.2d 525, 528 (1976)).
Plaintiffs’ Complaint alleges that, in deciding to
terminate the PRO Physicians’ clinical privileges, Queen’s
violated “the procedural safeguards concerning the termination of
privileges contained within” the Bylaws.
¶ 34.]

[Amended Complaint at

If the Immunity Provision barred the PRO Physicians from

bringing any civil actions relating to privileging decisions,
including claims that Queen’s failed to provide procedural
safeguards guaranteed by the Bylaws, Plaintiffs would have no
recourse to hold Queen’s accountable.

Defendants’ interpretation

of the Immunity Provision would essentially render the procedural
safeguard provisions meaningless.

Such an interpretation is

contrary to the principles of contract interpretation under
Hawai`i law.

See Stanford Carr Dev. Corp. v. Unity House, Inc.,

16

111 Hawai`i 286, 297, 141 P.3d 459, 470 (2006) (“We have long
expressed our disapproval of interpreting a contract such that
any provision be rendered meaningless.”).

Defendants have cited

some case law from other jurisdictions in which the courts
adopted interpretations of immunity provisions similar to
Defendants’ interpretation in the instant case, but, as these
rulings are inconsistent with Hawai`i case law, this court
declines to follow such case law.
Finally, this Court notes that § 12.4-1 states, in
pertinent part: “If . . . an individual institutes legal action
challenging any credentialing, privileging, peer review, or other
action and does not prevail . . . .”

This provision contemplates

that: 1) legal actions regarding privileging decisions may be
filed; and 2) the plaintiffs may prevail.

Thus, § 12.4-1 does

not support Defendants’ interpretation of the Immunity Provision
as prohibiting the filing of any action relating to privileging
decisions.
For these reasons, and in particular because this Court
must construe any ambiguities against Queen’s, this Court rejects
Defendants’ interpretation of the Immunity Provision.

Reading

the Immunity Provision in the context of the entire Bylaws, and
in particular in conjunction with §§ 12.3-5 and 12.4-1, this
Court concludes that the Immunity Provision only prohibits suits
based on the provision of information - including information

17

regarding an individual’s qualifications - in the appointment,
reappointment, privileging, credentialing, peer review,
disciplinary and other processes listed in the relevant
sections.10
In light of this Court’s interpretation of the Immunity
Provision, this Court CONCLUDES that the PRO Member Physicians
did not violate the Immunity Provision in bringing their claims
in the instant case.

This Court therefore GRANTS Plaintiffs’

Motion as to Counterclaim Count I.
B.

Counterclaim Count II
Plaintiffs argue that they are entitled to summary

judgment as to Counterclaim Count II because Queen’s has not
alleged, and cannot prove, that PRO LLC, PRO Associates, and the
PRO Member Physicians caused a negative effect on competition,
and Queen’s suffered an anti-competitive injury.

Further, to the

extent that Counterclaim Count II relies upon an alleged unfair
or deceptive acts or practices (“UDAP”) claim, Plaintiffs argue

10

For example, in connection with Plaintiffs’ motion for a
preliminary injunction, [filed 1/27/12 (dkt. nos. 1-3 to 1-19),]
Defendants submitted an affidavit by Peter Bryant-Greenwood,
M.D., who was the Chairman of Queen’s Credentialing Committee for
physicians and who was part of the task force which ultimately
recommended that Queen’s radiation oncology department transition
to a closed-department model. He described complaints that he
had about the PRO Physicians’ competency during the task force’s
investigation. Preliminary Injunction Order, 861 F. Supp. 2d at
1174-75 & nn.6-7. The Immunity Provision prohibits the PRO
Physicians from suing Dr. Greenwood, for example, for defamation
based on what he presented to the task force.
18

that Queen’s lacks standing to pursue that claim because it is
not a consumer.
Queen’s brings Counterclaim Count II pursuant to Haw.
Rev. Stat. § 480-2, which states, in pertinent part:
(a) Unfair methods of competition and unfair or
deceptive acts or practices in the conduct of any
trade or commerce are unlawful.
. . . .
(d) No person other than a consumer, the attorney
general or the director of the office of consumer
protection may bring an action based upon unfair
or deceptive acts or practices declared unlawful
by this section.
(e) Any person may bring an action based on unfair
methods of competition declared unlawful by this
section.
Queen’s is a “person” for purposes of Haw. Rev. Stat. Chapter
480, but it is not a “consumer.”

11

See Haw. Rev. Stat. § 480-1.11

Section 480-1 states, in pertinent part:
“Consumer” means a natural person who, primarily
for personal, family, or household purposes,
purchases, attempts to purchase, or is solicited
to purchase goods or services or who commits
money, property, or services in a personal
investment.
. . . .
“Person” or “persons” includes individuals,
corporations, firms, trusts, partnerships, limited
partnerships, limited liability partnerships,
limited liability limited partnerships, limited
liability companies, and incorporated or
unincorporated associations, existing under or
(continued...)
19

Thus, Queen’s can bring a UMOC claim pursuant to § 480-2(e), but
it cannot bring a UDAP claim pursuant to § 480-2(d).

This Court,

however, does not construe Counterclaim Count II as alleging a
UDAP claim.

Defendants’ argument that the conduct of PRO LLC,

PRO Associates, and the PRO Member Physicians was unfair and
deceptive is merely a component of their allegation of anticompetitive conduct.

See HMA, 113 Hawai`i at 113, 148 P.3d at

1215 (“[W]e hold that any person may bring a claim of unfair
methods of competition based upon conduct that could also support
a claim of unfair or deceptive acts or practices as long as the
nature of the competition is sufficiently alleged in the
complaint.”).
The Hawai`i Supreme Court has stated:
Davis explained that in order to state a
cause of action and recover money damages under
HRS § 480–2(e), a plaintiff must first satisfy the
requirements of HRS § 480–13. Davis [v. Four
Seasons Hotel Ltd.], 122 Hawai`i [423,] 434, 228
P.3d [303,] 314 [(2010)] (citation omitted). “HRS
§ 480–13(a) provides that, with limited
exceptions, any person who is injured in the
person’s business or property by reason of
anything forbidden or declared unlawful by
[chapter 480]:(1) [m]ay sue for damages . . . ;
and (2) [m]ay bring proceedings to enjoin the
unlawful practices[.]” Id. Davis noted,
therefore, that a claim under HRS § 480–13 has
three elements essential to recovery: (1) a
violation of HRS chapter 480; (2) which causes an

11

(...continued)
authorized by the laws of this State, or any other
state, or any foreign country.
20

injury to the plaintiff’s business or property;
and (3) proof of the amount of damages. Davis,
122 Hawai`i at 435, 228 P.3d at 315 (citations
omitted). . . .
With respect to the second element, Davis
explained that this element includes two parts.
First, a plaintiff is required to allege an injury
in fact to his or her “business or
property.” . . .
Second, a plaintiff is required to allege the
“nature of the competition.” . . . We explained
that this means that the plaintiff must allege
that “he or she was harmed as a result of actions
of the defendant that negatively affect
competition.” Davis, 122 Hawai`i at 438, 228 P.3d
at 318. The plaintiff was further required to
allege “how [Defendants] conduct [would]
negatively affect competition.” Davis, 122
Hawai`i at 437–38, 228 P.3d at 317–18.
Gurrobat v. HTH Corp., 133 Hawai`i 1, 21, 323 P.3d 792, 812
(2014) (some alterations in Gurrobat).
As to the first element, a violation of Chapter 480,
Defendants allege two theories - “free-riding” and improper selfreferral practices.
1.

Free-Riding

Defendants describe the concept of free-riding as:
Free riding on another person’s market
achievements can be defined as any act that a
competitor or another market participant
understakes with the intention of directly
exploiting another person’s industrial or
commercial achievement for his own business
purposes . . . [i]n that sense, free riding
is the broadest form of competition by
imitation.
Protection Against Unfair Competition: Analysis of
the Present World Situation, World Intellectual
21

Property Organization (WIPO) (Geneva, 1994).
“Free riding occurs when one firm benefits from
the actions of another without paying for it.”
Dennis Carlton and Jeffery Perloff, Modern
Industrial Organization, (3d. Ed. 2000) p. 347.
[Mem. in Opp. at 14 (alteration in Mem. in Opp.) (some citations
omitted).]

Defendants have identified some cases recognizing

that businesses have a legitimate interest in preventing freeriding.

[Id. at 16-17 (citing Cont’l T.V., Inc. v. GTE Sylvania

Inc., 433 U.S. 36, 55, 97 S. Ct. 2549, 2560 (1977); Alvord-Polk,
Inc. v. F. Schumacher & Co., 37 F.3d 996, 1010-11 (3d Cir. 1994);
Morris Commc’ns Corp. v. PGA Tour, Inc., 364 F.3d 1288, 1298
(1lth Cir. 2004)).]

Defendants, however, have not identified any

statute or case law establishing that free-riding is a violation
of Chapter 480, and this Court has not found any.
This Court has recognized that:
When interpreting state law, a federal court is
bound by the decisions of a state’s highest court.
Trishan Air, Inc. v. Fed. Ins. Co., 635 F.3d 422,
427 (9th Cir. 2011). In the absence of a
governing state decision, a federal court attempts
to predict how the highest state court would
decide the issue, using intermediate appellate
court decisions, decisions from other
jurisdictions, statutes, treatises, and
restatements as guidance. Id.; see also
Burlington Ins. Co. v. Oceanic Design & Constr.,
Inc., 383 F.3d 940, 944 (9th Cir. 2004) (“To the
extent this case raises issues of first
impression, our court, sitting in diversity, must
use its best judgment to predict how the Hawai`i
Supreme Court would decide the issue.” (quotation
and brackets omitted)).
Evanston Ins. Co. v. Nagano, 891 F. Supp. 2d 1179, 1189 (D.

22

Hawai`i 2012) (some citations omitted).

This Court has not found

any indication in Hawai`i case law that the Hawai`i Supreme Court
would recognize free-riding as a violation of Haw. Rev. Stat.
Chapter 480.

This Court therefore predicts that the Hawai`i

Supreme Court would not recognize a Chapter 480 claim based on
free-riding, and this Court CONCLUDES that Counterclaim Count II
fails as a matter of law to the extent that Defendants’ UMOC
claim is based on free-riding.

Plaintiffs’ Motion is GRANTED as

to the portion of Counterclaim Count II based on free-riding.
2.

Self-referral Practices

Defendants also argue that the PRO Member Physicians’
self-referral practices constitute unfair methods of
competition.12
There is undisputed evidence that the PRO Physicians
frequently referred patients who they initially saw at Queen’s to
CCH facilities.13
78.

See, e.g., Defs.’ Excerpts of DeMare Depo. at

The PRO Physicians characterize this practice as merely

providing their patients with choices or alternatives.

See,

e.g., Defs.’ Excerpts of DeMare Depo. at 80-82; Defs.’ Excerpts

12

Defendants describe self-referral as “the practice by
which a physician suggests patients should seek treatment at a
facility in which he/she has an ownership interest.” [Mem. in
Opp. at 19.]
13

Although all six of the PRO Physicians apparently had the
same referral practices, Dr. Bieniek is not a member of PRO and
is not named as a defendant in Counterclaim Count II.
23

of Lederer Depo. at 159-60.

Defendants argue that the PRO Member

Physicians’ referral practice violated Chapter 480 because they
failed to provide the patients with prior written disclosures
stating that they were referring the patients to a facility where
they have an ownership interest.

Defendants contend that the

failure to provide such written disclosures, which must be signed
by both the referring physician and the patient prior to the
referral, violates Haw. Rev. Stat. 431:10C-308.7.
Section 431:10C-308.7 states, in pertinent part:
(c) No health care provider shall refer, for any
service or treatment authorized under this
chapter, a patient to any entity in which the
referring provider has a financial interest unless
the referring provider has disclosed that
financial interest to the patient.
For the purposes of this section “financial
interest” shall mean an ownership or investment
interest through debt, equity, or any other means.
“Financial interest” does not refer to salary or
other compensation paid to physicians by a health
maintenance organization, or any compensation
arrangement involving payment by a group practice
which contracts with a health maintenance
organization to a physician in the same group
practice or entity affiliated with the health
maintenance organization for services provided to
a member of the health maintenance organization.
(d) The health care provider shall make the
disclosure required by this section in advance and
in writing, and shall obtain the signature of the
patient and retain the disclosure form for a
period of two years. The health care provider
shall include in the disclosure a statement
indicating that the patient is free to choose a
different health care provider.
Article 10C governs motor vehicle insurance, but Defendants argue
24

that § 431:10C-308.7 applies to the PRO Member Physicians’ selfreferrals because section (b) states “for any services or
treatment authorized under this chapter” and Chapter 431 is the
Insurance Code.

Defendants, however, have not cited any case law

supporting their argument that § 431:10C-308.7 applies outside of
the context of motor vehicle insurance.
This Court has not found any case law from the Hawai`i
Supreme Court, or the Intermediate Court of Appeals of Hawai`i
(“ICA”), supporting Defendants’ position that § 431:10C-308.7
applies in all situations when the Insurance Code applies.

This

Court must therefore predict how the Hawai`i Supreme Court would
decide this issue.

This Court has not found any case law from

the Hawai`i Supreme Court or the ICA applying any provision of
Article 10C outside of the context of motor vehicle insurance.
Further, the Insurance Code is voluminous, containing more than
twenty articles.

It defies logic to believe that the legislature

would have placed a disclosure requirement in the article titled
Motor Vehicle Insurance if it intended the requirement to apply
to all treatment and services by health care providers under the
Insurance Code.

If that was the legislature’s intent, it could

have placed the requirement in one of the articles with general
applicability, such as Article 3 (Insurers General Requirements)
or Article 10 (Insurance Contracts Generally).

The only logical

interpretation of § 431:10C-308.7 is that it is limited to the

25

context of motor vehicle insurance, but health care providers
giving referrals in that context must make the required
disclosure for any service or treatment authorized under the
Insurance Code.

See Kinkaid v. Bd. of Review of City & Cnty. of

Honolulu, 106 Hawai`i 318, 323, 104 P.3d 905, 910 (2004) (“the
legislature must be presumed not to intend an absurd result, such
that legislation will be construed to avoid, if possible,
inconsistency, contradiction, and illogicality” (brackets,
citations, and internal quotation marks omitted)).

This Court

therefore predicts that the Hawai`i Supreme Court would reject
Defendants’ suggested interpretation of § 431:10C-308.7 because
it is illogical and is not supported by any prior decisions in
the Hawai`i state courts.
Defendants have not presented any evidence which
suggests that the PRO Member Physicians were treating any of the
patients at issue in this case in the context of motor vehicle
insurance.

This Court therefore concludes that § 431:10C-308.7

does not apply in this case, and Defendants cannot base their
UMOC claim on the alleged failure to comply with the disclosure
requirements therein.
Defendants also argue that, apart from the argument
regarding § 431:10C-308.7, the PRO Member Physicians’ referral
practices were unfair and deceptive and therefore violated
Chapter 480.

Plaintiffs state that all of the patients at issue

26

received written disclosures about the CCH ownership when they
went to a CCH facility for the first time.
maintained in the patients’ files at CCH.

The disclosures are
[Defs.’ Excerpts of

Lederer Depo. at 73-74; Pltfs.’ Concise Counterstatement of
Additional Material Facts in Supp. of Motion, filed 9/2/14 (dkt.
no. 306) (“Pltfs.’ Reply CSOF”), Decl. of Mark S. Davis (“Davis
Reply Decl.”), Exh. Z (Pltfs.’ Excerpts of 7/17/14 Depo. of Paul
Arthur DeMare, M.D.) at 25-26; Pltfs.’ Reply CSOF, Decl. of Thanh
Huynh, M.D., Exh. X (CCH disclosure form).]

Defendants’ position

is that the PRO Member Physicians withheld information regarding
their ownership interest in the CCH facilities that they referred
patients to until after the patients were already at the facility
for treatment.

Defendants contend that the failure to disclose

that information manipulated patients’ choices.
In HMA, the Hawai`i Supreme Court stated:
if HMSA engages in acts or practices that impede
or interfere with physicians’ ability to provide
effective healthcare services to their patients
and/or create incentives for patients to look
elsewhere for medical services — that is, to other
participating physicians who may be reluctant to
challenge HMSA or to non-participating physicians
— such acts or practices can, if proven,
constitute unfair methods of competition.
113 Hawai`i at 112-13, 148 P.3d at 1214-15; see also Gurrobat,
133 Hawai`i at 22, 323 P.3d at 813 (“similar to HMA, plaintiffs
may prove how a defendant’s conduct negatively affects
competition by showing that defendant’s conduct enables the

27

defendant to create incentives for customers to purchase banquet
services from the defendant instead of competitors who did not
engage in the unlawful conduct”).
In the instant case, when a PRO Member Physician
referred a patient - who he initially saw at Queen’s - to a CCH
facility, the patient had a choice between accepting the referral
to the CCH facility or rejecting the referral and being treated
at Queen’s.

Defendants contend that the referring physician’s

ownership interest in the CCH facility is a factor that the
patient would consider in making that decision.

However, by

failing to disclose his ownership interest in the CCH facility
until the referred patient has arrived at the CCH facility for
treatment, the PRO Member Physician deprived the patient of the
opportunity to make a meaningful decision.

Even if the patient

objected to the PRO Member Physician’s ownership interest in the
referral facility, the patient is unlikely to refuse the referral
at that point because he has already scheduled and arrived at the
CCH facility for treatment.

Defendants’ position is that a

patient has an incentive to chose treatment at a facility where
his physician does not have an ownership interest over treatment
at a facility where his physician does have an ownership
interest.

Defendants contend that, by failing to disclose their

ownership interests in CCH prior to referral, the PRO Member
Physicians improperly eliminate that incentive.

28

This Court finds that such conduct could possibly be
deceptive.

See, e.g., Haw. Rev. Stat. § 481A-3(a).14

Thus,

Defendants can base a UMOC claim on the PRO Member Physicians’
allegedly deceptive self-referral practice if they can prove the
nature of the competition.
at 1215.

See HMA, 113 Hawai`i at 113, 148 P.3d

Plaintiffs do not dispute that Queen’s and PRO are

“active competitors in the market for radiation oncology
services.” [Reply at 9.]

Defendants have submitted some evidence

that patients were confused and there were misunderstandings
because of the PRO Physicians’ improper self-referrals.

See

Defs.’ CSOF, Decl. of Darlena Chadwick (“Chadwick Decl.”), Exh. 7
(email dated 9/9/11 from Darlena Chadwick to Virginia Walker
regarding complaints by PRO Physicians’ patients);15 Defs.’
Excerpts of Hata Depo. at 21-22, 26-27.

14

Defendants have also

Section 481A-3(a) states, in pertinent part:
A person engages in a deceptive trade practice
when, in the course of the person’s business,
vocation, or occupation, the person:
. . . .
(3) Causes likelihood of confusion or of
misunderstanding as to affiliation,
connection, or association with, or
certification by, another[.]

15

Darlena Chadwick is the Vice President of Patient Care at
Queen’s. [Chadwick Decl. at ¶ 2.] Virginia Walker is the
Director of Cancer Center, Women’s Health, & Imaging Services at
Queen’s. [Id., Exh. 6 at 1.]
29

asserted that Queen’s lost an estimated $4.8 million in gross
revenue as a result of the PRO Physicians’ referral practices.
[Defs.’ CSOF at Additional Material Facts ¶ 14 (citing Chadwick
Decl., Exh. 6 (email dated 7/1/11 from Virginia Walker to Darlena
Chadwick regarding radiation therapy patients transferred)).]
Plaintiffs contest the admissibility and reliability of
Defendants’ evidence.

See, e.g., Pltfs.’ 9/10/14 Mem. in Opp. to

Motion to Supplement at 1-2; Pltfs.’ Reply CSOF at ¶ 14.

In

reviewing Plaintiffs’ Motion and determining whether there is a
genuine issue of material fact as to Counterclaim Count II, this
Court must view the current record in the light most favorable to
Defendants.

See Crowley v. Bannister, 734 F.3d 967, 976 (9th

Cir. 2013) (“We review a grant of summary judgment de novo and
must determine, viewing the facts in the light most favorable to
the nonmoving party, whether there are any genuine issues of
material fact and whether the district court correctly applied
the relevant substantive law.” (citations and quotation marks
omitted)).

This Court finds that Defendants’ evidence is

sufficient to raise a genuine dispute of material fact as to the
issues of whether: the PRO Member Physicians’ self-referral
practice was an unfair and deceptive practice; whether their
actions, and the actions of PRO LLC and PRO Associates,
negatively affected competition; and whether Queen’s was harmed
as a result.

Insofar as there are genuine disputes of material

30

fact, Plaintiffs are not entitled to summary judgment as to
Counterclaim Count II.

Plaintiffs’ Motion is therefore DENIED as

to Counterclaim Count II.
III. Defendants’ Request for Summary Judgment
Defendants ask this Court to award summary judgment in
their favor as to both counts of the Counterclaim pursuant to
Fed. R. Civ. P. 56(f)(1) and Local Rule 56.1(i).

Insofar as this

Court has granted summary judgment in favor of Plaintiffs as to
Counterclaim Count I, Defendant’s request is DENIED as to that
count.
Rule 56(f) states: “After giving notice and a
reasonable time to respond, the court may: (1) grant summary
judgment for a nonmovant[.]”

Similarly, Local Rule 56.1(i)

states:
If a party moves for summary judgment and the
record establishes as a matter of law that another
party is entitled to summary judgment against the
moving party, the court, in the court’s
discretion, may enter summary judgment against the
moving party after providing that party with oral
or written notice and an opportunity to be heard.
“[I]f an issue is fully and fairly ventilated by the parties’
summary judgment briefing and there is no evidence from which a
jury could reasonably decide that issue in the movant’s favor,
then summary judgment on that issue may properly be granted
against the movant.”

Barnett v. Lincoln Nat’l Life Ins. Co., No.

CV–12–2160–PHX–SMM, 2014 WL 4259482, at *5 (D. Ariz. Aug. 27,

31

2014). “Grants of summary judgment to a nonmoving party, however,
are ‘generally disfavored, because they risk depriving a losing
party of adequate notice and opportunity to oppose summary
judgment.’”

Apple, Inc. v. Samsung Elecs. Co., Case No.:

12–CV–00630–LHK, 2014 WL 252045, at *15 n.9 (N.D. Cal. Jan. 21,
2014) (quoting Mikkelsen Graphic Engineering, Inc. v. Zund Am.,
Inc., ––– Fed. Appx. –––, 2013 WL 4269406, at *7 (Fed. Cir. Aug.
16, 2013)).
In light of the genuine issues of material fact
described supra Section II.B.2., Defendants have not established,
as to Counterclaim Count II, that there is “no evidence from
which a jury could reasonably decide” the claim in Plaintiffs’
favor.

This Court therefore DENIES Defendants’ request for

summary judgment pursuant to Rule 56(f)(1) and Local Rule 56.1(i)
as to Counterclaim Count II.
CONCLUSION
On the basis of the foregoing, this Court rules as
follows:
-Defendants’ Motion for Leave to Supplement the Summary Judgment
Record with New Material Evidence, filed September 9, 2014,
is HEREBY GRANTED;
-Plaintiffs’ “Motion for Summary Judgment on the Counterclaim
Filed February 25, 2014 [Dkt. 175-1],” filed July 28, 2014,
is HEREBY GRANTED insofar as this Court GRANTS summary
judgment in favor of the PRO Member Physicians as to
Counterclaim Count I and in favor of PRO LLC, PRO
Associates, and the PRO Member Physicians as to the portion
of Counterclaim Count II based on free-riding;

32

-Plaintiffs’ Motion is HEREBY DENIED as to the portion of
Counterclaim Count II based on the PRO Member Physicians’
self-referral practices; and
-Defendants’ request for summary judgment pursuant to Fed. R.
Civ. P. 56(f)(1) and Local Rule 56.1(i) is HEREBY DENIED.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, November 30, 2014.

/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

PACIFIC RADIATION ONCOLOGY, LLC, ET AL. VS. THE QUEEN’S MEDICAL
CENTER, ET AL.; CIVIL 12-00064 LEK-KSC; ORDER GRANTING IN PART
AND DENYING IN PART PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT ON
THE COUNTERCLAIM FILED FEBRUARY 25, 2014 [DKT. 175-1]

33