Sherr v. HealthEast Care System et al
MEMORANDUM OPINION AND ORDER granting 24 Defendants HealthEast Care System, Dr. Margaret Wallenfriedman, Dr. Mary Beth Dunn, Dr. Richard Gregory, and Dr. Stephen Kolar's Motion for Partial Judgment on the Pleadings; granting 28 Defendants CentraCare Health, Dr. Jerone D. Kennedy, and Archie Defillo's Motion for Judgment on the Pleadings (Written Opinion). Signed by Judge Ann D. Montgomery on 06/30/2017. (TLU)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Dr. Gregory Sherr,
Civil No. 16-3075 ADM/LIB
HealthEast Care System, CentraCare Health,
Dr. Margaret Wallenfriedman, Dr. Mary Beth Dunn,
Dr. Richard Gregory, Dr. Stephen Kolar,
Dr. Jerone D. Kennedy, and Archie Defillo,
Lawrence P. Schaefer, Esq., and Peter Christian, Esq., Schaefer Halleen, LLC, Minneapolis,
MN, on behalf of Plaintiff.
Daniel Falknor, Esq., and William R. Stoeri, Esq., Dorsey & Whitney LLP, Minneapolis, MN,
on behalf of Defendants HealthEast Care System, Dr. Margaret Wallenfriedman, Dr. Mary Beth
Dunn, Dr. Richard Gregory, and Dr. Stephen Kolar.
John L. Greer, Esq., Hughes Mathews Greer, P.A., St. Cloud, MN, on behalf of Defendants
CentraCare Health, Dr. Jerone D. Kennedy, and Archie Defillo.
On April 11, 2017, the undersigned United States District Judge heard oral argument on
Defendants HealthEast Care System (“HealthEast”), Dr. Margaret Wallenfriedman (“Dr.
Wallenfriedman”), Dr. Mary Beth Dunn (“Dr. Dunn”), Dr. Richard Gregory (“Dr. Gregory”),
and Dr. Stephen Kolar’s (“Dr. Kolar”) (collectively, the “HealthEast Defendants”) Motion for
Partial Judgment on the Pleadings [Docket No. 24] and Defendants CentraCare Health
(“CentraCare”), Dr. Jerone D. Kennedy (“Dr. Kennedy”), and Archie Defillo’s (“Defillo”)
(collectively, the “CentraCare Defendants”) Motion for Judgment on the Pleadings [Docket No.
28]. Plaintiff Dr. Gregory Sherr (“Dr. Sherr”) opposes the Motions. For the reasons discussed
below, the Motions are granted.
Dr. Sherr, a neurosurgeon, alleges that Defendants conspired to eliminate him as a
competitor for neurosurgery patients in both the Minneapolis-St. Paul, Minnesota (“Twin
Cities”) and the St. Cloud, Minnesota markets. First Am. Compl. (“FAC”) [Docket No. 15] ¶ 3.
Dr. Sherr alleges that Defendants colluded to initiate complaints against him during HealthEast’s
physician peer review process and improperly secured a summary suspension of his privileges at
St. Joseph’s Hospital (“SJH”), a HealthEast hospital in St. Paul. Id. ¶¶ 3, 8, 47, 54, 68, 73.
Within days of the summary suspension, Defendants allegedly spread word to the tight-knit
neurosurgery community of Sherr’s suspension, destroying his reputation in Minnesota and
forcing him to move to another state to continue his career. Id. ¶¶ 4, 76, 77, 82–83.
Dr. Sherr asserts the following claims: breach of peer review confidentiality under Minn.
Stat. § 145.64; common law invasion of privacy; defamation; tortious interference with
prospective economic advantage; tortious interference with contract; and violation of federal and
state antitrust statutes. Defendants move for judgment on the pleadings as to the breach of peer
review confidentiality claim, the invasion of privacy claim, and all antitrust claims. The
remaining claims survive.
All facts are taken from Sherr’s First Amended Complaint [Docket No. 15] and are
assumed true. Poehl v. Countrywide Home Loans, Inc., 528 F.3d 1093, 1096 (8th Cir. 2008).
Dr. Sherr is a Florida resident and licensed neurosurgeon specializing in treating highrisk patients with poor self-care histories. FAC ¶¶ 19, 25.
2. HealthEast Defendants
HealthEast is a non-profit health care provider and hospital management company
headquartered in St. Paul, Minnesota. Id. ¶ 8. HealthEast owns four hospitals including SJH.
Id. Drs. Wallenfriedman, Dunn, and Gregory are Minnesota residents and licensed
neurosurgeons employed at HealthEast. Id. ¶¶ 10–12. Dr. Kolar is a Minnesota resident and
licensed internal medicine physician who served as HealthEast’s Senior Vice President and
Chief Medical Officer in 2015. Id. ¶ 13.
3. CentraCare Defendants
CentraCare is a non-profit health care provider headquartered in St. Cloud, Minnesota
with locations throughout central Minnesota. Id. ¶ 9. CentraCare owns and operates six
hospitals including Saint Cloud Hospital (“SCH”). Id. Dr. Kennedy is a Minnesota resident and
licensed neurosurgeon employed at CentraCare. Id. ¶ 14. Defillo is Minnesota resident and an
administrator at CentraCare. Id. ¶ 15. He serves as the Clinical Director of Neurosciences at
B. Factual Background
1. Dr. Sherr Begins Neurosurgery Career
Dr. Sherr graduated from medical school in 2004, completed a neurosurgery fellowship
and residency in 2010, and joined Central Minnesota Neurosciences (“CMN”), an independent
neurosurgery practice serving patients in the St. Cloud area, in 2011. Id. ¶¶ 19–20. He was
granted privileges to practice as an attending physician SCH in St. Cloud and at SJH in St. Paul.
Id. ¶ 20. Dr. Sherr remained with CMN until late December 2014, when CMN was purchased by
CentraCare. Id. ¶¶ 23–24.
2. Dr. Sherr Joins Minnesota Spine & Brain Institute and Opens St. Cloud Clinic
In January 2015, Dr. Sherr joined the Midwest Spine & Brain Institute (“MSBI”), which
was known as the Midwest Spine Institute until Dr. Sherr was hired and the practice was
expanded to include cranial neurosurgery. Id. ¶¶ 26–27. At the time Dr. Sherr was hired, MSBI
operated clinics in Apple Valley, Burnsville, Elk River, Golden Valley, Maple Grove,
Maplewood, Minnetonka, Princeton, and St. Anthony, Minnesota as well as in New Richmond
and St. Croix Falls, Wisconsin. Id. ¶ 28.
Upon joining MSBI, Dr. Sherr opened a MSBI neurosurgery clinic in St. Cloud, two
blocks away from SCH. Id. ¶ 37. He staffed the St. Cloud clinic with his former administrative
team from CMN and added a neurosurgeon, Dr. David Chang. Id. ¶¶ 35, 37, 39. The group was
well connected and familiar with the patient base and referral sources in the St. Cloud area, and
the clinic was soon operating very successfully. Id. ¶ 37.
During the 15 months that Dr. Sherr practiced with MSBI, he maintained privileges at
numerous hospitals, including SCH in St. Cloud and SJH, Fairview Southdale, North Memorial
Medical Center, and United Hospital in the Twin Cities. Id. ¶ 29. He performed approximately
500 surgical cases during this time period, including approximately 140 surgeries at SJH. Id.
¶ 30. The majority of the surgeries were complex reconstructive spine surgeries, often for low
income, high-risk patients struggling with obesity, poor health habits, or other conditions such as
3. Dr. Sherr and MSBI Compete with CentraCare, HealthEast
Dr. Sherr alleges that the opening of the MSBI St. Cloud clinic posed a significant threat
to CentraCare and its ability to attract neurosurgery patients at SCH. Id. ¶ 39. According to Dr.
Sherr, Dr. Kennedy and Defillo were “deeply disturbed by the establishment of the successful
MSBI Neurosurgery Clinic two blocks from SCH, which was dramatically affecting revenues for
neurosurgery practice at SCH.” Id. ¶ 44. Dr. Sherr also alleges that MSBI’s addition of Drs.
Sherr and Chang to its neurosurgery staff threatened HealthEast’s ability to attract and retain the
majority of neurosurgery patients who were treated at SJH in St. Paul. Id. ¶ 39.
In February 2015, Drs. Wallenfriedman, Dunn, and Gregory moved their neurosurgery
practice from United Hospital, where they had practiced together for more than ten years, to
HealthEast, where they became known as the “HealthEast Neuro Group.” Id. ¶¶ 33, 41–42. In
negotiating this transition, the group initially stated that they would not move their practice to
HealthEast unless HealthEast discontinued all use of MSBI physicians for neurosurgery and
spine care and removed any MSBI clinic presence from HealthEast. Id. ¶ 42. HealthEast
executives denied this request but asked MSBI to agree that MSBI physicians would no longer
be “on call” in the SJH and St. Joseph’s emergency rooms for neuro or spine cases. Id. ¶ 43.
HealthEast also asked MSBI to agree that MSBI physicians would not perform “elective
procedures” at HealthEast facilities, but MSBI refused. Id. Although Drs. Wallenfriedman,
Dunn, and Gregory were unable to get HealthEast to agree to all of their demands, the group
joined HealthEast based on assurances that HealthEast would not make neurosurgery referrals to
4. Defendants Allegedly Conspire to Eliminate Dr. Sherr and MSBI as Competitors
Soon after joining HealthEast, the HealthEast Neuro Group “began a concerted attack . . .
to eliminate MSBI neurosurgeons from practicing at HealthEast.” Id. ¶ 44. Dr. Sherr alleges
“[u]pon information and belief” that the HealthEast Neuro Group “enlisted the participation of
[CentraCare’s] Dr. Kennedy and Defillo in this plan, as these physicians shared the goal of
eliminating Dr. Sherr and MSBI as competitors.” Id. “Upon information and belief,” Dr. Sherr
asserts that Dr. Kennedy and the physicians in the HealthEast Neuro Group were “close friends”
because Dr. Kennedy had practiced at United Hospital with them for ten years until Dr.
Kennedy’s resignation from United Hospital in 2012. Id. ¶ 33.
Dr. Sherr alleges that Dr. Kennedy and Defillo “made no attempt to hide their disdain for
Dr. Sherr and MSBI, their anger over his clinic, or their intent to destroy his practice.” Id. ¶ 46.
For example, shortly after MSBI’s St. Cloud clinic opened, Dr. Sherr was informed by
physicians in the St. Cloud area that Defillo had threatened them “by stating that if they
continued to refer patients to Dr. Sherr at the MSBI clinic, Defillo would ensure their SCH
practice would suffer. Defillo informed one such physician that he would be denied ‘block time’
to follow up with his patients at SCH, which would essentially preclude him from practicing at
SCH.” Id. ¶ 45. The HealthEast Neuro Group similarly expressed their disdain for Dr. Sherr by
regularly complaining to SJH operating room nurses about the significant block time Dr. Sherr’s
surgery practice consumed on the SJH operating room calendar. Id. ¶ 48.
Dr. Sherr alleges “[u]pon information and belief” that “Defillo and Dr. Kennedy began to
communicate, orally and in writing, with the HealthEast Neuro Group and other individuals in
the neurosurgeon [sic] community, specifically about the shared desire to force Dr. Sherr out of
practicing neurosurgery in Minnesota.” Id. ¶ 46.
Defendants’ plan to remove Dr. Sherr as a competitor for neurosurgery patients in the
Twin Cities and St. Cloud allegedly involved: gaining control of HealthEast’s physician peer
review committee (the “Spine Council”), which addresses complaints about physician care;
generating complaints to the Spine Council about Dr. Sherr’s care in eight patient cases; making
false statements at the Spine Council meetings to persuade Dr. Kolar (HealthEast’s Chief
Medical Officer and “upon information and belief” a close friend of Dr. Gregory) to issue a
summary suspension of Dr. Sherr’s HealthEast privileges; convincing the Spine Council to
unanimously vote to approve Dr. Kolar’s decision to summarily suspend Dr. Sherr’s privileges;
and obtaining the HealthEast Medical Executive Committee’s (“MEC”) approval of the
suspension. Id. ¶¶ 52–59, 68–71, 73.
5. HealthEast Conducts Peer Review Proceedings, Issues Summary Suspension
It is alleged that Dr. Wallenfriedman arranged to have herself nominated as one of three
candidates for the position of chairperson of the Spine Council. Id. ¶ 52. A vote regarding the
candidates was scheduled for the September 2015 Spine Council meeting. Id. ¶ 53. The other
two candidates (one of whom was Dr. Sherr’s partner at MSBI) did not attend the scheduled
meeting and expected that the vote would be delayed until the next meeting. Id. Instead, at the
September meeting “Dr. Wallenfriedman was simply placed into this role [of chairperson],
apparently without a vote, in direct violation of the HealthEast Bylaws.” Id.
With Dr. Wallenfriedman acting as chairperson, the Spine Council met on October 6,
2015, to discuss eight of Dr. Sherr’s patient care cases. Id. ¶ 57. Dr. Sherr believes that in two
of the cases the complaints originated from the HealthEast Neuro Group. Id. ¶ 56. At the
meeting, the HealthEast Neuro Group made “scores of false and malicious statements.” Id. ¶ 62.
The Spine Counsel reached a consensus at the conclusion of the meeting that MSBI would
develop a corrective action plan to reduce the risk of infections to Dr. Sherr’s patients and would
present the plan at a future Spine Council meeting. Id. ¶¶ 63–64.
Dr. Wallenfriedman unilaterally scheduled the future meeting for October 20, 2015 and
did not notify MSBI’s president of the meeting. Id. ¶ 65. At the October 20, 2015 meeting, Dr.
Kolar decided to summarily suspend Dr. Sherr’s privileges, and the Spine Council unanimously
voted to uphold Dr. Kolar’s decision. Id. ¶ 68. The MEC then met on October 22, 2015 and
voted to approve Dr. Sherr’s summary suspension. Id. ¶¶ 71, 73.
Dr. Sherr was informed of his summary suspension on October 20, 2015, after the
suspension had been upheld by the Spine Council but before it had been approved by the MEC.
Id. ¶ 71. At the time he was notified, Dr. Sherr and his surgical team were readying two patients
for surgery in the HealthEast pre-operation unit. Id. Dr. Sherr was forced to cancel both
surgeries, to the dismay of the patients and to his public humiliation. Id. However, one of the
patients was transferred to a non-HealthEast hospital where Dr. Sherr was able to perform the
surgery later that evening, and the other patient’s surgery was completed on another date at a
different facility. Id. ¶ 72.
6. Dr. Sherr’s Confidential Summary Suspension is Disclosed to Others
Although Minnesota law prohibits disclosure of matters that transpire at a peer review
meeting, within days of his summary suspension, individuals outside of the peer review process
were aware of Dr. Sherr’s suspension. Id. ¶¶ 77, 80, 82–83; Minn. Stat. § 145.64. Specifically,
Doug Mackay, a sales representative with Stryker Spine, was informed of the confidential
summary suspension by a coworker who had learned of the suspension from the SCH
neurosurgeons. FAC ¶ 77. Additionally, Tom O’Connor (“O’Connor”), president of United
Hospital, called MSBI’s president to inform him that Dr. Sherr’s summary suspension would
“directly and adversely affect the willingness of United Hospital and Allina-affiliated
neurosurgeons (who were also aware of this suspension), to make any referrals to Dr. Sherr or
MSBI.” Id. ¶ 80. According to Dr. Sherr, O’Connor “directly inferred” in the telephone
conversation that O’Connor was informed of the suspension by the HealthEast Neuro Group
because he stated without prompting that the group had “sharp elbows” and would use any
means at their disposal to eliminate potential competitors. Id. ¶ 82. Dr. Sherr was also informed
by a credentialing specialist at Fairview Southdale hospital that the hospital was aware of Dr.
Sherr’s summary suspension at HealthEast and SJH. Id. ¶ 83. Fairview Southdale required Dr.
Sherr to provide a letter of explanation from a practicing neurosurgeon at HealthEast before it
would re-credential him, which he did. Id.
Dr. Sherr also received a text from Defillo in December 2015 informing Dr. Sherr of an
employment opportunity in Dubai and describing the opportunity as an “excellent way to rebuild
[Sherr’s] career.” Id. ¶ 79. Although this text does not reference Dr. Sherr’s suspension, Dr.
Sherr alleges that he was “stunned” by the text because “Defillo at that time would have no
legitimate reason to even be aware of any suspension of Dr. Sherr, much less any ‘need to
rebuild his career,’ apart from improper disclosures by those involved in the [peer review]
7. Dr. Sherr Resigns from MSBI, Moves to Florida
Dr. Sherr appealed his summary suspension to the HealthEast Judicial Review
Committee and succeeded in having the summary suspension reversed on February 4, 2016. Id.
¶¶ 85, 88. Although he prevailed on appeal, Dr. Sherr alleges that the widespread public
disclosure of the summary suspension devastated his referral sources and damaged his
reputation. Id. ¶ 89. MSBI informed him that it could not continue to retain him as a physician
employee. Id. Dr. Sherr agreed to resign from MSBI and was forced to accept employment with
a neurosurgery group in Florida, where he is now located. Id. ¶ 90.
Dr. Sherr alleges that in addition to harming him, Defendants’ conduct caused significant
harm to the care of neurosurgery patients in the Twin Cities and St. Cloud Communities because
these patients “have been deprived of Dr. Sherr’s innovative and expert care, and are instead
forced to accept treatment from the . . . physician Defendants, who have, individually and
collectively, nowhere near the expertise and innovative skills and techniques Dr. Sherr brings to
this critically needed area of medical care.” Id. ¶ 6.
A. Motion for Judgment on the Pleadings Standard
In considering a motion for judgment on the pleadings under Rule 12(c) of the Federal
Rules of Civil Procedure, the court views “all facts pleaded by the nonmoving party as true and
grant[s] all reasonable inferences in favor of that party.” Poehl, 528 F.3d at 1096. Judgment on
the pleadings is appropriate “where no material issue of fact remains to be resolved and the
movant is entitled to judgment as a matter of law.” Faibisch v. Univ. of Minn., 304 F.3d 797,
803 (8th Cir. 2002). This is the same standard used to resolve a motion to dismiss under Rule
12(b)(6). Ashley Cty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).
To survive Rule 12 scrutiny, a plaintiff’s factual allegations must “raise a right to relief
above the speculative level,” and push claims “across the line from conceivable to plausible.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). In other words, the complaint must
establish more than a “sheer possibility that a defendant has acted unlawfully.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). However, a court “must not
presume the truth of legal conclusions couched as factual allegations,” and should “dismiss
complaints based on ‘labels and conclusions, and a formulaic recitation of the elements of a
cause of action.’” Hager v. Ark. Dept. of Health, 735 F.3d 1009, 1013 (8th Cir. 2013) (quoting,
in part, Twombly, 550 U.S. at 555); see also Retro TV Network, Inc. v. Luken Commc’ns, LLC,
696 F.3d 766, 768 (8th Cir. 2012) (“Conclusory statements and naked assertions devoid of
further factual enhancement are insufficient.”) (quotations and alterations omitted).
B. Breach of Peer Review Confidentiality Under Minn. Stat. § 145.64 (Count I)
Dr. Sherr asserts a claim against the HealthEast Defendants for breach of peer review
confidentiality under Minn. Stat. § 145.64. This claim is based on allegations that the
HealthEast Defendants disclosed confidential information from the peer review meeting. Dr.
Sherr further alleges that the HealthEast Defendants were motivated by malice in disclosing the
confidential information. The HealthEast Defendants argue that this claim must be dismissed
because Minn. Stat. § 145.64 does not provide a private cause of action.
Minnesota’s statutes governing peer review are embodied in Minn. Stat. § 145.61
through § 145.66. Dr. Sherr’s claim derives from the language in Minn. Stat. § 145.64,
addressing confidentiality of peer review information. This statute makes it unlawful to
“disclose what transpired at a meeting of a review organization except to the extent necessary to
carry out one or more of the purposes of a review organization.” Minn. Stat. § 145.64. The
penalty for prohibited disclosures is set forth in Minn. Stat. § 145.66, which provides: “Any
disclosure other than that authorized by section 145.64, of data and information acquired by a
review committee or of what transpired at a review meeting, is a misdemeanor.”
“A statute does not give rise to a civil cause of action unless the language of the statute is
explicit or it can be determined by clear implication.” Becker v. Mayo Found., 737 N.W.2d 200,
207 (Minn. 2007). “It is an elemental canon of statutory construction that where a statute
expressly provides a particular remedy or remedies, a court must be chary of reading others into
it.” Id. (quoting Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 19 (1979)).
Consistent with this principle, the Minnesota Supreme Court has repeatedly refused to recognize
a private cause of action under statutes that explicitly impose criminal or civil penalties but are
silent regarding a private cause of action. See, e.g., Graphic Commc’ns Local 1B Health &
Welfare Fund “A” v. CVS Caremark Corp., 850 N.W.2d 682, 691 (Minn. 2014); Becker, 737
N.W.2d at 208–09; Larson v. Dunn, 460 N.W.2d 39, 47 n.4 (Minn. 1990). Here, the plain
language of the statute imposes a criminal penalty for breach of peer review confidentiality, but
not a civil one. Thus, a private cause of action does not exist for a violation of Minn. Stat.
Dr. Sherr argues that the peer review statutes support a civil cause of action if the
unauthorized disclosure is motivated by malice. This argument is based on Minn. Stat. § 145.63,
subd. 1, which provides immunity to peer review participants for performance of their duties
“unless the performance of such duty, function or activity was motivated by malice.” Minn. Stat.
§ 145.63, subd. 1. Dr. Sherr’s argument is misplaced. The immunity provision of § 145.63,
subd. 1 does not address unauthorized disclosures of peer review information. Rather,
confidentiality of peer review information and the penalty for breaching such confidentiality are
explicitly governed by Minn. Stat. §§ 145.64 and 145.66, respectively. Under Minn. Stat.
§ 145.66, “[a]ny disclosure other than that authorized by section 145.64” is a misdemeanor,
regardless of whether or not the disclosure was made with malice. No other remedy is provided
for unauthorized disclosures. Thus, the immunity provision does not apply to breaches of peer
Because the statutes governing confidentiality of peer review information do not provide
a civil cause of action for unauthorized disclosures, Dr. Sherr’s claim for breach of peer review
confidentiality under Minn. Stat. § 145.64 is dismissed for failure to state a claim.
C. Invasion of Privacy
Dr. Sherr asserts an invasion of privacy claim against the HealthEast Defendants,
alleging that they publicized private facts from the peer review process by disclosing the facts to
the “larger neurosurgery community.” FAC ¶ 106. The HealthEast Defendants argue that Dr.
Sherr’s claim for common law invasion of privacy is not pled with particularity and fails to state
To state a claim for publication of private facts, a plaintiff must demonstrate that the
defendant gave “publicity” to a matter concerning the plaintiff’s private life and that “the matter
publicized is of a kind that (a) would be highly offensive to a reasonable person, and (b) is not of
legitimate concern to the public.” Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553
(Minn. 2003) (quoting Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231, 233 (Minn. 1998)).
“Publicity” means that “the matter is made public, by communicating it to the public at large, or
to so many persons that the matter must be regarded as substantially certain to become one of
public knowledge.” Id. at 557 (citing Restatement (Second) of Torts § 652D cmt. a). As the
it is not an invasion of the right of privacy, within the rule stated in
this Section, to communicate a fact concerning the plaintiff's private
life to a single person or even to a small group of persons. On the
other hand, any publication in a newspaper or a magazine, even of
small circulation, or in a handbill distributed to a large number of
persons, or any broadcast over the radio, or statement made in an
address to a large audience, is sufficient to give publicity within the
meaning of the term as it is used in this Section. The distinction, in
other words, is one between private and public communication.
Id. at 554 (quoting Restatement (Second) of Torts § 652D cmt. a).
In Bodah, the Minnesota Supreme Court held that a defendant's fax of 204 employees’
social security numbers to sixteen company managers in six different states “does not constitute
publication to the public or to so large a number of persons that the matter must be regarded as
substantially certain to become public.” Id. at 557-58. The court thus dismissed the claim on the
pleadings for failure to allege the requisite “publicity” to support a claim for invasion of privacy.
Id. at 558.
Dr. Sherr has not alleged sufficient facts to satisfy the “publicity” requirement for an
invasion of privacy claim. The First Amended Complaint identifies only one individual—United
Hospital’s president Tom O’Connor—who allegedly learned of Dr. Sherr’s suspension from the
HealthEast Defendants. The only other allegation that the HealthEast Defendants disclosed Dr.
Sherr’s suspension is made “”[u]pon information and belief” and alleges that the HealthEast
Neuro Group communicated Dr. Sherr’s suspension to Fairview Southdale. Id. ¶ 83. The Court
is not required to accept this allegation as true. Although a few other individuals allegedly knew
of Dr. Sherr’s summary suspension within days after it was imposed, those individuals are not
alleged to have learned the information from the HealthEast Defendants. See, e.g., id. ¶ 77
(alleging Stryker Spine sales representative Doug Mackay was informed of the suspension by a
coworker who, in turn, had learned of the suspension from the SCH neurosurgeons); ¶ 79
(alleging Defillo texted Dr. Sherr about rebuilding his career, but not specifically alleging that
Defillo knew of the summary suspension or that he learned of it from the HealthEast
Defendants). Thus, the factual allegations in the First Amended Complaint do not support a
reasonable inference that the HealthEast Defendants publicized the information “to the public or
to so large a number of persons that the matter must be regarded as substantially certain to
become public.” Bodah, 663 N.W.2d at 557–58.
Dr. Sherr also alleges that the HealthEast Defendants disclosed facts from the peer
review process “to the larger neurosurgery community” consisting of “35–40 active practitioners
in Minnesota,” this bald conclusion is unsupported by factual allegations and does not
sufficiently allege publicity. See FAC ¶¶ 38, 106; Bodah, 663 N.W.2d at 558 (citing Lewis v.
Snap-On Tools Corp., 708 F. Supp. 1260, 1262 (M.D. Fla. 1989) (“The mere conclusory
allegation that the alleged disclosure was to ‘large numbers of persons’ does not meet the
requirement that the publication be to the general public.”)). In addition to its conclusory nature,
the allegation that information was disseminated to a community of 35–40 individuals does not
constitute publicity. See, e.g., Cohen v. Beachside Two-I Homeowners’ Ass’n, No. 05-706,
2005 WL 3088361, at *17 (D. Minn. Nov. 17, 2005) (holding that distribution to “a small
community of about fifty households in a small geographic area” was not to the public at large).
Dr. Sherr cites a 1991 decision by the Wisconsin Court of Appeals to argue that even if
the information is not communicated to the public at large, the publicity standard may
nevertheless be satisfied if the information is shared within a smaller population that is
particularly relevant to the plaintiff. See Pl.’s Mem. Opp’n [Docket No. 35] 32–33 (citing
Hillman v. Columbia Cty., 474 N.W. 2d 913 (Wis. Ct. App. 1991)). Relying on this “relevant
population” approach, Dr. Sherr contends that “so many people within the population relevant to
Dr. Sherr were aware of his summary suspension that the matter can be substantially certain to
be one of public knowledge.” Id. at 33. However, the Minnesota Supreme Court has explicitly
“reject[ed] the ‘special relationship’ or ‘particular public’ approach taken by some jurisdictions,”
and has decided “instead, to adopt the Restatement definition of ‘publicity.’” Bodah, 663 N.W.
2d at 556–57. Under this definition, the matter must be “made public by communicating it to the
public at large, or to so many persons that the matter must be regarded as substantially certain to
become one of public knowledge.” Id. at 557 (citing Restatement (Second) of Torts § 652D cmt.
a). As discussed above, the allegations in the First Amended Complaint do not satisfy this
Dr. Sherr’s claim for invasion of privacy is dismissed based for failure to state a claim.
D. Sherman Act, Section 1 (Count VII)
Dr. Sherr asserts a claim under Section 1 of the Sherman Act, which prohibits a
“contract, combination . . . or conspiracy, in restraint of trade or commerce among the several
States.” 15 U.S.C. § 1. To establish a claim under Section 1 of the Sherman Act, a plaintiff
must demonstrate that: “(1) there was a contract, combination, or conspiracy; (2) the agreement
unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis;
and (3) the restraint affected interstate commerce.” Minn. Ass’n of Nurse Anesthetists v. Unity
Hosp., 5 F. Supp. 2d 694, 703 (D. Minn. 1998). Dr. Sherr alleges that Defendants conspired to
restrain his ability to participate in the St. Cloud and Twin Cities neurosurgery markets by
making false negative peer reviews about his performance as a neurosurgeon, suspending his
privileges at SJH, and improperly disclosing peer review confidential information, and that his
exclusion from those markets unreasonably restrained trade by reducing the neurological care
options open to patients. Id. ¶¶ 141–48.
Turning to the first element of Sherr’s Section 1 claim, Dr. Sherr alleges two levels of
conspiracy: (1) intra-corporate conspiracies in which the corporate Defendants conspired with
their own medical staff; and (2) a conspiracy among all Defendants. The Court addresses each in
a. Intra-corporate Conspiracy
Defendants argue that Dr. Sherr’s allegations that the corporate Defendants conspired
with their own physician employees fail as a matter of law under the intra-corporate immunity
doctrine. This doctrine provides that “officers or employees of the same firm do not provide the
plurality of actors imperative for a § 1 conspiracy.” Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752, 769 (1984). This is because “[t]he officers of a single firm are not separate
economic actors pursuing separate economic interests, so agreements among them do not
suddenly bring together economic power that was previously pursuing divergent goals.” Id.
Here, the individual Defendants are all alleged to be employees of their respective health care
entities. FAC ¶¶ 10–15. Thus, the immunity doctrine applies under the facts alleged.
Dr. Sherr argues that an exception to the intra-corporate immunity doctrine exists when
members of a peer review committee have a personal stake in the outcome of the peer review
process. However, “[t]o speak of a conspiracy among a medical staff during the peer review
process is not very meaningful in antitrust terms if the staff lacks the final authority to implement
any agreement it does reach.” Oskanen v. Page Mem’l Hosp., 945 F.2d 696, 706 (4th Cir. 1991);
accord Pudlo v. Adamski, 789 F. Supp. 247, 251–52 (N.D. Ill. 1992) (granting motion to dismiss
claim under Section 1 of Sherman Act where hospital’s governing board retained ultimate
authority to terminate plaintiff and it was thus “inconceivable a conspiracy among individual
members of the medical staff was the actual cause of [plaintiff’s] injuries”). Based on the
allegations in the First Amended Complaint, the individual Defendants lacked final authority to
summarily suspend Dr. Sherr’s HealthEast privileges. The ultimate decision rested with the
MEC, which voted to approve Sherr’s summary suspension on October 22, 2015. Therefore, Dr.
Sherr has failed to plead a viable intra-corporate antitrust conspiracy.
b. Conspiracy Among All Defendants
Defendants argue that Dr. Sherr has also failed to plead a conspiracy between the
HealthEast and CentraCare Defendants. The Court agrees.
“In order to withstand a motion to dismiss, a plaintiff must go further than merely
alleging a conspiracy existed, for a bare bones accusation of conspiracy without any supporting
facts is insufficient to state an antitrust claim.” Insignia Sys., Inc. v. News Corp., Ltd., No. 044213, 2005 WL 2063890, at *1 (D. Minn. Aug. 25, 2005). Here, Dr. Sherr conclusorily alleges
“upon information and belief” that the CentraCare and HealthEast Defendants communicated
orally and in writing about a scheme to force Dr. Sherr from practicing neurosurgery in
Minnesota by having his privileges terminated at SJH. FAC ¶¶ 46–47. Entirely lacking are
factual allegations to explain why, how, or for what purpose HealthEast and CentraCare—who
are not alleged to compete against each other—would need to conspire together to exclude Dr.
Sherr from the market. See Am. Channel, LLC v. Time Warner Cable, Inc., No. 06-2175, 2007
WL 142173, at *7 (D. Minn. Jan. 17, 2007) (granting defendant’s motion to dismiss Sherman
Act Section 1 claim where plaintiff failed to allege “any facts to explain why, how, or for what
purpose Time Warner and Comcast—who do not compete with one another—would need to
conspire together” to exclude plaintiff’s channel from their cable systems). “[A] conclusory
allegation of agreement at some unidentified point does not supply facts adequate to show
illegality.” Twombly, 550 U.S. at 557.
The allegations that the HealthEast Neuro Group demanded that HealthEast discontinue
its use of MSBI physicians for neurosurgery, and that CentraCare’s Defillo threatened St. Cloud
physicians by stating that their practices would suffer if they continued to refer patients to Dr.
Sherr, do not establish a plausible claim of conspiracy. “An allegation of parallel conduct is thus
much like a naked assertion of conspiracy in a § 1 complaint: it gets the complaint close to
stating a claim, but without some further factual enhancement it stops short of the line between
possibility and plausibility of entitlement to relief.” Id. (quotation marks and alterations
omitted). Moreover, the allegations provide no economic motive for the CentraCare Defendants
in a different city to conspire to have Dr. Sherr’s privileges suspended at SJH, and give no
economic motive for the HealthEast Defendants to include the CentraCare Defendants in their
alleged conspiracy. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
596–97 (1986) (“[I]f petitioners had no rational economic motive to conspire, and if their
conduct is consistent with other, equally plausible explanations, the conduct does not give rise to
an inference of conspiracy.”). The allegation that some of the individual Defendants had
previously practiced together does not give rise to a plausible inference that Defendants had an
economic motive to conspire. Thus, Dr. Sherr’s allegations do not sufficiently plead conspiracy
to restrain trade.
2. Unreasonable Restraint of Trade
In addition to failing to plausibly allege a conspiracy, Dr. Sherr has not sufficiently
alleged an unreasonable restraint on trade because he has not adequately alleged actual
detrimental effects on the neurosurgery market, and because his allegations of a relevant
geographic market are deficient as a matter of law.
“[A] restraint may be adjudged unreasonable either because it fits within a class of
restraints that has been held to be ‘per se’ unreasonable, or because it violates what has come to
be known as the ‘Rule of Reason,’ under which the test of legality is whether the restraint
imposed is such as merely regulates and perhaps thereby promotes competition or whether it
may suppress or even destroy competition.’” FTC v. In. Fed’n of Dentists, 476 U.S. 447, 457–58
(1986) (quoting Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918)). The federal
courts of appeals, including the Eighth Circuit, have “generally examined the denial or
revocation of hospital privileges under the rule of reason.” Flegel v. Christian Hosp., Ne.-Nw.,
4 F.3d 682, 686 (8th Cir. 1993).
In determining the legality of a restraint on trade under the rule of reason, courts focus on
the detrimental effects to competition. Id. at 688. A plaintiff may demonstrate the potential for
adverse effects on competition by (1) showing actual detrimental effects such as a reduction of
output, or (2) defining the relevant market and considering a defendant’s power within that
market. Minn. Ass’n of Nurse Anesthetists, 5 F. Supp. 2d at 706–07 (citing FTC, 476 U.S. at
a. Actual Detrimental Effects
“If a plaintiff demonstrates the existence of actual detrimental effects, formal market
analysis is unnecessary.” Id. at 707. Detrimental effects can include an increase in price, a
decrease in output, or a decline in the quality of good or services. Id.
Dr. Sherr argues that he has alleged detrimental effects by stating: “neurosurgery
patients in the Twin Cities and St. Cloud communities . . . who often face life-threatening and
excruciatingly painful medical conditions with limited treatment options, have been deprived of
Dr Sherr’s innovative and expert care, and are instead forced to accept treatment from the . . .
individually named physician Defendants, who have, individually and collectively, nowhere near
the expertise and innovative skills and techniques Dr. Sherr brings to this critically needed area
of medical care.” FAC ¶ 6. This allegation does not allege a decrease in the output of services,
because Dr. Sherr specifically alleges that patients are receiving treatment from the “individually
named physician Defendants.” Id. The allegation also fails to allege a decline in the quality of
services, because the reference to Dr. Sherr’s superior skills and expertise is conclusory and is
without any factual support. Broad, unsupported allegations of actual detrimental effects are
inadequate to withstand a motion to dismiss. See Insignia Sys.. Inc., 2005 WL 2063890, at * 4.
There is no allegation that the price of neurosurgery services has increased as a result of Dr.
Sherr’s departure from the market. Thus, Dr. Sherr has not alleged the existence of actual anticompetitive effects.
b. Relevant Market
Because Dr. Sherr failed to allege actual detrimental effects, he must allege that
Defendants have market power in a well-defined relevant market. Flegel, 4 F.3d at 689; Double
D Spotting Serv., Inc. v. Supervalu, Inc., 136 F.3d 554, 560 (8th Cir. 1998). “Without a welldefined relevant market, a court cannot determine the effect that an allegedly illegal act has on
competition.” Little Rock Cardiology Clinic PA v. Baptist Health, 591 F.3d 591, 596 (8th Cir.
2009) (citing FTC v. Freeman Hosp., 69 F.3d 260, 270–71 (8th Cir. 1995)).
A relevant market has two components: a product market and a geographic market.
Bathke v. Casey’s Gen. Stores, Inc., 64 F.3d 340, 345 (8th Cir. 1995). “The relevant product
market includes all reasonably interchangeable products.” Double D Spotting Serv., 136 F.3d at
560. The relevant geographic market “includes the geographic area to which consumers can
practically seek alternative sources of the product, and it can be defined as the market area in
which the seller operates.” Id. (quotation marks omitted).
Generally, “proper market definition can be determined only after a factual inquiry into
the commercial realities faced by consumers.” Id. 136 F.3d at 560 (quoting Queen City Pizza,
Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997)). However, this rule does not
equate to “a per se prohibition against dismissal of antitrust claims for failure to plead a relevant
market under Fed. R. Civ. P. 12(b)(6).” Id. (quoting Queen City Pizza, 124 F.3d at 436). The
Eighth Circuit and district courts within the circuit consistently dismiss antitrust claims at the
pleading stage where a plaintiff fails to adequately allege a viable relevant market. See, e.g.,
Little Rock, 591 F.3d at 601; Double D Spotting Serv., 136 F.3d at 561; Am. Channel, 2007 WL
142173, at *9; Tri State Advanced Surgery Ctr., LLC v. Health Choice, LLC, No. 14-143, 2015
WL 1737410, at *7 (E.D. Ark. Apr. 16, 2015); Davies v. Genesis Med. Ctr., 994 F. Supp. 1078,
1101–02 (S.D. Ia. 1998); Ferguson Med. Grp., L.P. v. Mo. Delta Med. Ctr., No. 06-08, 2006 WL
2225454, at *5 (E.D. Mo. Aug. 2, 2006). As the Eighth Circuit has observed, “[g]iven the
unusually high cost of discovery in antitrust cases, the limited success of judicial supervision in
checking discovery abuse, and the threat that discovery expense will push cost-conscious
defendants to settle even anemic cases, the federal courts have been reasonably aggressive in
weeding out meritless antitrust claims at the pleading stage.” Insulate SB, Inc. v. Advanced
Finishing Sys., Inc., 797 F.3d 538, 543 (8th Cir. 2015) (internal quotations, citations, and
Defendants argue the First Amended Complaint fails to identify a relevant geographic
market. The Court agrees. In the medical setting, the proper geographic market is the
geographic area were “few patients leave and few patients enter.” Little Rock, 591 F.3d at 598
(internal quotations and alterations omitted). The market for specialized or sophisticated
medical services may encompass a broader geographic area than the market for general medical
services. Davies, 994 F. Supp. at 1100. The First Amended Complaint alleges a “Twin Cities”
market and a “St. Cloud” market without addressing the critical question of where consumers of
neurosurgery services can reasonably turn for alternative care. See FAC ¶¶ 147–48. It is
reasonable to assume that a significant number of Twin Cities and St. Cloud neurosurgery
patients travel to the Mayo Clinic in Rochester, Minnesota, which is roughly a 75-mile drive
from SJH in St. Paul and approximately a 150-mile drive from SCH in St. Cloud. The failure to
consider the Mayo Clinic, a renowned neurosurgery provider, in delineating the geographic
market ignores the commercial realities faced by neurosurgery patients. See, e.g., Davies, 994 F.
Supp. at 1100–01 (finding plaintiffs’ geographic market was too narrow as a matter of law where
the complaint failed to consider the impact of a high quality hospital located 56 miles from the
Quad Cities). Thus, the factual allegations in the First Amended Complaint do not adequately
plead the existence of a relevant geographic market.
For the above reasons, the First Amended Complaint does not state a Section 1 antitrust
E. Sherman Act, Section 2 (Count VIII)
Defendants argue that Dr. Sherr’s claim under Section 2 of the Sherman Act must be also
dismissed for failure to properly allege a relevant market.
Section 2 of the Sherman Act makes it unlawful for any person to “monopolize, or
attempt to monopolize, or combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States.” 15 U.S.C. § 2. “Section 2 of the
Sherman Act requires a plaintiff to plead and prove that the defendant (1) possessed monopoly
power in the relevant market and (2) willfully acquired or maintained that power as opposed to
gaining it as a result of a superior product, business acumen, or historical accident.” Double D
Spotting Serv., 136 F.3d at 560 (internal quotations omitted). Thus, to state a Sherman Act
claim under Section 2, the plaintiff must identify a valid relevant market. Id.; Fed. Trade
Comm’n v. Tenet Health Care Corp., 186 F.3d 1045, 1051 (8th Cir. 1999) (“Identifying a valid
relevant market is a “necessary predicate to the finding of an antitrust violation.”).
Dr. Sherr alleges that Defendants violated Section 2 of the Sherman Act by monopolizing
or conspiring to monopolize the “St. Cloud market.” FAC ¶¶ 157–60. This market definition is
unsupportable on its face because Dr. Sherr’s own allegations establish that he practiced in a
geographic area larger than St. Cloud, maintaining privileges at five different hospitals in the
Twin Cities. See Flegel v. Christian Hosp. Ne.-Nw., 804 F. Supp. 1165, 1174 (E.D. Mo. 1992)
(holding plaintiffs’ proposed market definition “erroneous as a matter of law” because “Plaintiffs
themselves practice and have staff privileges at hospitals in a geographic area that even extends
beyond” the geographic market proposed by plaintiffs). Thus, Dr. Sherr’s claim under Section 2
of the Sherman Act is dismissed for failure to plead a relevant market.
F. Minnesota Antitrust Statutes (Counts IX and X)
Dr. Sherr also alleges violations of Minnesota antitrust law under Minn. Stat. §§ 325D.51
and 325D.52. See FAC ¶¶ 162–69. “Minnesota anti-trust law is interpreted consistent with the
federal court’s construction of the Sherman Act.” Lamminen v. City of Cloquet, 987 F. Supp.
723, 734 (D. Minn. 1997) (citing State by Humphrey v. Rd. Constructors, Inc., 474 N.W.2d 224,
225 n.1 (Minn. Ct. App. 1991)); see also Lorix v. Crompton Corp., 736 N.W.2d 619, 626 (Minn.
2007) (“As the purposes of Minnesota and federal antitrust law are the same, it is sensible to
interpret them consistently.”). Thus, where the federal antitrust claims fail, the Minnesota
antitrust claims must fail as well. Insulate, 797 F.3d at 547; Minn. Made Hockey, Inc. v. Minn.
Hockey, Inc., 789 F. Supp. 2d 1133, 1141 n.2 (D. Minn. 2011). Because the Dr. Sherr’s claims
under Sections 1 and 2 of the Sherman Act are dismissed for failure to state a claim, his claims
under Minnesota’s antitrust statutes are also dismissed.
Based upon all the files, records, and proceedings herein, IT IS HEREBY ORDERED
Defendants HealthEast Care System, Dr. Margaret Wallenfriedman, Dr. Mary
Beth Dunn, Dr. Richard Gregory, and Dr. Stephen Kolar’s Motion for Partial
Judgment on the Pleadings [Docket No. 24] is GRANTED;
Defendants CentraCare Health, Dr. Jerone D. Kennedy, and Archie Defillo’s
Motion for Judgment on the Pleadings [Docket No. 28] is GRANTED; and
Counts I, II, VII, VIII, IX, and X of the First Amended Complaint [Docket No.
15] are DISMISSED with prejudice.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: June 30, 2017.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?