Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—SCtMont: Montana Consumer Protection Act Applies to Hospitals, But Only to Their “Entrepreneurial” Functions, (Dec 18, 2012)

By Tobias J. Gillett, J.D., LLM.

The mother of a child with brain damage cannot maintain an action under Montana’s Consumer Protection Act (CPA) against the hospital that permitted the obstetrician allegedly responsible for her child’s injury to use its facilities, because the CPA does not apply to hospitals when they are not engaged in the business aspects of running a hospital, the Supreme Court of Montana has ruled (Brookins v. Mote, December 11, 2012, Rice, J.).

In 1993, Ann M. Brookins gave birth to her son at Mineral Community Hospital in Superior, Montana. Dr. Frederick Mote served as her obstetrician. Complications arose both prior to and after delivery, allegedly leading to problems with her son’s brain development.

In 1992, Mote had moved to Superior to take up a position with the hospital, but later that year he was charged in the state of Oregon with sexual abuse of a minor and endangering the welfare of a minor, and resigned his position with the hospital. Although the hospital declined to rehire Mote following his guilty plea to misdemeanor sexual abuse of a child, the hospital granted him credentials to use the hospital’s facilities as an independent physician.

The hospital conducted a review of Mote prior to this decision, and provided notice to the public of the circumstances surrounding it through a letter published in a local newspaper. Brookins hired Mote despite knowing of the conviction due to his location in Superior.

In 2005, Brookins sued Mote and the hospital over Mote’s care of her son, his allegedly unnecessary pelvic exams, and his alleged unauthorized sexual contact with her son during Mote’s delivery, examination, and circumcision of him. She asserted, among other claims, that the hospital was liable under the CPA for allowing Mote to use its facilities.

Brookins settled her claims with Mote, but her claims proceeded against the hospital. Following a discovery period, and motions for summary judgment by both parties, the district court granted summary judgment to the hospital on all claims. Brookins appealed.

Montana’s Consumer Protection Act prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” The CPA defines “trade” and “commerce” as “the advertising, offering for sale, or distribution of any services, any property, tangible or intangible, real, personal, or mixed, or any other article, commodity, or thing of value, wherever located, and includes any trade or commerce directly or indirectly affecting the people of this state.”

The court first considered the question whether a plaintiff could bring a claim under the CPA against a hospital at all, an issue of first impression in Montana. The court surveyed the history of the treatment of the learned professions, beginning with their early immunity from federal antitrust and consumer protection laws, and extending through the Supreme Court’s abolishment of blanket immunity in its 1975 opinion in Goldfarb v. Va. St. Bar (421 U.S. 773).

In Goldfarb, the court noted, the Supreme Court had recognized a distinction between the learned professions and other businesses, acknowledging that aspects of those professions may have to remain exempt from consumer protection laws. The Supreme Court separated the business functions of the learned professions from their professional aspects.

The court cited case precedent from other states following the Goldfarb decision that had recognized the distinction between the business and professional elements of the practice of medicine, and had held that consumer protection laws could apply to the “entrepreneurial aspects” of doctors’ and hospitals’ work. The court concluded that it “agree[d] with the courts that have reasoned that exempting hospitals entirely from consumer protection laws would be an improper form of elitism,” and that granting a wholesale exemption to hospitals would not be consistent with the CPA’s definitions of “trade” and “commerce.”

However, the court also held that “only those acts or practices in the conduct of the entrepreneurial, commercial, or business aspects of running a hospital are actionable under Montana’s CPA.” The court reasoned that holding the CPA applicable to the “actual practice” of medicine “could render medical malpractice law obsolete,” a decision the court did not think the legislature intended to make. Moreover, the court noted that in the same decision it had chosen to recognize the tort of negligent credentialing, making this reasoning “especially persuasive.”

Having reached these conclusions, the court applied its decisions to Brookins’s claim against the hospital, finding that Brookins could not bring such a claim under the CPA. The court concluded that the hospital’s process of reviewing a physician to determine whether a physician was qualified to use its facilities “implicate[d] the actual practice of medicine,” and was not part of the “entrepreneurial, commercial, or business aspects” of operating the hospital. Therefore, the court dismissed Brookins’s CPA claim.

Although the court noted that Brookins could still maintain a claim against the hospital for negligent credentialing if the hospital had failed to adequately review Mote’s qualifications, the court determined that Brookins had not provided sufficient evidence to establish a breach of the standard of care.

The case is No. 2012 MT 283.

James O’Brien (O’Brien Law Office, P.C.) for Ann M. Brookins. Gary Kalkstein (Kalkstein, Johnson & Dye, P.C.) for Frederick Mote.

Cases: ConsumerProtection MontanaNews