Reversal of $24.3M verdict is victory for Valley Hospital and hospital industry

The new Valley Hospital. (Valley Health System)

In a decision that was great for the Valley Hospital — and impactful for the hospital industry in the state — the New Jersey Supreme Court on Tuesday vacated a $24.3 million verdict awarded to a neurosurgery practice that sued the hospital over a privileges dispute.

A jury previously had awarded Hackensack-based Comprehensive Neurosurgical the multimillion-dollar award following a trial against Paramus-based Valley Hospital after the 11-physician practice alleged the hospital didn’t deal with them fairly or act in good faith.

The basis of the suit was this: Comprehensive Neurosurgical began working with the hospital in 2003 and had hospital and admitting privileges as well as the right to cover unassigned emergency patients. In 2015, the Valley Hospital granted exclusive privileges to a different neurosurgery group, revoking Comprehensive Neurosurgical’s rights in some areas. Comprehensive Neurosurgical argued that the move wasn’t a valid administrative health care decision, but rather a form of retaliation for its perceived disloyalty in joining another hospital.

The Supreme Court felt otherwise.

In doing so, the court seemingly made clear that Valley Hospital bylaws, which the hospital was accused of violating, are not a contract in the traditional sense and cannot support either an implied covenant claim or a damages award. In other words, the bylaws cannot be leveraged by aggrieved doctors to gain financial benefits. The court also appeared to uphold the well-established New Jersey law on the deference given to hospital boards when making institutional or strategic decisions remains unimpaired.

Chris Porrino. (File photos)

Of note, the court held that multiple errors during trial required reversal of the judgment. The case likely will be sent back to the trial court for further proceedings.

Chris Porrino, the chairman of the Litigation Department at Lowenstein Sandler, and counsel for the Valley Hospital, obviously was pleased with the decision.

“Today, the Supreme Court of New Jersey vacated a $28 million (total) judgment against the Valley Hospital and affirmed longstanding jurisprudence that hospital bylaws do not constitute a contract,” he said in a statement.

“The court’s decision is an important win for the Valley Hospital, health care systems across New Jersey and the country, as it underscores the deference to be afforded hospitals in making policy decisions that further patient care and public health objectives.  The decision also reaffirmed that legal advice provided by in-house counsel is confidential and privileged and reinforced the core principle that plaintiffs’ counsel may not ‘misstate evidence or distort the factual picture’ in summation at trial.”

Peter Verniero.

Peter Verniero, chair of the Sills Cummis & Gross Corporate Investigations and Integrity and Appellate practice groups, and the attorney for Comprehensive Neurosurgical, said his clients will retry the case.

“We are pleased that the New Jersey Supreme Court rejected the position that physicians do not have the ability to seek monetary damages on wrongful conduct of a hospital and, instead, recognized that the course of conduct between physicians and hospitals can support an implied contract between those parties, including a claim by physicians that a hospital has breached the implied covenant of good faith and fair dealing,” he said in a statement.

“This decision is an important reinforcement of our law that will enable physicians who have been treated unfairly or in bad faith to seek redress in our court like any other litigant.

“Our clients look forward to a retrial on the merits and are confident of success before a new jury.”

For legal observers, the case was a meeting of two of the most accomplished attorneys in the state. Verniero, who formerly sat on the New Jersey Supreme Court, also has served as attorney general in the state and chief counsel to a governor (Christie Whitman). Porrino has previously served as attorney general and the chief counsel to a governor (Chris Christie).