Summary - A-52-22
Plaintiffs’ good faith and fair dealing claim properly survived summary judgment, but the jury was not correctly charged or asked to rule on that claim. The trial judge failed to instruct the jury that the only underlying contract to which the implied covenant could attach to had to be one beyond the rights afforded by the Bylaws. Adding to the significant uncertainty created by the jury charge and verdict sheet are the improper admission into evidence of the privileged emails and the improper remarks by plaintiffs’ attorney. Those errors, cumulatively, had the capacity to lead the jury to reach a verdict it would not have otherwise reached and thus deprived Valley of a fair trial.
1. A claim for breach of the covenant of good faith and fair dealing that is implied by law into every contract requires a plaintiff to demonstrate that the defendant’s alleged misdeeds prevented the plaintiff from enjoying the full benefit of a particular bargain. Although medical staff bylaws impose reciprocal legal obligations and rights between those who agreed to be bound, those obligations do not give rise to a traditional contract, to a claim for the traditional contract remedy of damages, or to a separate breach of the implied covenant claim. Instead, when a hospital violates its medical staff bylaws, equitable relief may be available. Thus, plaintiffs here would have been entitled to a hearing if Valley had violated the Bylaws by failing to provide one in the first place; the jury, however, expressly found that Valley did not violate the Bylaws. The Bylaws cannot constitute the underlying contract for purposes of plaintiffs’ separate breach of the implied covenant claim. (pp. 28-34)
2. Just as the Bylaws here offer no ground for a breach of an implied covenant of good faith and fair dealing claim, Valley’s administrative healthcare decision to award exclusive privileges to a particular group cannot on its own give rise to a claim for breach of the implied covenant of good faith and fair dealing. A hospital may not act in bad faith and simultaneously serve a “genuine” healthcare objective based on “reasonable and reliable” information. See Desai, 103 N.J. at 91-93. Physicians who are adversely affected by a hospital’s administrative healthcare decision may challenge that decision by arguing that it was not made in accordance with the standard set forth in Desai. Here, however, the trial judge concluded that plaintiffs’ challenge to the Valley’s grant of exclusive privileges was “subsumed” with their implied covenant claim. As a result, the legal principles related to Valley’s administrative decision became relevant only as to its defense to the implied covenant claim, and not as an asserted basis for money damages. (pp. 34-38)
3. The final basis advanced in the course of this litigation for finding that Valley was bound to act in good faith and deal fairly with plaintiffs is an alleged implied contract between the parties, one that goes “beyond the Bylaws.” Plaintiffs allege that, from Valley’s initial offer to join and collaboratively build Valley’s neuroscience department and from the parties’ course of dealings since plaintiffs joined, it can be reasonably inferred that an implied contract existed between plaintiffs and Valley that would allegedly support their expectation to indefinitely maintain their privileges and rights absent a valid administrative healthcare decision providing otherwise. In the event that plaintiffs could demonstrate that all the fundamental elements of contract formation had been established, their theory of an agreement beyond the rights afforded by the Bylaws would be contractual in nature. Among the three possible sources to support plaintiffs’ claim here -- the Bylaws, Valley’s administrative healthcare decision, and the alleged implied-in-fact contract between plaintiffs and Valley -- the only alleged source of mutual obligation to which the implied covenant of good faith and fair dealing could properly attach to is the implied-in-fact contract. (pp. 38-41)
4. The Court explains how the evidence in the record, taken in the light most favorable to plaintiffs, was sufficient to raise a factual dispute as to whether there was an implied-in-fact contract between plaintiffs and Valley and whether Valley acted in bad faith in revoking certain of plaintiffs’ privileges, such that the claim properly survived summary judgment. Although the claim properly reached the jury, however, the jury charge and verdict sheet did not properly instruct the jurors on the elements of the claim. Notably, the jury was given no law on how to measure Valley’s defense to the implied covenant claim, and consideration of the jury charge as a whole raises significant doubt as to whether the jury found the underlying contract for plaintiffs’ implied covenant claim to be some implied or oral agreement beyond the Bylaws, or just the Bylaws. The jury could have come to a different result had it been correctly instructed on the contract claims, especially because the underlying contract on the implied covenant claim -- purportedly an endless right to treat “unassigned” ER patients with special tools -- was not in writing. (pp. 41-52).
5. The emails between Valley and its general counsel for the purpose of legal advice, rather than business purposes, are protected by the attorney-client privilege. Valley did not place its general counsel’s pre-litigation legal advice “in-issue,” nor did it call its general counsel as a witness. Valley’s inadvertent disclosure of the emails -- allegedly consisting of 352 pages -- in the course of an exchange of about 57,000 documents in roughly two months did not amount to waiver of the attorney-client privilege. The parties’ discovery agreement’s claw-back provision anticipated precisely such an inadvertence. And admission of the emails into evidence was not harmless. Select emails in many ways became the centerpiece of plaintiffs’ case. On remand, if plaintiffs attempt to introduce emails from the batch Valley attempted to claw back, the judge should conduct a document-by-document review to determine whether the emails are privileged and thus not admissible. (pp. 52-58)
6. Certain comments by plaintiffs’ trial counsel in summation were improper. Plaintiffs’ trial counsel knew that Valley had evidence of sixty cases of patient transfers. The summation remarks implied, however, that there was evidence of only two cases of patient transfers, and that inaccurate statement impacted Valley’s contention that it made a valid healthcare decision. (pp. 58-61)
7. The cumulative errors here deprived Valley of a fair trial and warrant a new one. The Court sets forth specific guidance for the remand proceedings. (pp. 61-62)