New Jersey Hospital Association and American Hospital Association Represented as Amici Curiae Before New Jersey Supreme Court

The New Jersey Hospital Association and the American Hospital Association asked Faegre Drinker to represent them as amici curiae before the New Jersey Supreme Court in a landmark appeal that overturned a $24 million jury verdict against a local hospital and rejected the establishment of new causes of action that would expose hospitals throughout New Jersey to similar liabilities in the future. The case was brought by a group of neurosurgeons practicing at The Valley Hospital that challenged the hospital’s decision to enter into an exclusive contract for neurosurgical services with a competing physician group. After a three week trial, a jury found in favor of the plaintiffs who had asserted that the hospital violated the implied covenant of good faith and fair dealing in the Medical Staff Bylaws, which is the organizational document governing the hospital’s medical staff and establishing the process for awarding and withdrawing a doctor’s privileges. Based on arguments principally advanced by the amici, the Supreme Court set aside the $24 million verdict, holding that the Medical Staff Bylaws were not a contract in the traditional sense and could not support an award of damages, and that courts evaluating whether to grant equitable relief must employ highly deferential standards when considering a challenge to a hospital’s strategic decisions. The court’s ruling thus closed off a potential avenue through which hospitals could be exposed to crippling jury verdicts awarded to those adversely affected by a hospital’s managerial decisions.

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