Vedder Thinking | Articles Fifth and Seventh Circuits Affirm Discretion for Associations Administering Their Grievance Programs
March 21, 2016
As republished on March 21, 2016 by The National Law Review.
Many trade and private associations develop and administer their own internal professional conduct and grievance programs. On occasion, a member will file a lawsuit challenging the association’s decision to discipline the member. Typically, the member will argue that the association did not follow its grievance procedures and/or failed to provide due process during the course of the grievance. Recently, Vedder Price attorneys Michael A. Chabraja, Frederic T. Knape and Brian W. Ledebuhr successfully defended two private associations in lawsuits brought by former members.
The Barrash Decision
The American Association of Neurological Surgeons (also known as the AANS) was sued by a member neurosurgeon in the United States District Court for the Southern District of Texas. The plaintiff, Dr. Jay Martin Barrash, challenged the association’s decision to censure him for providing certain expert testimony in an underlying medical malpractice case. Specifically, Dr. Barrash was censured for providing opinion testimony without first having reviewed pertinent medical imaging studies. Dr. Barrash alleged in his Complaint that the AANS failed to follow its bylaws, violated his due process rights and tortiously interfered with his potential to generate revenue as an expert witness.
The district court dismissed Dr. Barrash’s claims for breach of contract and tortious interference, and subsequently granted partial summary judgment in favor of the AANS. In its decision, the court made clear that, under Texas law, voluntary associations have significant discretion when conducting their internal affairs and that courts should not interfere with the substantive merits of the association’s decision so long as the process itself is fair. As a result, on the charge that Dr. Barrash failed to review pertinent imaging studies before providing expert testimony, the district court held that the AANS provided Dr. Barrash with sufficient due process and that he simply disagreed with the final outcome of the grievance proceeding.
Dr. Barrash appealed the ruling to the Fifth Circuit Court of Appeals, which affirmed the lower court decision. The court observed that its role is not to retry merits of a decision by a private association, but ascertain whether the parties received due process. The court added that due process is satisfied under Texas law by notice and a hearing even when an organization’s bylaws may require more. On this basis, the court concluded that the AANS provided Dr. Barrash with sufficient due process, including notice, a hearing and multiple levels of appeal, before he was censured for failing to review all pertinent records prior to testifying. The Fifth Circuit further noted that no Texas court has allowed a challenge to a professional association’s grievance procedures under a breach of contract theory. Therefore, based on Texas precedent and the doctrine of judicial nonintervention, the Fifth Circuit found that the district court properly dismissed the breach of contract claim, which it determined to be “little more than a disagreement with the disciplinary decision of the AANS.”
The Fifth Circuit decision may be found at Barrash v. Am. Ass’n of Neurological Surgeons, Inc., Case No. 14-20764, -- F.3d --, 2016 WL 374134 (5th Cir. Jan. 29, 2016).
The Brandner Decision
Similarly, the American Academy of Orthopaedic Surgeons and the American Association of Orthopaedic Surgeons (collectively, the AAOS) were named as defendants in a lawsuit by one of their members challenging the suspension of his membership. The plaintiff, Dr. Patrick Brandner, was disciplined by the AAOS for certain expert testimony he gave in an underlying medical malpractice case. Upon the conclusion of the AAOS grievance proceedings, Dr. Brandner filed an action in the United States District Court for the Northern District of Illinois, alleging that the AAOS did not follow its bylaws, acted in bad faith and violated his due process rights.
Upon cross-motions, the district court granted summary judgment in favor of the AAOS on all claims. In doing so, the court recognized that the conduct of voluntary associations under Illinois law is subject to judicial review only when an association violates its internal rules or where the member is denied the right to a fair hearing. The court ruled that Dr. Brandner received due process in that the AAOS complied with its internal grievance procedures and did not demonstrate any bias, prejudice or lack of good faith.
The Seventh Circuit Court of Appeals affirmed summary judgment in favor of the AAOS on separate grounds. Writing for the panel, Circuit Judge Frank Easterbrook made clear that as a threshold matter, a private association’s membership decisions are not subject to judicial review unless membership is an economic necessity or affects an important economic interest of the member. Based upon this standard, the court determined that the grievance proceeding was not subject to judicial review because the suspension did not affect Dr. Brandner’s license to practice medicine and he did not establish that the suspension “would end his professional career.”
The Seventh Circuit decision may be found at Brandner v. Am. Acad. of Orthopaedic Surgeons et al., 760 F.3d 627 (7th Cir. 2014).
The Precedential Impact
The rulings by the Fifth Circuit and Seventh Circuit Courts of Appeal are important decisions for the internal affairs of private associations. While claims seeking judicial intervention are governed by state law, the vast majority of (if not all) states adhere to limited judicial review when faced with challenges to disciplinary actions. In Barrash, the Fifth Circuit embraced this precedent by properly resisting the former member’s attempts to relitigate the merits of the censure. In Brandner, the Seventh Circuit correctly recognized the continued importance of demonstrating a sufficient economic interest or impact before subjecting the suspension to judicial review. Thus, while taking different paths based on the particular circumstances of each case, the respective courts not only validated the professional conduct programs of the AANS and the AAOS, but both courts reaffirm and build upon favorable precedent involving private medical association grievance claims.
For more information about developing your company’s internal professional conduct or grievance program and how to best avoid liability when administrating such a program, please contact Frederic T. Knape at +1 (312) 609 7559, Brian W. Ledebuhr at +1 (312) 609 7845 or any other Vedder Price attorney.