                                                                                             September 1 2015


                                           DA 14-0724
                                                                                             Case Number: DA 14-0724

                  IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           2015 MT 258



MONTANA INTERVENTIONAL AND DIAGNOSTIC RADIOLOGY
SPECIALISTS, PLLC; DENNIS L. PALMER, M.D.;
RANDY R. SIBBITT, M.D., and HASSAN MASSOUH, M.D.,

              Plaintiffs and Appellants,

         v.

ST. PETER’S HOSPITAL,

              Defendant and Appellee.



APPEAL FROM:            District Court of the First Judicial District,
                        In and For the County of Lewis and Clark, Cause No. DDV 2012-630
                        Honorable James P. Reynolds, Presiding Judge


COUNSEL OF RECORD:

                For Appellants:

                        David R. Paoli, Paoli Kutzman, P.C., Missoula, Montana

                        Timothy B. Strauch, Strauch Law Firm PLLC, Missoula, Montana

                For Appellee:

                        Robert J. Phillips, Mitch J. Vap, Phillips Haffey P.C., Missoula, Montana



                                                     Submitted on Briefs: July 1, 2015
                                                                Decided: September 1, 2015


Filed:

                        __________________________________________
                                          Clerk
Justice Patricia Cotter delivered the Opinion of the Court.

¶1     Montana Interventional and Diagnostic Radiology Specialists, PLLC, (MIDRS), is

a professional limited liability company whose members, Drs. Palmer, Sibbitt and

Massouh, are engaged in the practice of radiology. St. Peter’s Hospital is the only acute-

care, community hospital in Helena, Montana, open to the public. Prior to July 2011, St.

Peter’s Medical Staff granted privileges to qualified, non-employee radiologists,

including the physicians of MIDRS and other outside providers. On July 1, 2011, the

Hospital “closed” its Radiology Department to all non-employee physicians, regardless

of qualification. MIDRS filed a complaint against St. Peter’s in August 2012 alleging

unfair trade practices and intentional interference with prospective advantage. The First

Judicial District Court, Lewis and Clark County, granted the Hospital’s motion to dismiss

the complaint as untimely, concluding MIDRS filed its complaint outside of the

applicable statutes of limitation. MIDRS appeals. We reverse and remand.

                                          ISSUE

¶2     Did the District Court err in granting St. Peter’s motion for judgment on the

pleadings and dismissing the primary complaint as time-barred?

                 FACTUAL AND PROCEDURAL BACKGROUND

¶3     MIDRS and St. Peter’s worked together for several years during which the

MIDRS physicians provided radiological services through St. Peter’s Hospital. Prior to

2006, St. Peter’s had an “open” radiology department, meaning the Hospital’s Medical

Staff granted privileges to qualified, non-employee radiologists to interpret images

generated at the Hospital. No contract or employment with the Hospital was required;


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rather, privileges were granted to qualified radiologists based upon a review of the

physician’s education, training, competence, experience, ability, personal character, and

judgment. MIDRS claims that while it was providing services to the open radiology

department, the Hospital frequently solicited MIDRS’ doctors to work for the Hospital or

to enter into an exclusive contract with St. Peter’s, but the doctors declined these

solicitations.

¶4     In 2005, MIDRS announced its intent to open a separate and competing imaging

facility in Helena. In February 2006, however, the parties entered into a three-year

contract under which MIDRS would provide exclusive services to the Hospital and

refrain from opening a new facility while the contract was in effect. MIDRS claims that

the Hospital repeatedly solicited its doctors to become employees during this timeframe

but the radiologists chose to remain independent. As the exclusive contract approached

expiration, St. Peter’s solicited proposals from various radiological groups, from which

the Medical Staff would select a new radiological provider to begin under contract

commencing in February 2009. In October 2008, MIDRS submitted a proposal to extend

its expiring contract. St. Peter’s did not submit MIDRS’ proposal to the Medical Staff for

consideration; instead, it chose to enter into exclusive contracts with other providers

during 2009 and 2010.

¶5     MIDRS asserts that around this same time the Hospital initiated false credentialing

charges against the MIDRS’ doctors regarding the reading of certain mammograms, and

revoked the physicians’ medical staff privileges as a result of these credentialing issues.

St. Peter’s denies this allegation, asserting that the MIDRS’ doctors requested termination


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of the contract before the February 2009 expiration date and failed to renew their

privileges before their privileges expired. The Hospital acknowledges, however, that

after the expiration of the exclusive contract with MIDRS, the Hospital’s Credentialing

Committee, the Medical Executive Committee, and the Hospital Board of Directors voted

to revoke the doctors’ credentials due to their alleged failure to abide by Mammography

Quality Standards Act guidelines. Consequently, MIDRS’ radiologists were not allowed

to practice at the Hospital after February 2009.

¶6     In 2011, as the exclusive contract between the Hospital and another radiology

group was approaching expiration, MIDRS’ physicians again applied for staff privileges

but were told that the Hospital had “closed” its radiology department and the department

would thence forward be staffed only by Hospital personnel. According to MIDRS, the

decision to close the radiology department was made after MIDRS announced that it

intended to open a stand-alone radiology facility in Helena.

¶7     On August 3, 2012, MIDRS filed a complaint and request for a jury trial in the

District Court against the Hospital. The complaint sought declaratory and injunctive

relief and damages for unreasonable restraint of trade in violation of the Montana Unfair

Trade Practices Act (UTPA), and intentional interference with prospective advantage

arising from the Hospital’s action to close its radiology department in 2011. On August

6, 2012, MIDRS opened the Helena Imaging Center, a stand-alone facility offering a full

range of radiological services and located near the Hospital.

¶8     On November 5, 2012, the Hospital filed its answer to the complaint, asserted

affirmative defenses, and counterclaimed against MIDRS for breach of contract. In


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January 2013, MIDRS responded to the Hospital’s counterclaim and presented a

counterclaim against the Hospital claiming breach of contract and breach of implied

covenant of good faith and fair dealing, and seeking declaratory judgment. On June 20,

2013, St. Peter’s filed a motion to dismiss pursuant to M. R. Civ. P. 12(c) arguing that

MIDRS failed to commence its action within the two-year statute of limitations under the

UTPA or the three-year statute of limitations for intentional interference with prospective

advantage. It claimed that all elements of MIDRS’ claims were present as of February

2009 when the exclusive contract between St. Peter’s and MIDRS expired.

Consequently, the Hospital submitted that MIDRS’ complaint, filed August 3, 2012,

should be dismissed.

¶9     MIDRS countered that it was not claiming restraint of trade or intentional

interference based upon the 2009 actions of the Hospital; rather, its claims were premised

on the Hospital’s July 2011 closure of its radiology department and the anti-competitive

impact that this action had upon MIDRS’ doctors, its clinic, and all radiology patients in

Helena.   MIDRS therefore contended that its claims accrued in July 2011 and its

complaint was timely under both applicable statutes of limitation.

¶10    Following a hearing, the District Court determined that MIDRS’ claims accrued

in February 2009 when the Hospital denied it staff privileges and the MIDRS’ physicians

were no longer allowed to provide radiological services to St. Peter’s.         The court

therefore dismissed MIDRS’ complaint as untimely. Because the counter claims were

not dismissed, MIDRS moved to have the court’s order certified as final under M. R. Civ.




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P. 54(b). On October 9, 2014, the District Court granted MIDRS’ motion and entered its

Order on Motion for Rule 54(b) Certification. MIDRS filed a timely appeal.

                                STANDARD OF REVIEW

¶11     A party moving for judgment on the pleadings pursuant to Rule 12(c) must

establish that no issues of fact exist and that it is entitled to judgment as a matter of law.

A court must assume that all of the well-pleaded factual allegations in the nonmovant’s

pleadings are true and that all contravening assertions in the movant’s pleadings are false

when evaluating a Rule 12(c) motion. A motion for judgment on the pleadings is

appropriate in situations where all material allegations of fact are admitted or not

controverted in the pleadings, and only questions of law remain to be decided by the

court. Conway v. Benefis Health Sys., 2013 MT 73, ¶ 20, 369 Mont. 309, 297 P.3d 1200.

¶12    The issue of whether a district court properly applied the statute of limitations and

granted a motion for judgment on the pleadings presents a question of law. The standard

of review of a district court’s conclusions of law is whether the court’s interpretation of

the law is correct. Lundquist v. McBeth, 2001 MT 311, ¶ 13, 308 Mont. 1, 38 P.3d 831

(internal citations omitted).

                                       DISCUSSION

¶13 Did the District Court err in granting St. Peter’s motion for judgment on the
pleadings and dismissing the primary complaint as time-barred?

¶14    MIDRS argues that the District Court’s decision in this case was erroneous for

three reasons. First, judgment on the pleadings should have been denied because the

Hospital disputed multiple allegations of material fact set forth in MIDRS’ complaint.



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Judgment on the pleadings is appropriate only where all allegations of material fact are

admitted or not controverted in the pleadings, and only questions of law remain to be

decided by the court. Second, the court erred by construing the pleadings in a manner

favorable to the Hospital and finding as true the Hospital’s contravening allegation that

no new harm to MIDRS or its doctors could have occurred after February 2009. As

noted above, when evaluating a Rule 12(c) motion, the court was required to assume that

all of MIDRS’ well-pleaded factual allegations were true and that the Hospital’s

contravening assertions were false. Conway, ¶ 20. Lastly, MIDRS claims the District

Court committed legal error by concluding that the applicable statute of limitations had

expired before the conduct forming the basis of MIDRS’ claims as stated in the complaint

had occurred.

¶15    In its order of dismissal, the District Court determined that it was the “denial of

staff privileges” in 2009 that MIDRS alleged in its complaint as the cause of its harm.

Based upon this determination, the court ruled that MIDRS’ complaint was untimely.

MIDRS maintains on appeal that the District Court misinterpreted its complaint and that

it was not the 2009 loss of staff privileges or the Hospital’s refusal to extend its exclusive

contract that constituted the anti-competitive activities and caused the harm for which it

seeks relief; rather, it was the Hospital’s action to close its radiology department in July

2011 that gives rise to its claims under the UTPA and for intentional interference with

MIDRS’ prospective advantage. It notes that the District Court acknowledged this in its

October 2014 order on certification, stating:




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              The primary complaint alleged facts arising out of the Hospital’s
       closing of its radiology department in July 2011. As alleged, the decision
       to close the Department was designed to prevent MIDRS from competing
       in the Helena radiology services market and to solidify the Hospital’s
       monopoly power, causing harm to competition in both the provider and
       patient markets in the Helena radiology services market.

MIDRS contends that the District Court’s order on certification is correct, and

contravenes its order of dismissal which was premised upon the court’s conclusion that

all of MIDRS’ claims stemmed from its physicians’ loss of staff privileges in 2009.

¶16    MIDRS argues that the District Court misinterpreted its restraint of trade claims

when it looked only to the background allegations in the complaint pertaining to the 2009

interactions between MIDRS and the Hospital. MIDRS’ doctors assert that the court

failed completely to consider the anti-competitive impact of St. Peter’s 2011 closing of its

radiology department in response to MIDRS’ decision to open a stand-alone radiology

practice. It is these actions that underlie MIDRS’ antitrust and interference claims.

MIDRS maintains that the elements of these claims did not and could not accrue until the

Hospital took the action that constituted antitrust activity, i.e., closing its radiology

department and creating a “horizontal” rather than a “vertical” restraint on trade.

¶17     According to MIDRS, prior to 2011 the Hospital was not a direct competitor in

the radiology provider market and instead entered into exclusive contracts with non-

employee radiologists.    MIDRS further asserts that prior to 2011, applications for

privileges were reviewed for qualifications, and employment by the Hospital was not a

requisite to obtaining medical privileges. MIDRS contends this changed and the Hospital

became a direct competitor in the radiology market in 2011, when it decided that only



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Hospital employees could provide radiological services and precluded non-employee

radiologists from obtaining medical privileges. It was at this point, MIDRS argues, that

the Hospital began to exercise a monopoly power, creating the horizontal restraint on

trade that forms the basis of its antitrust and UTPA allegations.

¶18     As explained by the U.S. Supreme Court in United States v. Topco Assocs., 405

U.S. 596, 92 S. Ct. 1126 (1972), “horizontal” restraint of trade occurs when competitors

at the same level of competition enter into an agreement to allocate the market in a

manner to minimize competition. “Vertical” restraint of trade occurs when parties at

different levels of the distribution chain, for example, manufacturers and retailers, enter

into an agreement that minimizes competition. The U.S. Supreme Court has “reiterated

time and time again that ‘horizontal territorial limitations . . . are naked restraints of trade

with no purpose except stifling of competition.’ Such limitations are per se violations of

the Sherman Act.” Topco, 405 U.S. at 608, 92 S. Ct. at 1133-34 (internal citations

omitted). MIDRS contends that this restraint of trade also violated the UTPA.

¶19    The UTPA prohibits “[u]nfair methods of competition and unfair or deceptive acts

or practices in the conduct of any trade or commerce.”            Section 30-14-103, MCA.

Section 30-14-201, MCA, further provides “[t]he legislature declares that the purpose of

[the Montana UTPA] is to safeguard the public against the creation or perpetuation of

monopolies and foster and encourage competition by prohibiting unfair and

discriminatory practices by which fair and honest competition is destroyed or prevented.

This part must be liberally construed so that its beneficial purposes may be

accomplished.” MIDRS asserts that in closing its radiology department, the Hospital


                                               9
created an unlawful restraint on trade by empowering the Hospital to control the quantity,

quality, and cost of radiology services in Helena, thus driving up prices for patients,

preventing competition, and creating a monopoly.

¶20    As noted above, when considering a motion for judgment on the pleadings, a

court must assume that all of the well-pleaded factual allegations in the opposing party’s

pleadings are true. In addition, a motion for judgment on the pleadings is appropriate

only where all material allegations of fact are either admitted or not controverted in the

pleadings, and only questions of law remain for determination by the court. Conway, ¶

20. Based upon the foregoing and assuming as true MIDRS’ “well-pleaded factual

allegations,” we conclude that the accrual of MIDRS’ claims cannot be determined from

the pleadings alone and that further development of the record is necessary. We have

stated that “[i]f all material issues cannot be resolved on the pleadings, then a summary

judgment motion or a full trial is necessary.” Firelight Meadows, LLC v. 3 Rivers Tele.

Coop., 2008 MT 202, ¶ 10, 344 Mont. 117, 186 P.3d 869 (quoting Charles Alan Wright

& Arthur R. Miller, Federal Practice and Procedure: Civil vol. 5C, § 1368 at 248-51 (3d

ed., Thomson-West 2004)). We therefore reverse and remand for further proceedings.

                                    CONCLUSION

¶21   Reversed and remanded.

                                                /S/ PATRICIA COTTER
We Concur:

/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ MICHAEL E WHEAT


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