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Malak v. Associated Physicians Inc.

February 24, 1986


Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 83 C 464 - Michael S. Kanne, Judge.

Author: Cummings

Before CUMMINGS, Chief Judge, and CAMPBELL, Senior District Judge.*fn*

CUMMINGS, Chief Judge. This case involves a suit brought under 42 U.S.C. § 1983 by plaintiff Thaddeus J. Malak, M.D. ("plaintiff") against numerous defendants. Plaintiff appeals from the district court's grant of summary judgment in favor of all the defendants. For the reasons set out below, we reverse.


The ensuing analysis will be clearer by classifying the defendants into two groups. One group is the "public group," consisting of the Porter Memorial Hospital ("PMH"), its Board of Trustees, Arthur S. Malasto ("Malasto"), and Sharon Simon ("Simon"). The second group is the "private group," consisting of Associated Physicians, Inc. ("API"), Martin J. O'Neill, M.D. ("O'Neill"), and Clark McClure, M.D. ("McClure"). PMH is a public hospital. Malasto is the head administrator of PMH, and functions as its chief executive officer.*fn1 Simon is the head nurse in PMH's emergency room. API is an Indiana corporation which contracted with PMH to operate PMH's emergency room and staff it with physicians. O'Neill is the president of API and McClure is its secretary. O'Neill and McClure are chairmen of the emergency department at PMH and medical directors of emergency services at PMH.

Plaintiff was associated with PMH and was employed by API for five years as an emergency-room staff physician. Plaintiff was given notice of his termination by API in April 1983, and PMH subsequently revoked his staff privileges at the hospital. Plaintiff claims that the private group of defendants conspired with the public group of defendants to terminate him because he publicly criticized the emergency-room conditions at PMH, the conspirators thereby violating both the First and Fourteenth Amendments of the United States Constitution. Plaintiff also alleged a second count of liability against only the public group of defendants. Defendants countered that plaintiff's employment contract with API provided for termination without cause, and that API alone simply exercised its right to terminate him.

The defendants filed various motions under Rule 12(b) of the Federal Rules of Civil Procedure. On August 16, 1983, O'Neill filed a motion under both Rule 12(b)(1) and Rule 12(b)(6) which argued that there was no subject matter jurisdiction under either 28 U.S.C. § 1331 or 28 U.S.C. § 1343(3) because there was no state action, and that there was no constitutional claim against O'Neill. On August 18, 1983, PMH and its Board of Trustees also filed a motion to dismiss under both Rule 12(b)(1) and Rule 12(b)(6). On that same date the district court held a hearing on plaintiff's request for a preliminary injunction and denied it. At that time, the court heard argument as well on the issues presented in the motions to dismiss. On February 10, 1984, O'Neill, now joined by API and McClure, filed a Rule 12(b)(1) motion which argued that state action is a prerequisite to jurisdiction, and that there was no state action in the instant case.

On March 5, 1985, the district court granted summary judgment in favor of all defendants. Because the court had heard arguments from various parties and would look to facts outside the pleadings, the court treated the February 10, 1984, motion to dismiss as a motion for summary judgment. In a terse sentence devoid of any elaboration, the district court stated that plaintiff failed "to show that any acts undertaken by the defendants constituted 'state action'" (Plaintiff's App. A-2).


Before reaching the issue of whether the conduct of any of the defendants constituted state action, some procedural knots created by the pleadings must be untangled. The district court treated the motion to dismiss as a motion for summary judgment, since the court considered matters outside the pleadings, and cited Fed. R. Civ. P. 12(c) as authority for doing so. This citation is in error; Fed. R. Civ. P. 12(c) allows the conversion of a motion for judgment on the pleadings into a motion for summary judgment, and no defendant ever moved for judgment on the pleadings. Instead, the relevant authority is Fed. R. Civ. P. 12(b), which allows the conversion of a Rule 12(b)(6) motion into a motion for summary judgment when the court considers matters outside the pleadings. The difficulty is that only O'Neill and PMH and its Board of Trustees made 12(b)(6) motions: API and McClure made only a 12(b)(1) motion, while Malasto and Simon did not make any type of 12(b) motion.

There are two responses to this dilemma, the first being a partial solution and the second a complete solution. The partial solution is that the type of 12(b)(1) motion made by API and McClure should be treated as a 12(b)(6) motion where the federal claim is not insubstantial and frivolous, which apparently is what the district court did implicitly in the instant case. API and McClure, in their 12(b)(1) motion, contend that state action is a jurisdictional prerequisite for a Section 1983 suit, and that since the conduct of the private defendants is state action only if they acted jointly with the public defendants, which they did not, plaintiff's suit must fail for lack of jurisdiction. However, plaintiff's basis for jurisdiction with respect to these private defendants under 28 U.S.C. § 1331-state action via joint action with the public defendants-is also an element of plaintiff's federal cause of action under Section 1983. In such a situation, where a challenge to the court's jurisdiction is also a challenge to the existence of a federal cause of action, the Supreme Court has stated that jurisdiction cannot be defeated by the possibility that plaintiff may not have stated a cause of action. Bell v. Hood, 327 U.S. 678, 682, 90 L. Ed. 939, 66 S. Ct. 773 . Instead, the case should be dismissed for lack of jurisdiction only if the claim "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." Bell, 327 U.S. at 682-683.*fn2 Additionally, if plaintiff meets this Bell test, the district court should take jurisdiction and handle defendants' motion as a direct attack on the merits of plaintiff's case. Williamson v. Tucker, 645 F.2d 404, 415 (9th Cir. 1981), certiorari denied, 454 U.S. 897, 70 L. Ed. 2d 212, 102 S. Ct. 396 ; Student Government Association of Wilberforce University v. Wilberforce University, 578 F. Supp. 935, 940 (S.D. Ohio 1983). As the Ninth Circuit explained in Williamson, this method of treating indirect attacks on the merits as 12(b)(6) motions rather than 12(b)(1) motions properly provides more protection to the plaintiff, since under 12(b)(1) the court may determine disputed facts which determine jurisdiction, whereas under 12(b)(6) the court must treat plaintiff's allegations as true, and in addition under Rule 56 must determine that no genuine issue of material fact exists. Williamson, 645 F.2d at 415. This higher level of protection of plaintiff is warranted since in this situation he is in really facing a challenge to the merits of his claim. Id. at 415. By thus treating the 12(b)(1) motion made by the private defendants as an attack on the merits under 12(b)(6), the district court's conversion of the motion into a motion for summary judgment is valid. See 5 Wright & Miller, Federal Practice and Procedure § 1366 (1969) ("The element that triggers the conversion is a challenge to the sufficiency of the pleader's claim supported by extra-pleading material. It is not relevant how the defense actually is denominated.").

The above analysis still does not help Malasto or Simon, neither of whom made a 12(b) motion of any type. However, where one defendant files a motion for summary judgment which the court grants, the district court may sua sponte enter summary judgment in favor of additional non-moving defendants if the motion raised by the first defendant is equally effective in barring the claim against the other defendants and the plaintiff had an adequate opportunity to argue in opposition to the motion. Macon v. Youngstown Sheet & Tube Co., 698 F.2d 858 (7th Cir. 1983). If the district court concluded that there was no state action with respect to PMH and its Board of Trustees or the private defendants because the public defendants were not at all involved in the termination of plaintiff, then the same reasoning would justify a finding of no state action on the part of Malasto or Simon. This reasoning validates not only the district court's grant of summary judgment with respect to Malasto and Simon, but also with respect to API and McClure, and thus provides a complete solution to both Malasto's and Simon's failure to file any motion as well as API's and McClure's failure to file a 12(b)(6) motion.

Even though the foregoing discussion demonstrates that the district court in effect had before it the requisite motions to grant summary judgment with respect to all the defendants, a second procedural difficulty remains: the district court never gave notice to the parties that it intended to convert the 12(b)(6) motions before it into motions for summary judgment, as required by Fed. R. Civ. P. 12(b). See 5 Wright & Miller, § 1366 at p. 683. We have previously held that although a district court certainly should give notice to the parties when the court converts a 12(b)(6) motion into a motion for summary judgment, the failure to do so does not necessarily mandate reversal where nothing else could have been raised to alter the entry of summary judgment. Milwaukee Typo, Etc. v. Newspapers, Inc., 639 F.2d 386, 391 (7th Cir. 1981), certiorari denied, 454 U.S. 838, 70 L. Ed. 2d 119, 102 S. Ct. 144 ; Chicago-Midwest Meat Association v. City of Evanston, 589 F.2d 278, 282 (7th Cir. 1978), certiorari denied, 442 U.S. 946, 99 S. Ct. 2895, 61 L. Ed. 2d 318 . Although the cited cases involve a failure to give notice where the party against whom summary judgment was entered and could not possibly allege any genuine issues of material fact, whereas in the instant case there are genuine issues of material fact, ...

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