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April 22, 2024 | Alerts

NJ Supreme Court Vacates $23.4M Award Against Valley Hospital

NJ Supreme Court Vacates $23.4M Award Against Valley Hospital

On April 16, 2024, the Supreme Court of New Jersey issued its decision in Comprehensive Neurosurgical, P.C. v. The Valley Hospital (A-52-22) (087469), a closely watched case in the Hospital Industry.   In an over 60-page unanimous opinion written by Justice Fasciale, the Court vacated a 23.4 million dollar award against Valley Hospital (Valley).  In sum, the opinion holds that the jury was not correctly instructed on Plaintiffs’ good faith and fair dealing claim, that certain of Valley’s attorney-client privileged emails were improperly admitted into evidence and that Plaintiffs’ attorney made improper remarks on summation.  According to the opinion, these cumulative errors deprived Valley of a fair trial and warrant a new one.

In the case, 11 neurosurgeons and their medical practice (Plaintiffs), challenged Valley’s decision to enter into an exclusive agreement with a competing neurosurgical practice for unassigned emergency patients and access to specialized neurosurgery equipment.  Plaintiffs argued that Valley’s decision to grant the exclusive agreement to the other group was based on improper reasons, including alleged retaliation for Plaintiffs’ perceived disloyalty in joining a new nearby hospital.  Valley argued, among other things, that the decision was a valid administrative healthcare decision and that Plaintiffs were diverting patients from Valley to the new hospital.  The jury held in Plaintiffs’ favor finding that Valley breached the implied covenant of good faith and fair dealing when it granted the other group of neurosurgeons the exclusive agreement.

The Supreme Court of New Jersey vacated the jury verdict and remanded the case for further proceedings consistent with its findings.  Some of the highlights of the Court’s decision are as follows.

  • The Court held that medical staff bylaws cannot serve as an underlying contract to support an alleged breach of an implied covenant of good faith and fair dealing claim, nor can a violation of those bylaws support an independent claim for money damages.[1]
  • Similarly, the Court held that Valley’s administrative healthcare decision to award the exclusive agreement, cannot on its own, give rise to a claim for breach of the implied covenant of good faith and fair dealing, but was relevant to Valley’s defense against the good faith and fair dealing claim.
  • Emails authored by Valley’s General Counsel were privileged and admission of those emails into evidence was not harmless.
  • Plaintiffs’ counsel inappropriately commented on the lack of certain crucial evidence after successfully excluding that same evidence.  The Court also held that the evidence, which related to Plaintiffs transferring patients to another hospital, was improperly excluded in the first instance.

Ultimately, the Court held that, taken together, these trial errors were substantial and warranted a new trial.

In reaching its conclusions, the Court reinforced the long-standing jurisprudence that hospitals maintain broad discretionary powers in making administrative decisions related to healthcare.   The Court confirmed the sanctity of the attorney-client privilege and showed no tolerance for counsel misstating the record during summation. 

Should you have any questions regarding the above, please contact the author, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].


[1] The Court did find, however, that Plaintiffs raised an issue of fact warranting a trial on the question of whether the parties, through their course of dealing, had entered into an implied contract that gave Plaintiffs access to treat unassigned ER patients.