In an opinion released on December 31, 2014, the Supreme Court of Minnesota held that medical staff bylaws can be an enforceable contract and that a hospital’s medical staff (as an unincorporated association) can have the capacity to bring suit. Med. Staff of Avera Marshall Reg’l Med. Ctr. v. Marshall, No. A12–2117, 2014 WL 7448532 (Minn. Dec. 31, 2014).

In 2012, without the consent or approval of the medical staff, the governing board of Avera Marshall Regional Medical Center repealed the medical staff bylaws and replaced them with a revised version. Unhappy with the revisions, the medical staff brought suit seeking to enjoin the hospital from enforcing the revised bylaws. Both the district court and the court of appeals granted summary judgment for the hospital, concluding that the medical staff did not have the capacity to bring suit and that the bylaws were not an enforceable contract.

On appeal, the hospital argued that the bylaws were not an enforceable contract because the hospital had a pre-existing duty under Minnesota law and the hospital’s own corporate bylaws to adopt medical staff bylaws. The Supreme Court of Minnesota rejected this argument, finding that the bylaws enacted by the hospital went well beyond the minimum legal requirements. The court concluded that the bylaws were supported by consideration because, before a physician could be granted privileges at the hospital, the physician was required to agree to abide by the bylaws. Similarly, the hospital could choose whether to grant the physician privileges or not. Accordingly, the court found that the bylaws were an enforceable contract between the hospital and the medical staff.

Additionally, as a matter of first impression, the court held that the medical staff, as an unincorporated association, had the capacity to sue the hospital under Minn. Stat. § 540.151, which allows persons who associate under a common name to sue or be sued in that common name. The court of appeals had concluded that the medical staff was not a party that could bring suit because it was not its own “ultimate creator,” did not own any property, and could not contract debt or pay bills. However, the Supreme Court of Minnesota found that, under the plain language of Minn. Stat. § 540.151, as an incorporated association, the medical staff had the capacity to bring suit and to be sued.

Two justices dissented on the grounds that there was no mutual consideration. The dissent, noting that there is a split of authority on whether bylaws are an enforceable contract, agreed with the hospital’s argument that the hospital had a pre-existing duty to formulate and adopt bylaws, thus negating consideration. The dissent concluded that, even apart from the lack of consideration, there was no mutual assent because the hospital’s board of directors retained the ultimate authority to make final decisions and, thus, the hospital never agreed to be bound by the terms of the bylaws.

To view the court’s opinion, click here.

Reporter, Isabella Edmundson, Atlanta, + 1 404 572 3527, iedmundson@kslaw.com.