The New Jersey Supreme Court vacated a $24.3 million award to a group of neurosurgeons over their claim that The Valley Hospital was acting in bad faith and didn’t deal fairly when it signed an exclusive agreement with a competing surgical group.

In a unanimous opinion issued April 16 in the case of Comprehensive Neurosurgical PC v. The Valley Hospital, the state high court reversed the ruling, saying that the jury was incorrectly instructed by the trial judge.

The plaintiff, Comprehensive Surgery filed suit against Valley in 2016 in Bergen County Superior Court. The North Jersey-based group consists of 11 neurosurgeons and their practice, New Jersey Brain and Spine Center.

At the beginning

Comprehensive Surgery began working with Valley in 2003. The group had privileges for hospital and admitting, as well as the right to cover unassigned emergency patients. They also helped grow Valley’s facilities and surgical offerings by helping establish the hospital’s spine center and neuro-oncology program, along with introducing specialized equipment, such as the Biplane angiography system and the Gamma Knife radiosurgery procedure, according to court records.

However, the relationship soured in 2013. At that time, Hackensack University Medical Center reopened a hospital 6 miles from Valley in Westwood and granted several NJBSC physicians privileges to treat patients.

According to court records, Valley Health System CEO Audrey Meyers expressed in a meeting with Comprehensive that she disliked how they held privileges and leadership posts at both hospitals. A subsequent review by Valley determined Comprehensive neurosurgeons had lower inpatient and outpatient volumes, performed fewer procedures and overall “rendered a lower quality of patient care” than another group of neurosurgeons.

Two years later, Valley signed an exclusive agreement with Columbia Group, granting the practice rights over unassigned emergency patients and access to the specialized equipment, including the gamma knife and biplane equipment.

In suing Valley, Comprehensive argued they were being essentially shut out of Valley’s emergency room and neurosurgery suite as punishment for joining another hospital, and that it was not a valid administrative health care decision.

‘Judge failed to instruct the jury’

In 2020, a jury returned a no-cause verdict on a breach-of-contract claim but found in favor of the plaintiffs on an implied covenant claim and awarded $24.3 million in sustained damages.

Two years later, an appeals court upheld the jury’s award in favor of the neurosurgeons over claims that Valley breached the implied covenant of good faith and fair dealing.

In this week’s decision, Justice Douglas Fasciale wrote, “The trial judge failed to instruct the jury that the only underlying contract to which the implied covenant could attach to had to be one beyond the rights afforded by Valley’s medical staff bylaws. Adding to the significant uncertainty created by the jury charge and verdict sheet are the improper admission into evidence of the privileged emails and the improper remarks by plaintiffs’ attorney.”

Those errors could have potentially caused the jury to reach a verdict it otherwise would not have and deprived Valley of a fair trial, according to Fasciale.

He also clarified that since Valley obtained a no-cause verdict on the breach-of-contract claim, that issue cannot be tried again. But, at a retrial, a jury must decide whether the hospital breached an implied covenant of good faith and fair dealing on an underlying contract beyond the rights and obligations within Valley’s medical staff bylaws.

“If plaintiffs sustain their burden on their implied covenant of good faith and fair dealing claim – without reference to privileged emails containing legal advice or suggestions about the absence of evidence regarding patient transfers – money damages are appropriate,” he wrote.

Former AGs face off

The case also featured two former state attorneys general facing off against each other.

Christopher Porrino, a partner at Roseland-based Lowenstein Sandler, represented Valley. During Republican Gov. Chris Christie’s administration, Porrino served as New Jersey attorney general from 2016-2018.

Peter Verniero, chair of Newark-headquartered Sills Cummis & Gross’ corporate investigations and integrity and appellate practice groups, represented the surgeons. He previously served as state attorney general under Republican Gov. Christine Todd Whitman, from 1996-1999. After that, he was a justice on the New Jersey Supreme Court before returning to private practice.

Porrino said in a statement, “The Supreme Court of New Jersey … affirmed long-standing jurisprudence that hospital bylaws do not constitute a contract. The court held that multiple errors during trial required reversal of the judgment.”

He went on to describe the justices’ decision as “an important win for The Valley Hospital, health care systems across New Jersey and the country, as it underscores the deference to be afforded hospitals in making policy decisions that further patient care and public health objectives.”

Porrino went on to say, “The decision also reaffirmed that legal advice provided by in house counsel is confidential and privileged and reinforced the core principle that plaintiffs’ counsel may not ‘misstate evidence or distort the factual picture’ in summation at trial.”

Looking ahead

Verniero said in a statement, “We are pleased that the New Jersey Supreme Court rejected the position that physicians do not have the ability to seek monetary damages based on wrongful conduct of a hospital and, instead, recognized that the course of conduct between physicians and hospitals can support an implied contract between those parties, including a claim by physicians that a hospital has breached the implied covenant of good faith and fair dealing.”

He called the decision “an important reinforcement of our law that will enable physicians who have been treated unfairly or in bad faith to seek redress in our courts like any other litigant.”

“Our clients look forward to a retrial on the merits and are confident of success before a new jury,” Verniero said.