N.C. Gen. Stat. § 75-1.1 applies only to conduct “in or affecting commerce.” And under the statute’s plain language, “commerce” doesn’t include professional services rendered by a member of a learned profession.

This exemption has a broader reach than might initially be apparent. This is because a variety of conduct can affect the rendering of professional services.

A new decision from the North Carolina Court of Appeals considers the exemption’s boundaries. This post concerns that decision, called Hamlet H.M.A., LLC v. Hernandez.

The case pits a hospital against a doctor. The hospital (Sandhills Regional Medical Center) sued the doctor (Pedro Hernandez) for failing to fulfill an employment agreement. Hernandez counterclaimed, alleging that Sandhills duped him into signing the agreement. His counterclaims included an alleged violation of section 75-1.1, but the trial court dismissed that claim based on the learned-profession exemption.

Sandhills won a judgment at trial. On appeal, Hernandez raised multiple issues, including the dismissal of his 75-1.1 counterclaim.

The Court of Appeals started its analysis by characterizing the issue as one of “first impression.” It framed the question as whether the learned-profession exemption “applies to a dispute between a physician and a hospital relating to alleged false claims made by the hospital to induce the physician to enter into an employment contract.”

This careful framing suggests that the Court was concerned about its opinion’s precedential effect. More on that below.

The Court of Appeals then reviewed two of its prior decisions that applied the exemption to conduct that did not directly involve the rendition of medical services.

First, a 2014 decision called Wheeless v. Maria Parham Medical Center applied the exemption to a doctor’s 75-1.1 claim about a hospital’s complaint to the North Carolina Medical Board that concerned the doctor’s conduct. The Court of Appeals applied the exemption even though the relevant conduct was the Medical Board complaint, not the doctor’s rendition of services.

Over thirty years earlier, the Court of Appeals applied the exemption to another case about a hospital’s conduct. In Cameron v. New Hanover Memorial Hospital, the Court of Appeals concluded that section 75-1.1 did not apply to a claim about the hospital’s denial of staff privileges.

Having reviewed Wheeless and Cameron, the Court of Appeals concluded that the fact pattern in Hamlet involved materially different circumstances that justified not applying the exemption. In the Court’s view, Hamlet concerned “negotiations regarding a business arrangement,” which was fundamentally “a business deal, not rendition of medical services.”

Returning (as promised) to the earlier discussion of precedent:  the Court forecasted that the application of the exemption here would mean that the exemption would apply to “any business arrangement between medical professionals.”

The Court then gave an example. If a physician entered into a lease for space in a medical office building owned by a group of physicians or hospital and sought to bring a 75-1.1 claim based on a lease dispute, that dispute—in the Court’s view— “should be treated no differently than a similar lease arrangement for parties in any other business.” The Court explained that the lease arrangement does not arise from the rendition of professional services and has no effect on the quality of the medical care provided, even if medical services would be provided in the building.

This reasoning drew a dissent from Judge Mark Davis, who emphasized that prior decisions of the Court of Appeals make clear that the exemption “is to be construed broadly.”

Judge Davis, moreover, viewed Cameron as analogous to Hamlet. Both cases involved a dispute between medical professionals and a hospital. And in both cases, a hospital made arrangements for medical professionals to provide care to patients at its facilities.

Put another way, Sandhills negotiated with Dr. Hernandez to make arrangements for the hospital to provide medical care to its patients. The agreement at the heart of the case even had specific requirements about Dr. Hernandez being on emergency call and accepting unassigned patients.

On this basis, Judge Davis concluded that the dispute in Hamlet affected the rendition of professional services, both by the hospital and by Dr. Hernandez, and that the learned-profession exemption should apply.

After unsuccessfully seeking rehearing en banc, Sandhills on Friday filed a notice of appeal in the Supreme Court of North Carolina based on Judge Davis’s dissent. An opinion by the Supreme Court on this issue would be a notable development in the jurisprudence on the exemption.

In the meantime, Hamlet represents a meaningful data point in drawing the learned-profession exemption’s boundaries. Although that exemption is broadly construed, the contours of that breadth might not be firmly settled.

Author: Stephen Feldman