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A BREACH OF CONTRACT ACTION IS NOT PROPERLY CONVERTED TO AN ARTICLE 78 PROCEEDING; HERE THE PHYSICIAN SUED THE HOSPITAL FOR FAILING TO HONOR A CONTRACTUAL COMMITMENT TO ADMIT PLAINTIFF TO A RESIDENCY PROGRAM; THE PHYSICIAN’S ACTION WAS PRECLUDED FOR FAILURE TO EXHAUST THE ADMINISTRATIVE REMEDIES UNDER THE PUBLIC HEALTH LAW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the breach of contract action should not have been converted to an Article 78 and the action was precluded by plaintiff-physician’s failure to exhaust the administrative remedies under the Public Health Law. Plaintiff was matched to a residency program at defendant hospital and the hospital was contractually bound to offer the residency to the plaintiff. The hospital sought a waiver which was denied, and the hospital still refused to offer the residency to plaintiff. Plaintiff sued for breach of contract and requested a preliminary injunction. Supreme Court improperly converted the action to an Article 78 (mandamus) proceeding and granted the preliminary injunction. The appellate division held a breach of contract action cannot be converted to an Article 78:

Invoking CPLR 103(c), the Supreme Court erroneously converted the subject branch of the plaintiff’s motion and this action into a proceeding pursuant to CPLR article 78. Under CPLR 103(c), courts are empowered to convert a civil judicial proceeding that was brought in the improper form to the proper form and convert a motion into a special proceeding. Here, the court erred in concluding that a proceeding pursuant to CPLR article 78 was the proper form. “[A] CPLR article 78 proceeding is not the proper vehicle to resolve contractual rights” … . “Indeed, it is well settled that mandamus relief lies only to compel the performance of purely ministerial acts, and may not be used when there are other available remedies at law, such as a breach of contract action” … . * * *

Supreme Court should not have rejected the hospital’s argument that the branch of the plaintiff’s motion which was for preliminary injunctive relief against it should be denied because the plaintiff failed to exhaust his administrative remedies under Public Health Law article 28. Public Health Law § 2801-b(1) makes it an “improper practice” for a hospital to deny, withhold, or terminate professional privileges for a reason unrelated to “patient care, patient welfare, the objectives of the institution or the character or competency of the applicant.” “To enforce the statutory prohibition against improper practices, the Legislature created a two-step grievance process by which a physician may obtain injunctive relief requiring the hospital to restore wrongfully terminated staff privileges” … . “First, the physician must submit a complaint to the [public health and health planning council (hereinafter PHHPC)]” … . “It is the duty of the [PHHPC] to undertake a prompt investigation of the action complained of and to allow the parties to the dispute to submit, in a strictly confidential setting, any relevant information in support of their respective positions” … . “After investigating the physician’s complaint, the [PHHPC] will either direct the hospital to reconsider its decision or inform the parties of its determination that the complaint lacks merit” … . Khass v New York Presbyt. Brooklyn Methodist Hosp., 2023 NY Slip Op 00851, Second Dept 2-15-23

Practice Point: A breach of contract action is not properly converted to an Article 78 proceeding pursuant to CPLR 103(c).

Practice Point: A hospital’s failure to honor its contractual commitment to admit plaintiff physician to a residency program is subject to administrative remedies under the Public Health Law which must be exhausted before bringing suit.

 

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