## Facts

- Avera Marshall d/b/a Avera Marshall Regional Medical Center (Avera Marshall) was a Minnesota not-for-profit corporation that owned and operated the hospital.
- Avera Marshall’s corporate bylaws placed management authority in the board of directors and required the board to organize the medical staff under medical-staff bylaws approved by the board.
- In 1995, Avera Marshall’s board adopted medical-staff bylaws that included:
  - Article 2.1-1(e), stating the medical staff was subject to the board’s “ultimate authority.”
  - Article 17.2, requiring a two-thirds vote of the eligible medical staff to change the medical-staff bylaws.
  - A priority clause stating that if the medical-staff bylaws conflicted with the corporate bylaws, the corporate bylaws controlled.
- In 2012, the board amended the medical-staff bylaws without submitting the changes for a two-thirds vote of the medical staff.
- Dr. Steven T. Meister and other physicians on the medical staff sued for declaratory relief, seeking a ruling that (1) the medical-staff bylaws were an enforceable contract between Avera Marshall and the medical staff and (2) Avera Marshall could not amend the bylaws unilaterally.
- The district court initially held the medical-staff bylaws were not a contract, and the court of appeals affirmed.
- The Minnesota Supreme Court reversed, holding the medical-staff bylaws were an enforceable contract between Avera Marshall and the medical staff, but it did not decide whether Avera Marshall could amend them unilaterally and remanded for further proceedings.
- On remand, the district court granted summary judgment to Avera Marshall, concluding the board had authority to unilaterally amend the medical-staff bylaws.
- Meister and the other physicians appealed from the summary-judgment decision, resulting in this 2016 court of appeals opinion.

## Issues

1. After the Minnesota Supreme Court held the medical-staff bylaws were an enforceable contract, could Avera Marshall’s board nonetheless unilaterally amend those bylaws despite a provision requiring a two-thirds medical staff vote for bylaw changes?
2. Did interpretation of the governance documents and applicable nonprofit corporate law permit summary judgment for Avera Marshall?

## Decision

- The Minnesota Court of Appeals affirmed the district court’s grant of summary judgment for Avera Marshall.
- The court held that, even though the medical-staff bylaws were contractual, the board could unilaterally amend them under the parties’ governing documents.
- The court concluded that the written corporate bylaws and medical-staff bylaws resolved the dispute as a matter of law, leaving no genuine issue of material fact.

## Legal Principles

- Medical-staff bylaws may be an enforceable contract, but contract interpretation requires reading the bylaws as a whole and in connection with other governing documents that define authority within the hospital’s corporate structure.
- Where medical-staff bylaws expressly state that the staff is subject to the board’s “ultimate authority,” that language limits the extent to which staff procedures can restrict board action.
- A clause stating that corporate bylaws control in the event of a conflict establishes a hierarchy in which the corporate bylaws can override inconsistent provisions in medical-staff bylaws.
- A medical-staff bylaw provision requiring a supermajority staff vote for amendments can be read as governing how the staff proposes or approves changes, without eliminating the board’s reserved authority to approve and revise staff bylaws under the corporate bylaws.
- In a not-for-profit corporate setting, the board’s statutory and bylaw-based responsibility for management supports construing governance documents to preserve final board control over subordinate bylaws that the board is required to approve.

## Conclusion

The court of appeals affirmed summary judgment for Avera Marshall, holding that although the medical-staff bylaws were an enforceable contract, their express subjection to the board’s ultimate authority and their conflict clause favoring the corporate bylaws allowed the hospital board to amend the medical-staff bylaws without obtaining a two-thirds medical staff vote.


Meister v. Marshall, A15-1982 (2016)