Shareholder Liability for the Misconduct of Others: What is “Direct Supervision and Control?”
September 15, 2014
Physicians often practice through a limited liability entity to shield the physician from practice liabilities. In New York, such entities may take the form of a professional service corporation, professional limited liability company, or professional limited liability partnership. Regardless of the type of entity selected, professionals in New York remain “personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by him or her or by any person under his or her direct supervision and control while rendering professional services on behalf of [the entity],” See NY BCL§1505(a); NY LLCL §1205; N.Y. PTR. LAW § 26(c).
The issue of whether certain alleged tortfeasers were under a physician-shareholder’s “direct supervision and control” was recently presented in Schaefer v. Mackinnon, 117235/09, NYLJ 1202669507383, at *1 (Sup., NY, Decided August 27, 2014). In Schaefer, Plaintiffs Frank Schaefer and his wife, Maria Schaefer, brought a medical malpractice suit against Broadway Cardiopulmonary, P.C. and its four shareholders for injuries Mr. Schaefer sustained during a cardiac stress test. Additional defendants include the alleged tortfeasers, David Mackinnon, M.D., a non-shareholder physician, a medical assistant and a medical technologist, all employees of Broadway Cardiopulmonary, P.C. According to the record, the test was ordered by Dr. Mackinnon, but Dr. Mackinnon did not interview or examine Mr. Schaefer prior to or during the course of testing. The test was administered by the medical technologist who apparently left the room during testing. Mr. Schaefer passed out and fell resulting in injuries.
The defendant shareholders moved for summary judgment arguing they did not directly supervise or control the alleged tortfeasers during the rendering of professional services as the test was performed by the other named defendants and not the shareholders. Plaintiffs opposed the motion stating the shareholders failed to implement guidelines, controls and procedures for proper and safe testing.
In analyzing the issue, Justice Joan B. Lobis looked to the Appellate Divisions ruling in Wise v. Greenwald, 208 A.D.2d 1141 (3rd Dep’t 1994).
“In Wise, the appellate court considered the liability under Section 1505(a) of the Business Corporation Law of a shareholder of a dental practice, whose employee dentist allegedly negligently extracted Wise’s tooth. Indicia of liability included the shareholder’s hiring responsibilities, setting hours of operation, evaluation of employees, and whether any intermediary supervisor lay between the shareholder and employee whose actions were at issue. Id. at 1142. Applying these factors, the Wise Court affirmed the denial of the shareholder’s motion for summary judgment. Id. at 1143.”
Turning to the case at hand, Justice Lobis looked to the testimony of the defendants finding that
• the four shareholders met at least every two months to discuss practice operations;
• all four shareholders signed the office lease, approved of the imaging machine at issue, and ordered medical and office supplies;
• all four shareholders hired and/or evaluated Dr. Mackinnon and the defendant medical technologist;
• one of the shareholders regularly discussed operational issues and staff scheduling with Dr. Mackinnon;
• the shareholders had the power to terminate employees;
• the medical technologist testified he reported directly to one of the shareholders yet he had not been trained or given procedures to follow in operating the imaging machine, he failed to monitor blood pressure, respiration or pulse before the resting portion of the stress test and he was not instructed to remain in the room with the patient during the equipment’s operation.
Based on the record, Justice Lobis found that genuine issues of material fact remain for a jury to determine whether the shareholders are liable for the actions of other persons at the practice.
Direct supervision and control by a shareholder-physician goes beyond supervision of the professional care provided. Shareholder-physicians who take on administrative oversight responsibilities can be liable if they fail to properly train and control persons rendering professional services for the practice.