Pagan v. Sarasota County Public Hospital BoardAnnotate this Case
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
VALERIE PAGAN and JAMI PAGAN,
SARASOTA COUNTY PUBLIC
HOSPITAL BOARD, d/b/a SARASOTA )
MEMORIAL HEALTH CARE SYSTEM; )
SMH PHYSICIAN SERVICES, INC., a )
Florida not-for-profit corporation, d/b/a )
FIRST PHYSICIANS GROUP OF
SARASOTA; KRISTEN L. PAULUS,
M.D.; MICHAEL M. SHRODER, M.D.; )
AUDREY ALOISE ROEHRIG; and
FLORIDA PHYSICIANS INSURANCE )
Opinion filed August 13, 2004.
Appeal from the Circuit Court
for Sarasota County; Harry M.
Mark Dungan of Icard, Merrill,
Cullis, Timm, Furen & Ginsburg, P.A.,
Sarasota, for Appellants.
Case No. 2D02-5672
David A. Wallace of Willliams, Parker,
Harrison, Dietz & Getzen, for Appellees
Sarasota County Public Hospital Board,
SMH Physician Services, Inc., Kristen L.
Paulus, M.D., and Michael M. Shroder, M.D.
Stephen E. Day and Rhonda B. Boggess
of Taylor, Day & Currie, Jacksonville,
for Appellee First Professionals Insurance
Company, Inc., f/k/a Florida Physicians
No appearance for Appellee Audrey Aloise
Joel S. Perwin of Podhurst Orseck, P.A.,
Miami, for Amicus Curiae Florida Trial
ALTENBERND, Chief Judge.
Valerie and Jami Pagan appeal a summary final judgment that was
entered in an unusual action for declaratory relief filed by Sarasota County Public
Hospital Board (Hospital Board) and SMH Physician Services, Inc., d/b/a First
Physicians Group of Sarasota (First Physicians Group). The Hospital Board and First
Physicians Group sought a legal ruling that First Physicians Group and the doctors who
practiced medicine through this nonprofit corporation were entitled to all the benefits of
sovereign immunity. See § 768.28, Fla. Stat. (2001). The trial court's judgment so rules
as to the Pagans' claim. We conclude that the Pagans have not demonstrated a basis
that entitles them to receive a reversal of this judgment.
On the other hand, it is equally clear that the complex issues presented by
this action for declaratory relief were not fully litigated and that the trial court did not
intend the ruling to affect other persons who may be similarly situated to the Pagans.
Accordingly, we decline to adopt the position argued by the Hospital Board and First
Physicians Group that this ruling has broad application. Although the trial court's order
contains language broader than necessary to decide the dispute between the Pagans
and First Physicians Group, we limit the ruling to those parties. Whether this nonprofit
corporation and all of the forty to fifty doctors who practice in this group are entitled to
governmental immunity in all cases is not an issue that can be resolved on this record.
I. THE CREATION OF FIRST PHYSICIANS GROUP
The Hospital Board, which is comprised of nine publicly elected members,
is the governing board of the Sarasota County Public Hospital District. The Hospital
Board was created by a special act of the legislature in 19491 at a time when private,
for-profit corporations played little role in the construction of hospitals. It is undisputed
that such hospital boards and their employees can possess the protections provided by
sovereign or governmental immunity, subject to the limited waiver of sovereign immunity
contained in section 768.28. See, e.g., Eldred v. N. Broward Hosp. Dist., 498 So. 2d
911 (Fla.1986); Brown v. N. Broward Hosp. Dist., 521 So. 2d 143 (Fla. 4th DCA 1988);
Lower Fla. Keys Hosp. Dist. v. Littlejohn, 520 So. 2d 56, 57 (Fla. 3d DCA 1988); see
also Hillsborough County Hosp. Bd. v. Taylor, 546 So. 2d 1055 (Fla. 1989).
The Hospital Board's enabling legislation provides that the Hospital Board
is "authorized and empowered":
(q) To the extent permitted by the Constitution and laws
of this state, to establish, operate, or support subsidiaries
and affiliates, either for profit or not for profit, to assist the
hospital board in fulfilling its declared public purpose of
provision for the health care needs of the people of the
Ch. 26468, Laws of Fla. (1949).
hospital district . . . . The establishment, operation, or
support of a subsidiary or affiliate corporation . . . is hereby
declared to be a public purpose and necessary for the
preservation of the public health and for a public use and for
the welfare of the hospital board and inhabitants of the
Ch. 26468, Laws of Fla. (1949), as amended by ch. 86-373, § 1, Laws of Fla.
Based upon this provision, in 1994 the Hospital Board voted at a public
meeting to create SMH Physician Services, Inc., as a nonprofit corporation. The
Hospital Board's creation of this nonprofit corporation was apparently justified on the
theory that Sarasota County did not have an adequate supply of primary care physicians, that market forces within the private sector could not supply these physicians,
and that governmental action was necessary to assure an adequate supply of primary
care physicians for the people of Sarasota County.2 Once incorporated, the corporation
began providing medical services under the fictitious name of First Physicians Group.
First Physicians Group grew rapidly. By the time this lawsuit was filed in
2001, the group included more than forty physicians practicing in a wide range of
specialities. It does not have a single location, but has doctors in about fifteen separate
locations.3 The group has apparently attracted a few doctors into the community, but
our record suggests that most of the members of this group were doctors practicing in
Sarasota County in 1994 who have simply merged their medical practices into this
Our record does not contain any studies or data that may have been
generated to support these conclusions.
Our record contains information from a website that provides more detailed
information about this group. See http://www.firstphysiciansgroup.com.
Although First Physicians Group is a nonprofit corporation, this is not a
group of doctors that is serving primarily or only the poor. These doctors appear to
accept patients and receive payments from their patients and insurance companies just
like any private clinic or professional association of physicians. The Hospital Board
does not appear to control these doctors' fees or the selection of their patients. The
doctors in this group are only required to perform eighteen hours of community service
each year. The corporation is a nonprofit corporation, but the physicians within the
group earn large salaries established by complex production formulas similar to those
used in private sector medical groups. In 2000, many of the physicians had incomes in
excess of $200,000 and several had incomes in excess of $400,000.
The Hospital Board created this nonprofit corporation, and it has the
power to dissolve it. It used government money to create this corporation. The Hospital
Board elects the nine members of the corporation's board, and a majority of those
elected must be sitting Hospital Board members. The corporation actually runs at a loss
and receives additional government funds annually to cover its expenses.4 The doctors
in this group are not required to admit their patients to Sarasota Memorial Hospital.
Their patients may be admitted to other hospitals in the community. If the Hospital
The deposition of G. Duncan Finlay, M.D., the president and CEO of Sarasota
Memorial Health Care System, indicates that the Hospital Board infused more than
$4,000,000 into this nonprofit corporation in fiscal year 2001. Dr. Finlay explained that
when the physicians in this group were in private practice they generated income from
laboratory work and x-rays. This work is now performed by other groups controlled by
the Hospital Board. Apparently, the infusion of government money into this nonprofit
corporation is designed to offset or compensate the doctors for this loss in personal
Board decided to dissolve the corporation, the corporation's remaining assets would
revert to the Hospital Board.
II. THE SIGNIFICANCE OF GOVERNMENTAL IMMUNITY
FOR FIRST PHYSICIANS GROUP, ITS DOCTORS,
AND PATIENTS IN SARASOTA COUNTY
Since the creation of this nonprofit corporation, First Physicians Group has
taken the position that it is a governmental entity and that the doctors within the group
are government employees. Patients have disagreed. The outcome of this dispute has
significant ramifications for medical malpractice lawsuits, for First Physicians Group, for
the doctors it employs, and for their patients.
If these doctors do not have the benefit of governmental immunity, then
their patients can pursue malpractice claims just like other patients bring claims against
other doctors. The duty that a typical doctor owes to a patient is governed by the
professional negligence standard, which generally requires that the doctor provide that
level of care that a similar and reasonably careful physician would provide. See §
766.102(1), Fla. Stat. (2003); Fla. Std. Jury Instr. 4.2(a). On the other hand, if the
doctors at First Physicians Group receive the benefit of governmental immunity, they
can only be personally sued if they act "in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety, or property."
See § 768.28(9)(a), Fla. Stat. (2003).
For First Physicians Group the difference is equally significant. If it does
not possess governmental immunity, it will be vicariously liable to its patients for the
actions of its doctors just like any other private medical professional corporation. Its
liability will not have any special limits or caps that are different from the rules that apply
to for-profit medical professional corporations. If it is an instrumentality of a
governmental agency, then it cannot be liable for a patient's claim in excess of $100,000
unless the legislature orders it to pay the claim. See § 768.28(5), Fla. Stat. (2003).
Likewise, claims against it will be controlled by the governmental presuit procedures,
and attorneys representing patients against First Physicians Group will be limited to a
twenty-five percent contingency fee. See § 768.28(6), (8), Fla. Stat. (2003).
It is understandable that First Physicians Group, the medical community,
and patients within Sarasota County would wish to obtain a final legal decision
establishing whether this method of creating a nonprofit corporation controlled by a
government board is effective in allowing doctors to obtain immunity from malpractice
suits without sacrificing the income of private practice. If this method works, then
economically it may be logical for many local physicians to join the nonprofit group. It
might also be logical for many local patients to seek health care in nearby counties
where doctors remain personally and professionally responsible to the patients and
liable for negligence based upon the usual, reasonable levels of patient care.
III. THE UNUSUAL ACTION FOR DECLARATORY RELIEF
Sovereign or governmental immunity is usually raised on a case-by-case
basis as an affirmative defense by both the governmental agency and its employees. In
this case, however, the Hospital Board and First Physicians Group decided to file a
separate action for declaratory relief seeking a definitive ruling that they were entitled to
sovereign immunity as a matter of law.
The complaint for declaratory relief was filed in June 2001 by the Hospital
Board, First Physicians Group, and three of its physicians: Carlos F. Caballero, M.D.,
Kristen L. Paulus, M.D., and Michael M. Shroder, M.D. These plaintiffs sued Florida
Physicians Insurance Corporation, Inc., which is the professional liability insurance
company for First Physicians Group and its doctors. They also sued Valerie and Jami
Pagan, Mary Colonese, and Audrey Aloise Roehrig.
It is clear that Florida Physicians Insurance Corporation was not truly an
adverse party in this action. It has an exclusion in its insurance policy that limits its
coverage in the event that the insured has governmental immunity. Thus, First
Physicians Group was in the odd, if not unique, position of suing its insurance company
to prove that the insurance company was not obligated to provide it with certain
coverage. Florida Physicians Insurance Company apparently concluded that it would
benefit if First Physicians Group and its doctors had limited liability. Thus, it never took
an adversarial role in the trial court and has aligned itself with its insureds in this appeal.
The complaint for declaratory judgment described the remaining defendants as persons who had already filed medical malpractice suits against First
Physicians Group and one or more of its doctors. The complaint admitted that First
Physicians Group and the relevant doctors had already raised governmental immunity
as a defense in the pending lawsuits but claimed a need to resolve the legal issue as to
these parties in a separate proceeding.
In describing each of the defendants who were medical malpractice
plaintiffs in separate pending lawsuits, the complaint alleged simply that Audrey Aloise
Roehrig sued Dr. Caballero for "failing to use the appropriate standard of care in his
treatment of" her. As to Mary Colonese, the complaint with equal brevity claimed that
she has sued Dr. Paulus. Finally, as to the Pagans, the complaint alleged that they
sued Dr. Shroder for a failure to use the appropriate standard of care in his treatment of
Valerie Pagan. No further detail about these malpractice claims was ever alleged or
developed below. Because of the limited record in this case, we have no information
whatsoever about the treatment of Mrs. Pagan by Dr. Shroder.
Two months after the complaint for declaratory relief was filed, Dr.
Caballero voluntarily withdrew as a plaintiff. Thus, he ceased to be a party to the
proceedings. The party who had sued him, Ms. Roehrig, initially moved to dismiss the
action for declaratory relief. Later, in December 2001, Altom M. Maglio, Esquire, filed
an answer on her behalf. Since that time, she has not participated in the lawsuit and
the parties seem to have stopped serving her attorney. The order granting summary
judgment, the final judgment, and the notice of appeal were not served on Ms. Roehrig
or her lawyer. Thus, we can only assume from this record that she is either still an
active party in the trial court and that no judgment has been entered against her, or that
she was somehow dismissed from the action by documents that are not in our record.
At approximately the same time that Dr. Caballero withdrew from the
lawsuit, the plaintiffs filed a notice of voluntary dismissal as to Mary Colonese. However, Dr. Paulus, who allegedly was her treating physician, did not withdraw from the
lawsuit. Following the dismissal of Mary Colonese, it is not obvious that Dr. Paulus has
any legal need to resolve the question of immunity in this action.
As a result of these shifts in the action for declaratory relief, it soon
became a lawsuit in which the Pagans' claim was the only case truly in controversy and
the lawsuit was structured only to obtain a resolution of the affirmative defense that First
Physicians Group had earlier filed in the Pagans' malpractice lawsuit. Although the
Pagans moved to dismiss the complaint for declaratory relief on the ground that it was
an improper lawsuit to resolve this affirmative defense, that motion was denied.5
Other parties who had pending claims against First Physicians Group
apparently became aware of this lawsuit and were concerned that it could have a
binding effect on their claims. Accordingly, separate attorneys representing Maria
Torres, Judith Brandt, and Janie Sweet each filed motions to intervene and various
documents and attachments supporting their motions.6 In March 2002, these motions to
intervene were denied in two orders that expressly declared that the intervenors have
no legal interest in the outcome of this declaratory judgment action. The trial court
ordered and adjudged that "nothing adjudicated in this action will be binding or have any
effect by way of res judicata, [or] collateral estoppel" on the intervenors. See
§ 86.091, Fla. Stat. (2001) (providing in declaratory judgment action that "all persons
may be made parties who have or claim any interest which would be affected by the
declaration. No declaration shall prejudice the rights of persons not parties to the
proceedings"). Thus, it is clear that the trial court decided to resolve only the issue of
the affirmative defense raised by First Physicians Group in the Pagans' medical
IV. THE SUMMARY JUDGMENT HEARING
The Hospital Board and First Physicians Group filed motions for summary
judgment. The Pagans filed a competing motion for summary judgment. These
The Pagans have not challenged the denial of their motion to dismiss in this
appeal. Accordingly, we do not rule upon the correctness of that order.
Indeed, approximately one-third of our entire record is consumed by the filings
of the parties who wished to intervene.
motions were heard by the trial court in October 2002. The parties filed unusually
limited materials prior to this summary judgment hearing. The record contains the
affidavit of Della Shaw, who is the chief operating officer of First Physicians Group. It
also contains a deposition of Ms. Shaw taken in the medical malpractice suit filed by
Mary Colonese, and another deposition taken in the medical malpractice suit filed by
Maria Torres, one of the unsuccessful intervenors. It contains the affidavit of G. Duncan
Finlay, M.D., the chief executive officer of Sarasota Memorial Hospital and the Sarasota
Memorial Health Care System. It also contains his deposition, which had been taken for
purposes of this action and numerous other malpractice lawsuits. Finally, it contains a
short affidavit from Brad Lerner, the chief medical administrative officer for First
The record contains no pleadings or discovery material from the Pagans'
lawsuit. Thus, we are in the odd situation of affirming a ruling on an affirmative defense
when we know virtually nothing about the lawsuit. There are no depositions or affidavits
from any of the doctors involved in the treatment of Mrs. Pagan or any other patient.
We know very little about how these doctors practice medicine or how their employment
by a nonprofit corporation created by a governmental entity affects that practice.
Apparently, as a matter of litigation tactics, both sides decided that the
controlling issue for purposes of summary judgment was whether the Hospital Board
exercised sufficient control over First Physicians Group to be considered an instrumentality of the Hospital Board, and both sides believed that the materials in the record
were sufficient to decide this issue in their favor. Thus, various other legal and public
policy issues that have been argued on appeal were neither raised nor preserved in the
As to the specific issue argued at summary judgment, which revolved
around whether the Hospital Board controlled First Physicians Group, the undisputed
facts before the trial court showed that First Physicians Group was created by the
Hospital Board, initially funded by the Hospital Board, and remains partially funded by it.
The Hospital Board has the power to dissolve First Physicians Group and to claim any
remaining assets upon dissolution. The nine members of First Physicians Group's
board of directors are elected by the Hospital Board and serve at the pleasure of the
Hospital Board. Under the bylaws and articles of incorporation of First Physicians
Group, a majority of its board of directors must be composed of sitting Hospital Board
members. The chief executive officer of the Sarasota Memorial Health Care System is
required to also be president of First Physician Group. Approximately forty physicians
have entered into employment agreements with First Physicians Group that provide for
full-time employment with First Physicians Group and prohibit the maintenance of
private practices or the treatment of any patients other than patients of First Physicians
At the hearing, the Hospital Board and First Physicians Group successfully
argued that "the structure dictates the control" and that the Hospital Board had
structural control of First Physicians Group and therefore First Physicians Group and its
employees were "agencies" of the Hospital Board entitled to sovereign immunity. See,
e.g., Prison Rehabilitative Indus. & Diversified Enters., Inc. v. Betterson, 648 So. 2d 778
(Fla. 1st DCA 1994); Shands Teaching Hosp. & Clinics, Inc. v. Lee, 478 So. 2d 77 (Fla.
1st DCA 1985). The Pagans similarly focused on the Hospital Board's structural control
of First Physicians Group as the decisive issue in determining whether First Physicians
Group was a corporation primarily acting as an instrumentality or agency of the state,
counties, or municipalities. See § 768.28(2). The Hospital Board argued that the
doctors would have immunity if they were directly employed by the Hospital Board to
work inside the hospital and that the creation of the nonprofit corporation did not alter
At the conclusion of these arguments, the trial judge stated:
It seems to me that what the hospital is doing is spreading
around their sovereign immunity because of what is
perceived to be the malpractice crisis.
However, in following the law, I mean, I'm not here for
public purpose--public policy purpose, you know, that's really
not what I'm here for today, because I think it stinks. I think
it's wrong. I think it's uncompetitive and I think the hospital--I
think they ought to fix it by doing away with the independent
corporation and just have these people as employees of the
hospital. There would be no question, you know, but
anyway, I can't tell them how to do their business.
In following the law, it appears that they followed what
they have to do to create this subsidiary or affiliate, whatever
you want to call it, and I'm going to grant summary judgment.
I find that they're entitled to sovereign immunity, as much
as I think it's bad public policy, and I hope that an appellate
court would consider all of those arguments.
The trial court then entered a summary judgment order that stated:
"Plaintiffs' Motion for Judgment is hereby granted. [First Physicians Group] and each of
its employee physicians are entitled to sovereign immunity under Florida Statutes
§ 768.28." This language was repeated in the final judgment.
In light of the limited arguments made below and thus preserved for
appellate review, and in light of the existence of case law that supports the trial court's
conclusions based on those arguments, the Pagans have not demonstrated a basis for
this court to reverse the final summary judgment in this case. See, e.g., Betterson, 648
So. 2d 778. We therefore affirm the final summary judgment as to these parties.
We recognize that the language of the trial court's orders was substantially
broader than was necessary to resolve the dispute between First Physicians Group and
one or two of its doctors, on one side, and the Pagans, on the other side. The language
could be misread to have binding effect on the intervenors or other nonparties.
However, the trial court clearly did not intend this, and section 86.091 does not permit it.
See also Fasig v. Fla. Soc'y of Pathologists, 769 So. 2d 1151, 1154 (Fla. 5th DCA
2000). Dr. Caballero affirmatively opted out of this ruling, and the great majority of
doctors at First Physicians Group have neither been involved in these proceedings nor
asserted a claim of sovereign immunity to limit their own liability to claims of wanton and
willful misconduct. The trial court's ruling is restricted to the claim between the Pagans
and Dr. Michael M. Shroder and First Physicians Group as Dr. Shroder's employer.
It appears that the Hospital Board, First Physicians Group, and the two
physicians who remain in this litigation are seeking an appellate court opinion holding,
as a matter of law, that First Physicians Group and its employees are entitled to
sovereign immunity in any medical malpractice action. It is a long-standing rule of
appellate jurisprudence that the appellate court should not undertake to resolve issues
which, though of interest to the bench and bar, are not dispositive of the particular case
before the court. Marion County Hosp. Dist. v. Akins, 435 So. 2d 272, 273 (Fla. 1st
DCA 1983). Accordingly, while we affirm the trial court's ruling as it affects these parties
on the basis of this limited record and based on the specific issues preserved for review
by this court, the trial court was not authorized to make a broader legal holding, nor
does this appellate court have a record or adequate arguments upon which it could
announce any broader rule of law.
SILBERMAN, J., Concurs.
CANADY, J., Concurs in result only.
CANADY, Judge, Concurring specially.
I agree with the majority's determination that the declaratory judgment in
favor of the appellees should be affirmed. I write separately to explain the basis for my
conclusion that the Hospital Board is entitled to sovereign immunity under section
768.28. Because I disagree with various aspects of the majority's characterization of
the proceedings below, I have refrained from joining the majority opinion. I especially
disagree with the majority's repeated characterization of the underlying declaratory
judgment action as an "unusual action," as well as its statement that "the complex
issues presented by this action for declaratory relief were not fully litigated."
In this concurring opinion, I will first comment briefly on my disagreement
with the majority's description of the proceedings below. Then, I will outline the issues
presented by the parties. Finally, I will set forth the analysis which supports my
conclusion that the trial court's decision should be affirmed.
I. THE MAJORITY OPINION
The majority acknowledges that the issue of whether the declaratory
judgment action "was an improper lawsuit to resolve [the sovereign immunity]
affirmative defense" raised in the underlying tort action by the Pagans is not at issue in
this appeal. Nonetheless, the majority persists in calling into question the propriety of
the declaratory judgment action. In my view, on the record before us, this is totally
Section 86.011, Florida Statutes (2002), provides, in pertinent part, that a
"court may render declaratory judgments on the existence or nonexistence (1) [o]f any
immunity, power, privilege or right." (Emphasis added.) The issue of whether a
particular entity is entitled to sovereign immunity appears to fall squarely within the
express provision of section 86.011. Where the status of an entity under section 768.28
has been challenged or is otherwise in doubt, it does not seem at all "unusual" for that
entity to seek a declaratory judgment concerning its status. See Haines City v. Allen,
509 So. 2d 982, 983 (Fla. 2d DCA 1987) (discussing "declaratory judgment action
asking the circuit court to declare the city's rights with regard to sovereign immunity
under section 768.28"); see also Strachan Shipping Co. v. Spigner, 573 So. 2d 926, 927
(Fla. 1st DCA 1991) ("The determination of the existence of an immunity [under the
workers' compensation law] is an appropriate subject for declaratory relief.").
Similarly unwarranted is the majority's statement that "the complex issues
presented by this action for declaratory relief were not fully litigated." The dispositive
issue of whether First Physicians Group was an instrumentality of the Hospital Board
was extensively litigated. There is no suggestion in the record that either the appellants
or the appellees were in any way foreclosed from fully developing any factual issues
that they deemed material to the critical legal issues that they chose to present to the
trial court. The majority states that "[w]e know very little about how these doctors
practice medicine or how their employment by a nonprofit corporation created by a
governmental entity affects that practice." The majority also stresses that "we know
virtually nothing about the lawsuit" brought by the Pagans. Whatever bearing facts
related to such matters might have on some hypothetical issues that the parties have
not presented, they have no demonstrated connection with the issues actually before
the trial court and this court. It is hard to see how the details of the Pagans' malpractice
claim or facts concerning how the employee physicians "practice medicine" could have
any relevance to the legal issue of whether the entity employing the treating physician
was entitled to sovereign immunity under section 768.28. In short, I do not believe that
the record before us is in any way deficient.
Unlike the majority, I see no reason to shrink back from announcing as a
rule of law that a corporate entity such as First Physicians Group, which was
established by a sovereignly immune independent establishment of the state and which
is subject to the type of control to which First Physicians Group is subject, is entitled to
sovereign immunity. Such an announced rule is necessarily limited by the material facts
of the case before us and the issues actually litigated. See Adelman Steel Corp. v.
Winter, 610 So. 2d 494, 502 (Fla. 1st DCA 1992) ("The holding or ratio decidendi of a
decision is appropriately defined as the outcome of the case on the precise points
discussed in the opinion stated in terms of the facts found to be material to the court's
decision."); see also Arthur L. Goodhart, Determining the Ratio Decidendi of a Case, 40
Yale L.J. 161 (1930). The disposition of future cases presenting different material facts
or raising different legal issues would, of course, not be bound by the rule announced in
this case. But further cases presenting the same material facts and the same legal
issues should be guided by the precedent established by this court's decision of the
instant case. I am concerned that the majority opinion may be read to suggest that the
decision of this case will not have such precedential effect. Denying precedential effect
to the decision of this case in future cases presenting similar facts and issues would,
however, be inconsistent with the fundamental principle that like cases should be
treated alike. See Gessler v. Dep't of Bus. & Prof'l Regulation, 627 So. 2d 501, 504
(Fla. 4th DCA 1993) ("The concept of stare decisis, by treating like cases alike and
following decisions rendered previously involving similar circumstances, is a core
principle of our system of justice.").
II. ISSUES ON APPEAL
The Pagans argue that the Hospital Board's control over First Physicians
Group is insufficient for First Physicians Group to be considered an instrumentality of
the Hospital Board. The Pagans contend that day-to-day operational control over a
corporation is necessary to establish that the corporate entity is an instrumentality or
agency under section 768.28(2). In making this argument, the Pagans rely on the case
law articulating the requirement relating to control which is necessary to establish the
existence of an employment or agency relationship. They also rely on the case law
addressing the circumstances in which piercing of the corporate veil is justified. They
contend that the sovereign immunity of the hospital district extends to First Physicians
Group only if First Physicians Group can be considered the "alter ego" of the hospital
district. Finally, the Pagans argue that the extension of sovereign immunity to First
Physicians Group–which they characterize as essentially a private medical practice–is
inconsistent with the public policy underlying the sovereign immunity statute. The
Pagans contend that the Hospital Board improperly "has, in effect, attempted to sell its
sovereign immunity to what is, for all practical purposes, a private medical practice."
This public policy argument was not specifically raised by the Pagans in the
proceedings before the trial court.
The Hospital Board argues that it is the right of control, not actual day-today operational control, that is sufficient to establish that an entity is acting as an
instrumentality or agency. The Hospital Board emphasizes its role in creating First
Physicians Group, its power to dissolve First Physicians Group and to appoint and
remove all the members of the First Physicians Group board of directors, as well as the
role of its officers and employees in the management of First Physicians Group. The
Hospital Board argues that the Pagans should not be allowed to raise the public policy
argument for the first time on appeal but that the extension of sovereign immunity to
First Physicians Group is in any event not inconsistent with the public policy underlying
The hospital district is an "independent establishment of the state" which is
sovereignly immune from liability pursuant to the provisions of section 768.28. See
Eldred, 498 So. 2d 911, 913-14 (holding that the provisions of section 768.28 waiving
sovereign immunity and limiting liability are applicable to hospital special taxing district
as an independent establishment of the state under section 768.28(2)). The hospital
district's immunity is not disputed by the Pagans.
It is also well established that a physician employed by a sovereignly
immune entity is entitled to the benefit of sovereign immunity. See Pub. Health Trust v.
Valcin, 507 So. 2d 596, 601 (Fla. 1987); White v. Hillsborough County Hosp. Auth., 448
So. 2d 2, 2 (Fla. 2d DCA 1983); Bates v. Sahasranaman, 522 So. 2d 545, 546 (Fla. 4th
DCA 1988); Jaar v. Univ. of Miami, 474 So. 2d 239, 244 (Fla. 3d DCA 1985). No facts
have been adduced to show that the physicians who practice with First Physicians
Group are anything other than employees of First Physicians Group. The liability of the
appellee physicians thus depends on the status of First Physicians Group. If First
Physicians Group is subject to the protection of section 768.28, its physician employees
are generally immune from liability for negligent acts performed within the scope of their
employment. See § 768.28(9).
The parties agree that the dispositive question presented by this case
therefore is whether First Physicians Group is entitled to sovereign immunity by virtue of
its relationship with the Hospital Board. The answer to this question turns on the
meaning of the phrase "corporations primarily acting as instrumentalities or agencies of
the state" in section 768.28(2), which defines the entities entitled to sovereign immunity.
I conclude that the undisputed facts concerning the relationship between First
Physicians Group and the Hospital Board, an independent establishment of the state,
establish that First Physicians Group is a "corporation[ ] primarily acting as [an]
instrumentalit[y] . . . of the state."
In some circumstances, the analysis of whether a corporate entity is an
instrumentality or agency focuses on the extent to which the corporate entity has been
given the authority and responsibility to carry out a management function that would
otherwise be directly carried out through governmental officials. See Skoblow v. AmeriManage, Inc., 483 So. 2d 809, 811, 812 (Fla. 3d DCA 1986) (holding that corporation,
under contract with state "to provide direct management for" state hospital and to
coordinate long-range planning for the hospital, "was operating as an agency of the
state"). Cf. Sebring Utils. Comm'n v. Sicher, 509 So. 2d 968, 970 (Fla. 2d DCA 1987)
(holding that utilities commission which was created in city charter as part of city
government was entitled to sovereign immunity pursuant to section 768.28).
Generally, however, the analysis of whether a corporation is a
governmental instrumentality or agency centers on the issue of control. In order for an
entity to be considered an instrumentality or agency, it must be subject to something
more than the sort of control that is exercised by the government in its regulatory
capacity. See United States v. Orleans, 425 U.S. 807 (1976) (holding that community
action agency, a nonprofit corporation established pursuant to the Economic
Opportunity Act and subject to the federal standards and regulations, was not an
instrumentality of the United States under Federal Tort Claims Act). The control that
flows from a simple contractual arrangement between the government and a corporate
entity ordinarily will not be considered sufficient to establish that the contracting
corporate entity is an instrumentality or agency of the state. Cf. Mingo v. ARA Health
Servs., Inc., 638 So. 2d 85, 86 (Fla. 2d DCA 1994) (holding that contract defining
corporate providers as independent contractors effectively "disavows [the corporation]
as a corporation primarily acting as an instrumentality or agency of the state or its
subdivisions"). And the mere fact that a corporation is created by the government will
not necessarily establish that it is a governmental agency or instrumentality. See Doe v.
Am. Red Cross, 727 F. Supp. 186 (E.D. Pa. 1989) (holding that federally chartered
corporation is not a government instrumentality).
The common understanding of the terms "agency" and "instrumentality"
points–at least in a general way–to the type of governmental control necessary for a
corporation to be entitled to sovereign immunity under section 768.28(2). An
instrumentality is defined as "something that serves as an intermediary or agent through
which one or more functions of a controlling force are carried out," or as "a part, organ,
or subsidiary branch esp[ecially] of a governing body." Webster's Third International
Dictionary 1172 (3d ed. 1993). Agency has a similar meaning. It is defined as "a
person or thing through which power is exerted or an end is achieved," or as "an
establishment engaged in doing business for another." Id. at 40.
Further guidance is provided by the case law addressing the application of
section 768.28. The two leading cases–Shands Teaching Hospital & Clinic, Inc., 478
So. 2d 77, and Betterson, 648 So. 2d 778–were both decided by the First District. In
Shands the court concluded that the nonprofit corporation to which the State Board of
Education leased the Shands Teaching Hospital was not entitled to the benefit of
sovereign immunity. The corporate entity was determined to be "an autonomous and
self-sufficient entity, one not primarily acting as an instrumentality on behalf of the
state." Shands, 478 So. 2d at 79. In making this determination, the court interpreted
the statutory provision governing the establishment of the nonprofit corporation–section
240.513, Florida Statutes (1985)–as "reflect[ing] that Shands' day-to-day operations are
not under direct state control." Id. The court referred to the case law under the Federal
Tort Claims Act, which states that "the critical factor" in ". . . 'determining whether an
entity is a federal agency . . . is the existence of federal government control over the
"detailed physical performance" and "day to day operation" of that entity . . . .' " United
States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 1975, 48 L.Ed.2d 390 (1976)'." Id.
(quoting Lewis v. United States, 680 F.2d 1239, 1240 (9th Cir. 1982)).7
In Betterson, the court reached a different conclusion regarding the status
of the nonprofit corporation entity–commonly known as PRIDE–which operated the
prison industry program. Based on the statutory provision requiring the Department of
Corrections to "lease the prison industry program to a nonprofit corporation 'organized
solely for the purpose of operating' the program," the court determined that PRIDE had
from its inception acted primarily as an instrumentality of the state. Id. at 780; see ch.
81-125, § 1, at 254, Laws of Fla.; § 946.502, Fla. Stat. (1988). While recognizing that
under the statute "PRIDE was accorded substantial independence in the running of the
work programs," the court focused on the fact that PRIDE's "essential operations
nevertheless remained subject to a number of legislatively mandated constraints over
its day-to-day operations." Id. at 780. Among the constraints mentioned by the court
were requirements that: (a) PRIDE's sale to private entities be subject to approval by
the governor; (b) PRIDE be subject to various regular state audits; (c) PRIDE's policies
and procedures relating to the use of inmates in its work program be subject to approval
by the Department of Corrections; and (d) the state have a reversionary interest in
property acquired by PRIDE relating to correctional work programs. The court stated:
"These statutory constraints cumulatively constitute sufficient governmental control over
Although the fact is not mentioned by the Shands court, the statute provided
for the "governance of the nonprofit corporation by a board of directors appointed by the
President of the University of Florida and chaired by the Vice President for Health
Affairs of the University of Florida." § 240.513(3)(b)(1).
PRIDE's daily operations to require the conclusion as a matter of law that PRIDE has,
from its inception, acted primarily as an instrumentality of the state." Id. at 780-81.8
In both Betterson and Shands, the issue of control played a prominent part
in the analysis of whether the nonprofit corporate entity was acting primarily as an
instrumentality of the state. Both cases make reference to the significance of
governmental control over the "day-to-day operations" of the corporate entity whose
status was at issue. See Betterson, 648 So. 2d at 780 (referring to statute which
"contained numerous provisions for extensive governmental control over PRIDE's dayto-day operation"); Shands, 478 So. 2d at 79 (referring to statutory provisions reflecting
that "Shands' day-to-day operations are not under direct state control"). There is,
however, no bright line division between the "extensive governmental control" that was
present in Betterson and the "direct [governmental] control" that was absent in Shands.
The most that can be drawn from Betterson and Shands is that the "substantial
independence" of any entity, coupled with significant governmental "constraints over
[the entity's] day-to-day operations," Betterson, 648 So. 2d at 780, will support a
determination that the entity is an instrumentality, while "an autonomous and selfsufficient entity," whose "day-to-day operations are not under direct [governmental]
control," Shands, 478 So. 2d at 79, will not be considered an instrumentality.
In the case law–outside the sovereign immunity context–addressing the
circumstances where a principal-agent relationship exists, the issue of control is also
crucial. The cases make clear, however, that when analyzing the issue of control, the
Although it was not mentioned by the Betterson court, the statute also required
a showing that "[t]he members of the corporation were appointed by the Governor and
confirmed by the Senate." § 946.504(5)(a)(1).
focus should be on "the right to control, rather than actual control." Villazon v.
Prudential Health Care Plan, Inc., 843 So. 2d 842, 853 (Fla. 2003) (citing Nazworth v.
Swire, Inc., 486 So. 2d 637, 638 (Fla. 1st DCA 1986) ("The standard for determining
whether an agent is an independent contractor is the degree of control exercised by the
employer or owner over the agent. More particularly, it is the right of control and not
actual control, which determines the relationship between the parties.") (citations
omitted). Thus, the existence of a principal-agent relationship turns on whether the
principal has a sufficient right of control and not on the extent to which the principal
exercises actual control.
Although particular entities "may be deemed agents of the state, [and] not
agencies of the state" under section 768.28(2), Sierra v. Associated Marine Insts., Inc.,
850 So. 2d 582, 592 (Fla. 2d DCA 2003), review denied, 869 So. 2d 538 (Fla. 2004),
these general principles governing the existence of principle-agent relationships
nonetheless shed light on the question at issue here. Just as an ordinary agency
relationship can exist without the exercise of actual day-to-day control by the principal,
so can a corporation be acting primarily as an instrumentality or agency of a sovereignly
immune entity without that entity exercising actual control over the day-to-day
operations of the corporation.
The Pagans argue that First Physicians Group should not be considered
an instrumentality or agency under section 768.28(2) unless the Hospital Board's control
over First Physicians Group is such that the corporate veil could be pierced. This is
nonsensical. It imputes to the legislature an intention to grant corporate entities
immunity under section 768.28(2) only if those corporate entities are sham entities and
if there is a showing of improper conduct in connection with the operation of the entities.
See Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114, 1117, 1121 (Fla. 1984)
(holding that "allegations of mere instrumentality and improper conduct clearly state a
cause of action" for piercing the corporate veil and reviewing extensive case law
"hold[ing] that the corporate veil may not be pierced absent a showing of improper
conduct"). A "mere instrumentality" or "alter ego" which is used as a "sham" and for
some improper purpose is in an entirely different category from an entity acting primarily
as a governmental instrumentality or agency. The type of control necessary to establish
that a corporation is being used as a "sham" and "alter ego" or "mere instrumentality" is
entirely different from the control necessary to establish that a corporate entity is entitled
to immunity pursuant to section 768.28(2).
It would be unfaithful to the plain meaning of section 768.28(2) to impose
a requirement for control of a type that is inconsistent with the separate corporate
existence of the entity acting primarily as an instrumentality or agency. The
authorization of immunity for corporations under section 768.28(2) necessarily involves
a recognition that those corporations will carry out their operations in a manner that is
separate and distinct from the operations of the governmental entity to which they are
related. The control of the governmental entity over the corporation necessary to
establish an instrumentality relationship under section 768.28(2) does not require that
the corporation be subsumed in the governmental entity. The Pagans' argument to the
contrary would effectively rewrite section 768.28(2).
First Physicians Group rightly points out that since the public policy
argument raised by the Pagans was not presented to the trial court it is not properly
argued on appeal. See Tillman v. State, 471 So. 2d 32, 34 (Fla. 1985) ("In order to be
preserved for further review by a higher court, an issue must be presented to the lower
court and the specific legal argument or ground to be argued on appeal or review must
be part of that presentation if it is to be considered preserved."); Dober v. Worrell, 401
So.2d 1322, 1324 (Fla. 1981) (holding that it is "inappropriate for [an appellant] to raise
an issue for the first time on appeal from summary judgment"); Clock v. Clock, 649 So.
2d 312, 315 (Fla. 3d DCA 1995) ("[A]n appellate court will not consider any ground for
objection not presented to the trial court; review is limited to the specific grounds raised
below."). Such an unpreserved issue cannot be the basis for reversal of the judgment
entered by the trial court.
All the efforts of the Pagans to establish that First Physicians Group is not
an instrumentality or agency of the Hospital Board run aground on the reality of the
Hospital Board's undeniable right to control the operations of First Physicians Group.
First Physicians Group began its existence as a creature of the Hospital Board, and it
carries out its ongoing operations as a creature of the Hospital Board. The Hospital
Board effectively directs the management of First Physicians Group through the
appointment of all the members of the board of directors of First Physicians Group and
by the placement of the chief executive officer of the Hospital Board's health care
system in the position of president of First Physicians Group. The Hospital Board's
authority to direct the management of the ongoing operations of First Physicians Group
strongly supports the conclusion that First Physicians Group is an "intermediary . . .
through which [the] functions of a controlling force are carried out," Webster's, supra, at
1172, and thus properly considered an "instrumentality" as that term is commonly
understood. See also Lebron v. Nat'l R.R. Passenger, 513 U.S. 374, 399-400 (1995)
(holding that "when the State has specifically created [a] corporation for the furtherance
of governmental objectives[ ] and . . . controls the operation of the corporation through
its appointees . . . . [t]he corporation is part of the Government for purposes of the First
Amendment"). There is no basis for concluding that First Physicians Group acts as "an
autonomous and self-sufficient entity." Shands, 478 So. 2d at 79. On the contrary, First
Physicians Group is subject to significant governmental "constraints over [its] day-to-day
operations." Betterson, 648 So. 2d at 780.
I therefore conclude that the trial court correctly decided as a matter of law
that First Physicians Group is an instrumentality of the Hospital Board. First Physicians
Group and the appellee physicians thus are entitled to sovereign immunity under