Roberts v. SUBURBAN HOSPITAL ASS'N, INC.

WILNER, Judge. In a complaint filed in the Circuit Court for Montgomery County, appellant contended that (1) he is a hemophiliac who, whenever injured or undergoing surgery, requires a transfusion of blood containing a procoagulant known as Factor VIII, (2) he has received all of his transfusions at Suburban Hospital, (3) in or about February, 1985, he was diagnosed as having acquired AIDS through the sale and transfusion of contaminated blood by Suburban Hospital, and (4) as a result, he has suffered and will continue to suffer injury and loss. He sued the hospital on three theories: strict liability (Count I), breach of implied warran ³ ties of merchantability and fitness (Count II), and negligence (Count III). Suburban’s initial response to the complaint was a motion to dismiss it on the ground that appellant had failed to comply with the mandatory arbitration requirements then embodied in Md.Code Ann.Cts. & Jud.Proc. art., §§ 3-2A-01 —3-2A-09.

After a hearing in September, 1986, that motion was denied. In December, 1986, appellant voluntarily dismissed Count III without prejudice. A month later, the court dismissed Counts I and II on the ground that they failed to state a claim upon which relief can be granted. Md. Rule 2-322(b)(2).

The basis of that conclusion was that, under the circumstances pled, the transfusion of blood constituted the provision of a service rather than the sale of goods. The correctness of that determination is the issue raised in this appeal. We shall decide that issue but not in the context presented. (1) Procedure Md.Code Ann.Cts. & Jud.Proc. art., §§ 3-2A-01—3-2A-09, as they stood when this action was filed, required that all claims “by a person against a health care provider for medical injury allegedly suffered by the person” in which damages in excess of the concurrent jurisdiction of the District Court are alleged must be submitted to arbitration before a Health Claims Arbitration panel as a condition precedent to any judicial action.

As we indicated, Suburban Hospital’s initial response to appellant’s complaint was a motion to dismiss it for failure to comply with that condition. The Circuit Court’s denial of that motion was apparently based on its belief that Counts I and II, though clearly filed against a “health care provider” (see § 3-2A-01(e)), were not for a “medical injury.” In opposing the motion to dismiss, appellant contended that those counts were grounded on the sale of a defective product—the blood—rather than on any negligence or deficiency in medical care. ⁴ This is a threshold issue that we must address, notwithstanding that Suburban has apparently abandoned its attempt to have the matter arbitrated and has raised no complaint about the court’s ruling in this appeal. As stated by the Court of Appeals in Oxtoby v. McGowan, 294 Md. 83, 91 , 447 A.2d 860 (1982), “So strong is this public policy [requiring arbitration] that this Court will, sua sponte, vacate judgment and order an action dismissed where the litigants have not followed the special statutory procedure.” The Court of Appeals has dealt with the scope of the Health Claims Arbitration Act on three occasions in the past four years. In Cannon v. McKen, 296 Md. 27 , 459 A.2d 196 (1983), a patient sued her dentist for injuries sustained when either an x-ray machine attached to the wall or part of the dental chair came loose and struck her.

She claimed in strict liability, breach of warranty, and negligence. Responding to a motion raising preliminary objection based on her failure to submit the claim to arbitration, she argued that the claim was one of product liability and general negligence, that it did not arise from the rendering or failure to render health care, and that it was therefore not subject to mandatory arbitration. Finding that, in enacting § 3-2A-01 et seq., the Legislature intended to subject to arbitration “only those claims which the courts have traditionally viewed as professional malpractice,” 296 Md. at 34 , 459 A.2d 196 , the Court concluded, at 36-37, 459 A.2d 196 : “We hold that the Act covers only those claims for damages arising from the rendering or failure to render health care where there has been a breach by the defendant, in his professional capacity, of his duty to exercise his professional expertise or skill. Those claims for damages arising from a professional’s failure to exercise due care in non-professional situations such as premises liability, slander, assault, etc., were not intended to be covered under the Act and should proceed in the usual tort claim manner.” ⁵ Against this standard, the Court found the pleading before it lacking in a clear articulation of whether the injury arose from the breach of a professional or a nonprofessional duty and thus remanded the case to give the plaintiff an opportunity to clarify her pleading.

In that regard, it observed in a footnote on p. 38, 459 A.2d 196 : “We hasten to add that claims of strict liability and breach of warranty may not always be arbitrable; however, if such claims are related to and incorporate a negligence claim, as here, which may be arbitrable, then all counts will be arbitrable.” Two months after Cannon v. McKen, the Court decided Nichols v. Wilson, 296 Md. 154 , 460 A.2d 57 (1983). The infant plaintiff there alleged that, in the course of suturing her wound, the defendant doctors deliberately struck her and then abandoned her. She sued, without benefit of arbitration, for assault, negligence, and intentional infliction of emotional distress. After amending the ad damnum in the negligence count to seek less than $5,000 in an attempt to withdraw it from the ambit of the Act, the plaintiff contended that her action was for intentional tort rather than the breach of a professional duty.

The Court concluded that the assault and intentional infliction counts were not, of themselves, arbitrable. Expanding upon the footnote in Cannon , however, and applying a notion of pendent jurisdiction, the Court held that if the negligence count was subject to arbitration, the other counts would have to be arbitrated as well. It remanded for further proceedings. Brown v. Rabbit, 300 Md. 171 , 476 A.2d 1167 (1984), was an obvious attempt to circumvent the Act.

The plaintiff underwent a tubal ligation, from which she claimed to have contracted severe and irregular menstrual cramps. Rather than suing for traditional malpractice or lack of informed consent, she sued her doctor for breach of express and implied warranties. The Court had little difficulty affirming the dismissal of that complaint for failure to comply with the Act. It observed first, at 175, 476 A.2d 1167 , that “the critical question is whether the claim is based on the rendering or failure to render health care and not on the ⁶ label placed on the claim,” and then concluded, at 176, 476 A.2d 1167 : “In our view the claim here stems from the rendering of or the failure to render health care and is thus covered under the Act.

This is clearly a claim involving the appellee’s professional expertise and thus is subject to mandatory arbitration, notwithstanding the fact that the action is brought for breach of warranty. Only a physician in his professional capacity could make a representation such as was alleged here. The representations were directly related to medical treatment and the degree of success of such treatment. They arose from a doctor/patient relationship and as such appellant’s claim is covered by the Act.” (Footnote omitted.) See also Long v. Rothbaum, 68 Md. App. 569 , 514 A.2d 1223 (1986).

It is clear from Oxtoby v. McGowan, supra, 294 Md. 83 , 447 A.2d 860 (1982), and from Schwartz v. Lilly, 53 Md.App. 318 , 452 A.2d 1302 (1982), that, if the claim presented by appellant, however captioned, was subject to the Act, the Circuit Court was obliged to dismiss the complaint for failure to exhaust the prerequisite administrative remedy. The merits of the claim, including whether the pleading sufficed to state a cause of action, would not, in that circumstance, have properly been before the Circuit Court and indeed would not properly be before us. When the court ruled on the preliminary motion to dismiss, the negligence count was still alive. That count charged the hospital with breaching a duty “to use ordinary and reasonable care in the selection, screening and testing of blood suppliers and donors for infectious diseases and viruses including the AIDS virus and to use ordinary and reasonable care to mitigate the possibility of AIDS being transmitted to patients receiving blood transfusions in the hospital.” There is no doubt in our mind that this stated a claim for breach of professional skill and duty and that it was ⁷ therefore subject to the Act.

The strict liability and breach of warranty counts were certainly “related to” that count, which indeed incorporated by reference the averments in the other counts. Accordingly, the ruling, when made, was clearly wrong. As the case then stood, the whole complaint should have been dismissed. It was not, of course, dismissed at that point or on that ground, and so, in the end the order denying the motion became an interlocutory one.

By the time the ultimate judgment was entered, on the merits, the negligence count had been dismissed; at that point, the remaining two counts would not have been subject to dismissal simply by virtue of their relation to the negligence claim. That does not mean that the issue of exhaustion was removed from the case; the “precondition” of the Act still existed. The focus merely shifted from the negligence claim and its effect on the complaint to the intrinsic nature of the two remaining counts: were they, on their own, subject to the arbitration requirements of the Act? That, we think, is the appropriate issue before us.

We look at the case as it reaches us, not as it once was in the Circuit Court. Cf Smith Laboratories, Inc. v. Teuscher, 310 Md. 676 , 531 A.2d 300 (1987); Nichols v. Wilson, supra, 296 Md. 154 , 460 A.2d 57 (1983). In that regard, this is a most unusual case, for the threshold issue of arbitrability involves essentially the same legal theory as the issue of liability; the answer to one is the answer to the other. Suburban Hospital asserted that the claims were arbitrable because they all arose from the transfusion of blood, which, they contended, involved the rendering or failure to render health care rather than the sale of a product.

That was also the basis for their motion to dismiss Counts I and II on the merits—that the transfusion “is in reality the provision of a service, not the sale of a product subject to claims sounding in strict liability and breach of warranty.” Appellant’s theory, on the other hand, both as to non-arbitrability and as to the merits, was that the action arose from the sale of a product, not the ⁸ provision of a medical service. If appellant were correct in his view, we would be obliged to reverse the judgment as being properly, but erroneously, entered; if the hospital is correct, as we believe it is, we would affirm the judgment dismissing Counts I and II, but on grounds other than those used by the Circuit Court. (2) Product or Service? The implied warranties of merchantability and fitness provided for in Md.Code Ann.Comm.

Law art., §§ 2-314 and 2-315 apply only to the sale of “goods,” as that term is defined in § 2-105; and the doctrine of strict liability, as set forth in Restatement (Second) of Torts § 402A and adopted in Phipps v. General Motors Corp., 278 Md. 337 , 363 A.2d 955 (1976), applies only to the sale of a “product.” Neither the implied warranties nor the notion of strict liability has been applied in Maryland to a transaction that is predominantly one of providing services. It is not clear from appellant’s complaint precisely when the transfusion of contaminated blood took place, although obviously it was before February, 1985. Had the transfusion occurred on or after July 1, 1986, the issue would have been controlled by statute, for, effective that day, the General Assembly rewrote Md.Code Ann. Health-Gen. art., § 18-402 to provide: “A legally authorized person who obtains, processes, stores, distributes, or uses whole blood or any substance derived from blood for injection or transfusion into an individual for any purpose is performing a service and is not subject to: (1) Strict liability in tort; (2) The implied warranty of merchantability; or (3) The implied warranty of fitness.” There being no indication that the Legislature intended this statute to be applied retroactively (see 1986 Md. Laws, ch. 259) and no other compelling reason to so apply it, we shall regard the new enactment as having prospective effect only and thus as not governing this case, especially ⁹ on the issue of arbitrability. See WSSC v. Riverdale Fire Co., 308 Md. 556 , 520 A.2d 1319 (1987). 1 Prior to the 1986 amendments, § 18-402 provided: “A person who obtains, processes, stores, distributes, or uses whole blood or any substance derived from blood for injection or transfusion into an individual for any purpose may not be held liable for the virus of serum hepatitis under: (1) Strict liability in tort; (2) The implied warranty of merchantability; or (3) The implied warranty of fitness.” (Emphasis added.) The limited application of the pre-1986 statute to serum hepatitis contamination was deliberate.

The bill proposing that law (H.B. 761 (1971)) would have exempted all transfusions from the doctrine of strict liability and implied warranties and declared them generally to constitute the rendering of a service rather than a sale, but, during the legislative process, the General Assembly struck out that general language and restricted the exemption as noted. See 1971 Md. Laws, ch. 717. 2 It is clear, then, that the ¹⁰ pre-1986 statute does not govern this case, at least not directly. The hospital’s liability, if any, must be determined as a matter of Maryland common law. Although, as in Maryland, the issue is now controlled by statute throughout the country, 3 many of those statutes are ¹¹ of fairly recent origin, and there is, therefore, a considerable body of case law discussing the issue under common law principles.

Nearly all of the contamination cases arose before the discovery of AIDS and its methods of transmittal; they mostly concern hepatitis contamination. 4 The seminal case in this area is Perlmutter v. Beth David Hospital, 308 N.Y. 100 , 123 N.E.2d 792 (1954). The plaintiff was a patient at the defendant hospital receiving general medical care. As part of that care, she received a transfusion of blood which she claimed was contaminated and from which she contracted hepatitis. Emphasizing that the hospital had made a separate charge on its bill for the transfusion, the plaintiff asserted that the transfusion constituted the sale of goods subject to, and in breach of, the implied warranties of fitness and merchantability.

No claim of strict liability was made. In a 4-3 decision, the New York Court of Appeals rejected the notion that a blood transfusion was the sale of goods subject to the implied warranties. It viewed the contractual relationship between hospital and patient as involving a broad spectrum of medical care—“the patient bargains for, and