State supreme court considers whether hospital subsidiary can claim sovereign immunity in Sentara dispute

Brendan O'Toole, appellant's counsel for Sentara Medical Group, told the court that "sovereign immunity may be alive and well in the Commonwealth, but with respect to the facts of this case, it's dead on arrival." He argued that Chesapeake Regional Medical Group (CRMG), a private nonstock corporation created by the Chesapeake Hospital Authority, is not "the Commonwealth" and therefore is not entitled to sovereign immunity from Sentara's claim for tortious interference.

The issue matters because if CRMG qualifies for sovereign immunity, Sentara's tortious-interference claim could be barred; if not, the claim may proceed in the lower courts. The justices pressed both sides on whether the court can resolve the question based on the pleadings or whether a remand for an evidentiary hearing is required to apply the multi-factor James v James test used for derivative immunity questions.

O'Toole told the court that the lower court had no evidentiary record supporting CRMG's claim and that CRMG "didn't put on any evidence to establish their burden." He also emphasized that the enabling statute did not expressly extend immunity to subsidiaries or affiliates the legislature creates to carry out hospital authority functions.

The bench repeatedly asked whether precedents such as Stevens and the James v James framework require a fact-finding hearing. O'Toole acknowledged Stevens as a case in which the trial court took evidence before ruling and argued that, here, the record is thin: "There is no evidence, as to what the state does to control CRMG," he said, and noted that CRMG had rarely asserted sovereign immunity in other litigation.

Johan Konrad, appellee's counsel for Chesapeake Regional Medical Group, urged that the complaint itself contains facts the trial court could rely on. He pointed to paragraph 15 of the complaint identifying CRMG as a Virginia nonstock corporation and subsidiary of the Chesapeake Hospital Authority and to paragraph 37 concerning notice allegations. "The evidentiary record was set forth in the actual complaint itself," Konrad told the court.

Konrad and the bench traded hypotheticals about how far immunity would extend if subsidiaries automatically inherited the authority's protection — asking whether joint ventures or commercial vendors could become immune under a broad rule. Konrad urged narrower treatment tied to "the function, the nature and function that the entity was performing" and stressed the case involves the "very core" of the authority's healthcare function: the hiring of a cardiothoracic surgeon.

Justices also explored factual gaps — who billed for the surgeon's services, the extent of credentialing and hospital oversight, and whether the city council could remove leadership — and both sides admitted the record is silent on some of those specifics. The parties debated remedies: Konrad said the appropriate path could be to apply a step-down James analysis on remand with an evidentiary record, while O'Toole warned that allowing a remand so CRMG can "do over" its evidentiary presentation would be improper.

The appellant used rebuttal time to reiterate his central point: because CRMG did not present evidence below, the court should not permit a do-over to meet a burden it failed to meet earlier. The court recessed until tomorrow morning, leaving unresolved whether the court will rule now as a matter of law or remand for further factfinding.