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Mark T. Fahlen v. Sutter Central Valley Hospitals et al

August 14, 2012


(Super. Ct. No. 662696) APPEAL from a judgment of the Superior Court of Stanislaus County. Timothy W. Salter, Judge.

The opinion of the court was delivered by: Wiseman, Acting P.J.



Health and Safety Code section 1278.5*fn1 is a whistleblower protection law designed to encourage health care workers to notify authorities of "suspected unsafe patient care and conditions." (§ 1278.5, subd. (a).) One of the issues we must decide is whether a doctor claiming he lost his hospital privileges as a form of whistleblower retaliation must exhaust his judicial remedy of pursuing review, via writ of mandate, of the hospital's action before he can file a whistleblower lawsuit under section 1278.5. A section 1278.5 claim cannot be asserted in writ proceedings, so applying the exhaustion requirement would delay relief for a whistleblower.

In two recent cases interpreting the California Whistleblower Protection Act (Gov. Code, § 8547 et seq.), the California Supreme Court held that a state employee sanctioned by an agency need not file a mandate petition against the agency before suing it under the whistleblower statute. The court recognized the Legislature's intent to encourage employees to report threats to public health without fear of retribution. (Runyon v. Board of Trustees of California State University (2010) 48 Cal.4th 760, 763, 774; State Bd. of Chiropractic Examiners v. Superior Court (2009) 45 Cal.4th 963, 977-978.) For the same reason, prior filing of writ proceedings also is not required here.

Dr. Mark T. Fahlen reported to hospital authorities that some nurses who worked with him at Memorial Medical Center failed to follow his instructions. In some instances, he believed the nurses endangered patients' lives. One nurse refused to follow Fahlen's order to shock a patient with defibrillator paddles. Another disobeyed Fahlen's order to transfer a patient to intensive care. Some of these incidents involved heated exchanges between Fahlen and the nurses, and complaints were made about Fahlen's behavior as well.

The hospital's chief operating officer allegedly blamed Fahlen and helped persuade Fahlen's medical group to fire him. The hospital then declined to renew Fahlen's staff privileges. A judicial review committee of six physicians reviewed the non-renewal of Fahlen's staff privileges. It found no professional incompetence and reversed the decision. The hospital board of trustees then reversed the committee. The board found that Fahlen's conduct was not acceptable and was "directly related to the quality of medical care at the Hospital." This outcome was reported to the Medical Board of California. Fahlen did not file a petition for a writ of mandate challenging the decision. Instead, he filed this lawsuit, asserting a section 1278.5 claim among others.

This appeal is from an order denying the hospital's anti-SLAPP motion. (Code Civ. Proc., § 425.16.) The crucial issue is presented by the hospital's contention that the motion should have been granted because Fahlen's whistleblower claim will be defeated on the merits due to his failure to pursue writ relief. In light of our holding on the exhaustion issue, we reject that contention. We conclude the trial court correctly denied the motion with respect to the section 1278.5 cause of action and one other. As to the remaining causes of action, however, we must reverse, because the exhaustion requirement does apply to them.

The Legislature's intent in enacting section 1278.5 is clear: Medical personnel must be protected from retaliation when they report conditions that endanger patients. This policy of putting patients first would be undermined if retaliation victims had to pursue writ review before seeking the statute's protection.

This case illustrates why this is true. Fahlen reported what he thought were serious threats to patient safety. The hospital expelled him. A committee of his peers found that he should retain his staff privileges, but the hospital persisted. If we accepted the hospital's argument in this case, Fahlen could have to spend years pursuing writ relief before being able even to assert his whistleblower claim in court. This type of delay is incompatible with the Legislature's goals.


Plaintiff and respondent Mark T. Fahlen is a nephrologist, a physician specializing in the treatment of diseases of the kidneys. Prior to June 2008, he was employed by Gould Medical Group (Gould). Fahlen was granted provisional staff privileges at Memorial Medical Center (MMC) in 2003 and was granted medical staff privileges at MMC in September 2004. MMC is operated by defendant and appellant Sutter Central Valley Hospitals.

Twice in 2004 and twice in 2006, Fahlen argued with nurses who failed to follow his directions concerning the care and treatment of patients. Between August 16, 2007 and April 28, 2008, there were six other incidents in which Fahlen had negative interactions with particular nurses providing care to Fahlen's patients. On many of these occasions, Fahlen reported the substandard or insubordinate nursing activity to nursing supervisors or by written complaint to MMC administration.

Around the beginning of May 2008, after the last of Fahlen's negative interactions with nursing staff, defendant and appellant Steve Mitchell, MMC's chief operating officer, contacted Gould's medical director with information concerning Fahlen's interactions with MMC's nursing staff. Mitchell testified at the peer review hearing that he contacted Gould's director in the hope that the director would meet with Fahlen, that Fahlen would become angry during the meeting, and that Gould would terminate Fahlen's employment as a result of the director's "own personal experiences" in such a meeting. Mitchell said his hope was that if Fahlen were fired by Gould he would leave town, with the net effect being to eliminate the need for peer review proceedings by MMC's medical staff. "Or at least that is my plan," Mitchell wrote in an earlier e-mail to MMC's chief executive officer.

Gould terminated Fahlen's at-will employment contract on May 14, 2008. Since the termination also resulted in the cancellation of Fahlen's medical malpractice insurance, Fahlen was immediately unable to continue treating patients at MMC. On May 30, 2008, Fahlen met with Mitchell to determine the status of Fahlen's staff privileges at MMC, because Fahlen intended to open a private medical practice in Modesto. At that meeting, according to Fahlen, Mitchell advised Fahlen that he should leave Modesto and that if he did not do so, MMC would begin an investigation and peer review that would result in a report of disciplinary proceedings to the Medical Board of California. Fahlen advised Mitchell that he intended to stay in town. Ten days later, MMC made a written request to Fahlen that he provide information concerning his interactions with nurses on five occasions, beginning in December 2007. Fahlen provided a written response dated June 10, 2008. Three days prior to this meeting, after Fahlen had scheduled the meeting with Mitchell, Mitchell sent an e-mail to MMC's chief executive officer stating that Fahlen "does not get it"--that is, as Mitchell testified, that Fahlen was going to lose his staff privileges at MMC. The chief executive officer responded: "Looks like we need to have the Medical Staff take some action on his MedQuals!!! Soon!"

MMC appointed an investigative committee, which reported to the Medical Executive Committee (MEC) at its meeting on August 11, 2008. MEC is charged under the bylaws of MMC's medical staff with the review of applications for staff privileges at MMC and for the initiation of corrective or disciplinary action against medical staff. At the August 11, 2008, meeting, MEC recommended that MMC not renew Fahlen's staff privileges.

MEC notified Fahlen of its decision, and of his right to contest that decision, by letter dated August 28, 2008. Fahlen responded by letter from his attorney, requesting a hearing. By letter of dated October 2, 2008, MMC advised Fahlen that the review hearing would be conducted by a Judicial Review Committee (JRC) in accordance with the procedures contained in the bylaws. The letter also included a statement of charges against Fahlen, including 17 incidents of disruptive or abusive behavior toward MMC staff occurring from 2004 through 2008, and one incident of "abusive and contentious behavior" during a 2008 interview with the MEC's appointed investigative committee.

The JRC, composed of six physicians with staff privileges at MMC, and with an attorney as hearing officer, conducted an evidentiary hearing on the proposed termination of Fahlen's staff privileges over 13 sessions between October 8, 2009 and May 24, 2010. By written findings and conclusions unanimously adopted and issued on June 14, 2010, the JRC concluded that MEC "did not sustain its burden of proving that its recommendation not to reappoint Dr. Fahlen to the Medical Staff of Memorial Medical Center for medical disciplinary cause or reason is reasonable and warranted."

The JRC found that Fahlen's "interaction with the nursing staff at Memorial Medical Center was inappropriate and not acceptable" "on several occasions." In essence, the JRC concluded the medical staff should have intervened earlier with Fahlen, but failed in its responsibility to do so, leaving the matter to the administrators of MMC. MMC, in turn, delegated the primary responsibility for investigation of the matter to an outside attorney, whose investigative report, though highly influential with MEC, failed to consider other options, such as counseling. As a result, MEC failed to consider "intermediate steps short of recommending loss of Medical Staff privileges ...." The JRC concluded that the evidence before it did "not establish any professional incompetence on the part of [Fahlen]." Similarly, the evidence did "not establish that any behavior of [Fahlen] was, or is, reasonably likely to be detrimental to patient safety." Further, after MEC recommended termination of privileges, Fahlen "voluntarily obtained psychological counseling and attended anger management sessions." Fahlen's behavior "has appreciably improved." To the extent the evidence indicated that, prior to the MEC recommendation, anyone's conduct was "detrimental to the delivery of patient care, the nursing staff ... was more to blame for such conduct than was [Fahlen]." The JRC reversed the MEC decision not to reappoint Fahlen to the MMC medical staff.

Pursuant to the medical staff bylaws, the final decision on termination of medical staff privileges rests with the MMC board of trustees. The board determined that it "need[ed] the JRC's assistance" in fulfilling its duties under the bylaws and, by letter dated September 16, 2010, propounded 21 questions, with subsidiary parts, to the JRC, asking whether each alleged incident of misconduct occurred, what findings the JRC made with respect to the individual charge, and "[w]hat evidence produced at the hearing was considered in making those findings of fact?" The board requested the JRC's response within 30 days.

The JRC met and considered the board's request. It determined that answering the board's questions would require its members to read the entire transcript of the proceedings, together with the documentary evidence, and that the request was unreasonable. As a result, the JRC advised the board that "the Board will have to proceed on the basis of all the materials available to it at this time, including the Findings of Fact and Conclusion that was previously rendered by the Judicial Review Committee."

In a lengthy letter to Fahlen's attorneys from MMC's chief executive officer dated January 7, 2011, the board conveyed its decision "to reverse the JRC's decision and not to reappoint [Fahlen] to the medical staff." The board was critical of the JRC's findings and conclusions, which the board characterized as "unlinked to any factual support in the hearing record." In summary, the board concluded from its own review of the evidence at the JRC hearing that Fahlen's conduct "was inappropriate and not acceptable, [and was] directly related to the quality of medical care at the Hospital." Fahlen did not seek judicial review of this determination. MMC subsequently filed a report of disciplinary action with the Medical Board of California.

On March 9, 2011, Fahlen filed a complaint for damages and injunctive and declaratory relief against Sutter Central Valley Hospitals and Steve Mitchell. The first cause of action alleged retaliation in violation of section 1278.5, which prohibits any health facility from retaliating against, among others, members of its medical staff because the member has presented a complaint or report concerning quality of care, services, or conditions at the facility. (See § 1278.5, subd. (b)(1).) The second cause of action requested a declaratory judgment "pursuant to ... Business and Professions Code Section 803.1."*fn2 The third cause of action is for interference with the right to practice an occupation. The fourth cause of action is for intentional interference with Fahlen's contractual relations with Gould.*fn3 The fifth cause of action is for interference with prospective advantage, including loss of reputation and loss of the directorship of the Merced Dialysis Center. The sixth cause of action is for retaliation against Fahlen for "advocat[ing] for appropriate care for [his] patients," in violation of Business and Professions Code sections 510 and 2056. The seventh cause of action is for wrongful termination of Fahlen's hospital privileges. Along with damages and declaratory relief, Fahlen sought an injunction ordering his reinstatement to the medical staff of MMC.

Defendants demurred to the complaint and filed an anti-SLAPP motion. After extensive briefing and submission of evidence, the court overruled the demurrer and denied the anti-SLAPP motion. With respect to the order on the anti-SLAPP motion, the court concluded that Fahlen's causes of action did not arise from "protected activity" as described in Code of Civil Procedure section 425.16 because "disciplinary action is not protected activity." In addition, the court concluded, "plaintiff has established a prima facie case that he will prevail on the merits," requiring denial of the motion under Code of Civil Procedure section 425.16, subdivision (b)(1).


I. The parties' contentions

The parties make several overarching arguments. Defendants' primary arguments are: First, that all of Fahlen's causes of action arise from protected activity as contemplated by Code of Civil Procedure section 425.16 since the California Supreme Court has held that hospital peer review proceedings are official proceedings authorized by law. (See Kibler v. Northern Inyo County Local Hospital Dist. (2006) 39 Cal.4th 192, 203 [construing Code Civ. Proc., ยง 425.16, subd. (e)(2)] (Kibler).) As a result, the trial court's first basis for denying the motion was erroneous. Second, defendants contend Fahlen's failure to seek judicial review of the MMC board's final administrative decision makes that determination final and precludes, as a matter of fundamental jurisdiction, an attack on that decision in collateral judicial proceedings ...

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