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Fahlen v. Sutter Central Valley Hospitals

Supreme Court of California

February 20, 2014

Mark T. FAHLEN, Plaintiff and Respondent,
SUTTER CENTRAL VALLEY HOSPITALS et al., Defendants and Appellants.

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[168 Cal.Rptr.3d 166] Hanson Bridgett,Joseph M. Quinn, Glenda M. Zarbock, San Francisco, Lori C. Ferguson, Sacramento; Arent Fox, Los Angeles, Lowell C. Brown, Debra J. Albin-Riley and Jonathan E. Phillips for Defendants and Appellants.

Fulbright & Jaworski, Mark A. Kadzielski, Robert M. Dawson, Tambry L. Bradford and Kristina Ayers, Los Angeles, for Kaiser Foundation Hospitals as Amicus Curiae on behalf of Defendants and Appellants.

Manatt, Phelps & Phillips, Los Angeles, Barry S. Landsberg, Doreen W. Shenfeld and Joanna S. McCallum for Dignity Health and Adventist Health System/West as Amici Curiae on behalf of Defendants and Appellants.

Horvitz & Levy, Encino, David S. Ettinger, H. Thomas Watson and Peder K. Batalden for Good Samaritan Hospital, L.P., Los Robles Regional Medical Center, San Jose Healthcare System, L.P., Riverside Healthcare System, L.P., West Hills Hospital and Fountain Valley Regional Hospital & Medical Center as Amici Curiae on behalf of Defendants and Appellants.

Davis Wright Tremaine, Los Angeles, and Terri D. Keville for Scripps Health, Sharp HealthCare and St. Joseph Health as Amici Curiae on behalf of Defendants and Appellants.

Jana N. DuBois; Davis Wright Tremaine, Terri D. Keville, Los Angeles; Arent Fox, Los Angeles, Lowell C. Brown, Debra J. Albin-Riley and Jonathan E. Phillips for California Hospital Association as Amicus Curiae on behalf of Defendants and Appellants.

DiCaro, Coppo & Popcke, Carlsbad, Carlo Coppo, Michael R. Popcke and Shelley A. Carder for Beta Healthcare Group as Amicus Curiae on behalf of Defendants and Appellants.

Law Offices of Stephen D. Schear, Stephen D. Schear, Oakland; Justice First and Jenny Huang, Oakland, for Plaintiff and Respondent.

Center for Legal Affairs, Francisco J. Silva and Long X. Do, Sacramento, for California Medical Association and American Medical Association Amici Curiae on behalf of Plaintiff and Respondent.


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[318 P.3d 834] In Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 131 Cal.Rptr. 90, 551 P.2d 410 ( Westlake ), we held that, before

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a physician may bring a common law tort action directed against a hospital's quasi-judicial decision to terminate the physician's staff privileges, he or she must first exhaust all internal hospital procedures to reverse the decision, and, if this fails, must prevail in court in a mandamus proceeding to have the decision set aside. In two more recent decisions, however, we concluded that persons filing damage suits authorized by certain whistleblower statutes— laws forbidding employer retaliation against workers who have reported fraud, danger, corruption, [168 Cal.Rptr.3d 167] waste, or malfeasance— did not have to exhaust available administrative and mandamus remedies before seeking relief in court. ( Runyon v. Board of Trustees of California State University (2010) 48 Cal.4th 760, 108 Cal.Rptr.3d 557, 229 P.3d 985( Runyon ); State Bd. of Chiropractic Examiners v. Superior Court (2009) 45 Cal.4th 963, 89 Cal.Rptr.3d 576, 201 P.3d 457( Arbuckle ); but see Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 80 Cal.Rptr.3d 690, 188 P.3d 629( Miklosy ).)

Here, as in Westlake, defendant Sutter Central Valley Hospital, through its quasi-judicial peer review procedures, terminated plaintiff Mark T. Fahlen's physician's staff privileges. He sued the hospital and its chief operating officer, seeking damages, reinstatement, and other relief on multiple theories. Among other things, his complaint claims the hospital's action constituted retaliation for his reports of substandard performance by hospital nurses, and thus violated [318 P.3d 835]Health and Safety Code section 1278.5.[1]

Defendants moved to dismiss the action on grounds, among others, that plaintiff could not bring a civil suit under section 1278.5 unless he first succeeded by mandamus in overturning the hospital's action. The trial court denied the motion. In a published decision, the Court of Appeal reversed in part. The appellate court held that plaintiff could pursue those claims based on section 1278.5, rather than on the common law, even though he had not previously sought and obtained a mandamus judgment against the hospital's decision. This holding conflicted with that of another appellate decision, Nesson v. Northern Inyo County Local Hospital Dist. (2012) 204 Cal.App.4th 65, 138 Cal.Rptr.3d 446( Nesson ). We granted defendants' petition for review for the sole purpose of resolving the conflict.

We conclude that when a physician claims, under section 1278.5, that a hospital's quasi-judicial decision to restrict or terminate his or her staff privileges was itself a means of retaliating against the physician " because" he or she reported concerns about the treatment of patients, the physician need not first seek and obtain a mandamus judgment setting aside the hospital's decision before pursuing a statutory claim for relief. Section 1278.5 declares

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a policy of encouraging workers in a health care facility, including members of a hospital's medical staff, to report unsafe patient care. The statute implements this policy by forbidding a health care facility to retaliate or discriminate " in any manner" against such a worker " because" he or she engaged in such whistleblower action. (ยง 1278.5, subd. (b).) It entitles the worker to prove a statutory violation, and to obtain appropriate relief, in a civil suit before a judicial fact finder.

Section 1278.5 does not expressly or impliedly condition this right on a prior successful mandamus challenge to a hospital's quasi-judicial decision to restrict or terminate the whistleblower's medical staff privileges. Indeed, the statute includes terms indicating the Legislature's understanding and expectation that a medical staff member's whistleblower suit might begin and go forward while the hospital's proceedings against the physician were still pending.

Moreover, such a condition would seriously undermine the Legislature's purpose to afford a whistleblower on a hospital medical staff the right to sue. A [168 Cal.Rptr.3d 168] hospital disciplinary proceeding against a member of the medical staff is ostensibly focused on concerns about the physician's professional fitness, not on redressing his or her claims of whistleblower retaliation. Indeed, plaintiff asserts here that the hospital proceeding was the very means of retaliation. By concluding, on limited mandamus review, that the administrative evidence of the physician's deficiencies was sufficient to support the hospital's decision, the mandamus court could thus entirely and permanently foreclose the physician's statutory right to litigate, in court, his or her distinct claim that whistleblower retaliation was a reason for the exclusionary effort.

The Legislature cannot have intended, sub silentio, to so limit the physician's statutory right to persuade a judicial fact finder, in the first instance, that the adverse hospital action actually occurred because of, and in retaliation for, his or her efforts to report concerns about the hospital's quality of care. We thus conclude, as to the narrow issue before us, that there is no such necessary condition to a physician's statutory medical whistleblower claim.

Of course, both the California Legislature and the United States Congress have recognized that legitimate, properly conducted hospital peer review proceedings are themselves a crucially important means of protecting patients against unsafe hospital medical care. As we discuss below, both state and federal statutes seek to encourage participation in medical peer review activities by providing qualified tort immunity for those involved in reasonably founded medical peer review decisions. Even aside from these statutory limitations, " mixed motive" cases may arise in which such proceedings, though instigated at least in part as retaliation [318 P.3d 836] against a whistleblower,

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nonetheless disclose substantial legitimate medical grounds for restricting or terminating a physician's hospital staff privileges— reasons that would properly have produced the same decision in the absence of retaliatory animus.

Future litigants may argue that proper attention to these various concerns should affect the trial timing, the issues, and the available remedies in an individual physician's whistleblower suit under section 1278.5. Such matters, however, are beyond the scope of the narrow question before us here. We pass no final judgment upon them, but await their appropriate future development.


Plaintiff physician, a kidney specialist, was employed by Gould Medical Group (Gould) in Modesto. Beginning in 2004, he was granted nonprovisional staff privileges at Memorial Medical Center (Hospital), which is operated by defendant Sutter Central Valley Hospital (Sutter). Twice in 2004 and twice in 2006, plaintiff argued with Hospital nurses who assertedly failed to follow his patient treatment instructions. From August 2007 through April 2008, plaintiff had six other clashes with particular Hospital nurses about patient care. On several of these occasions, he reported to nursing supervisors, or in writing to the Hospital's administration, that nurses had been insubordinate and had provided substandard care.

In early May 2008, after the last of these clashes, defendant Steve Mitchell, the Hospital's chief operating officer, contacted Gould's medical director about plaintiff's disruptive interactions with the Hospital's nursing staff. Mitchell hoped that Gould's director would meet with plaintiff, that plaintiff would get angry during the meeting, that Gould's director would react by terminating plaintiff's employment, [168 Cal.Rptr.3d 169] and that plaintiff would then leave town. This, Mitchell envisioned, would obviate the need for peer review proceedings to determine the status of plaintiff's Hospital staff privileges. Gould did terminate plaintiff's at-will employment contract on May 14, 2008. As a result, plaintiff's medical malpractice insurance was cancelled, leaving him immediately unable to treat patients at the Hospital.

Because he intended to open a private practice in Modesto, plaintiff scheduled a meeting with Mitchell to determine the status of his Hospital staff privileges. After the meeting was scheduled, but before it occurred, Mitchell declared in an e-mail to the Hospital's chief executive officer that plaintiff " does not get it" — meaning, as Mitchell admitted, that plaintiff was going to lose his privileges at the Hospital. The chief executive officer responded that it " [l]ooks like we need to have the Medical Staff take some action on his MedQuals!!! Soon!"

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At his May 30, 2008, meeting with plaintiff, Mitchell told plaintiff he should resign from the Hospital staff and leave town, or the Hospital would begin an investigation and peer review proceeding that would result in a report to the Medical Board of California. The Hospital thereafter convened an ad hoc investigative committee, which presented a report to the Hospital's medical executive committee (MEC)— the body responsible, under the Hospital's bylaws, for reviewing staff privilege applications and initiating corrective or disciplinary action against medical staff. At its meeting on August 11, 2008, the MEC recommended against renewal of plaintiff's privileges. The MEC notified plaintiff of its decision and his right to contest it.

Plaintiff requested a hearing. The MEC informed him by letter that a judicial review committee (JRC) would conduct the review hearing in accordance with the procedures set forth in the bylaws. The letter also included a statement of charges, including 17 incidents of disruptive or abusive behavior toward Hospital staff from 2004 through 2008, and one incident of " abusive and contentious behavior" during a 2008 interview with the ad hoc investigating committee.

The JRC, composed of six physicians with Hospital staff privileges, conducted an extensive evidentiary hearing in 13 sessions between October 2009 and May 2010. An attorney acted as hearing officer.

In unanimously adopted findings, issued on June 14, 2010, the JRC reversed the MEC's [318 P.3d 837] decision. The JRC reached the following conclusions: The evidence failed to show plaintiff was professionally incompetent or had engaged in behavior endangering the delivery of patient care. To the extent anyone's conduct was detrimental to such care, the nursing staff was more to blame than plaintiff. Several of his interactions with the nursing staff had been " inappropriate and [un]acceptable," but the Hospital should have intervened sooner and failed in its responsibility to do so. As a result, the Hospital omitted to consider intermediate steps short of loss of staff privileges, such as anger management counseling. Moreover, after the MEC recommended termination of privileges, plaintiff had voluntarily obtained psychological counseling and attended anger management sessions, and his behavior had appreciably improved. Accordingly, the MEC had failed to sustain its burden of proving that its recommendation not to reappoint plaintiff to the Hospital's medical staff for " medical disciplinary cause" was " reasonable and warranted."

Under the Hospital's bylaws, the final decision whether to terminate a physician's staff privileges rests with its board of trustees (Board). The Board concluded it [168 Cal.Rptr.3d 170] needed the JRC's assistance to fulfill its duties in plaintiff's case. By a letter dated September 16, 2010, the Board propounded a series of

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detailed questions to the JRC, asking whether each alleged incident of misconduct occurred, what findings the JRC had made with respect to each charge presented by the MEC, and " [w]hat evidence provided at the [JRC] hearing was considered" in making these findings. The JRC was asked to respond within 30 days.

After considering the Board's request, the JRC concluded it was unreasonable, because it would require JRC members to read the entire hearing transcript and all the documentary evidence. The JRC advised that the Board would " have to proceed on the basis of all the materials available to it at this time, including the Findings of Fact and Conclusion that [were] previously rendered by the [JRC]."

In a letter to plaintiff's counsel, dated January 7, 2011, the Board conveyed its decision reversing the JRC. The Board criticized the JRC's findings and conclusions as " unlinked to any factual support in the hearing record." From its own review of the evidence, the Board concluded that plaintiff's conduct " was inappropriate and not acceptable, [and was] directly related to the quality of medical care at the Hospital."

Plaintiff did not seek direct judicial review of the Board's decision by means of a petition for writ of mandamus to set the decision aside. The Hospital filed with the Medical Board of California a so-called 805 report of its ...

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