Fahlen v. Sutter Central Valley Hospitals: Doctor Who Loses Hospital Privileges Does Not Have To Exhaust Judicial Remedies Before Filing Lawsuit Under Whistleblower Law

by Sayema Hameed

Is a doctor who claims that he lost his hospital privileges in retaliation for being a whistleblower required to “exhaust his judicial remedies” by pursuing judicial review of the hospital’s decision before he can file a separate whistleblower lawsuit under California Health and Safety Code Section 1278.5?

In a new case,  Fahlen v. Sutter Central Valley Hospitals (Fifth District, Case No. F063023; filed 8/14/12), the California Court of Appeal has answered this question: No, the doctor does not have to exhaust judicial remedies through writ proceedings first.  The doctor can directly bring a lawsuit against the hospital for whistleblower retaliation.

California Health and Safety Code section 1278.5 is a whistleblower protection law designed to encourage health care workers to notify authorities of “suspected unsafe patient care and conditions.” (§ 1278.5(a).) The Court of Appeal explained that the California State Legislature’s  intent with the whistleblower protection law is “to encourage employees to report threats to public health without fear of retribution.”

The plaintiff in this case, Dr. Mark T. Fahlen, a nephrologist, 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 engaged in substandard nursing and endangered patient lives.

One nurse refused to follow his order to shock a patient with defibrillator paddles. Another disobeyed his order to transfer a patient to intensive care. Some of these incidents involved heated exchanges between Fahlen and the nurses, and nurses complained about Fahlen’s behavior.

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 hospital staff privileges. A peer review committee of six physicians reviewed the nonrenewal of Fahlen’s staff privileges and found no professional incompetence, as the evidence did not show that Fahlen endangered patient safety. Therefore, the peer review committee reversed the hospital decision.

The hospital board of trustees then reversed the peer review committee’s decision. The board of trustees found Fahlen’s conduct unacceptable and “directly related to the quality of medical care at the Hospital.” Thus, the hospital did not renew Fahlen’s staff privileges.  This outcome was reported to the Medical Board of California.

Fahlen did not file a petition for a writ of mandate challenging the hospital’s decision not to renew his hospital privileges. Instead, he filed this lawsuit, asserting numerous claims including a claim for whistleblower retaliation in violation of Health and Safety Code Section 1278.5.  The hospital filed an anti-SLAPP motion to dismiss the lawsuit, which the trial court denied.

The hospital appealed the trial court’s decision to the Court of Appeal and argued that Fahlen’s whistleblower claim must fail because he failed to seek judicial review (through writ proceedings) of the hospital’s administrative decision before filing his own lawsuit.

The Court of Appeal concluded that the trial court correctly denied the hospital’s motion with respect to the section 1278.5 claim because Fahlen is not required to seek judicial review of the hospital’s decision before filing a lawsuit for whistleblower retaliation under section 1278.5.  However, the exhaustion requirement does apply to his other claims.

The Court of Appeal explained as follows:

“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.”

Thus, a doctor can pursue a whistleblower retaliation claim under California Health & Safety Code Section 1278.5 without first seeking judicial review of the hospital’s administrative actions.  Retaliation against a medical staff member for complaints about quality of patient care is not a “legitimate peer review activity” and, therefore, not subject to the judicial review requirement.

However, under established California case law, a doctor must still exhaust all available remedies, including judicial review through writ proceedings, to reverse an adverse hospital decision, before the doctor may pursue other common law and statutory claims against a hospital.  Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 485-486.

Thus, Fahlen’s claims for (1) interference with the right to practice his occupation, (2) interference with prospective economic advantage, including loss of reputation and loss of his medical directorship of the Merced Dialysis Center, (3) retaliation in violation of Business & Professions Code Sections 510 and 2056, and (4) wrongful termination of hospital privileges, were all barred because Fahlen failed to seek judicial review before bringing these claims.

About Cabada & Hameed LLP

Cabada & Hameed LLP is a law firm serving the greater Southern California region. Formed by “big firm” veterans in 2009, the firm offers exceptional legal representation with experienced attorneys handling Labor & Employment and Business Litigation matters. Partners and co-founders Francisco Cabada and Sayema Hameed bring nearly two decades of legal experience to every matter and ensure that clients receive individualized counsel, around-the-clock availability, the utmost discretion and maintenance of the highest professional and ethical standards. For more information, please visit the website www.cabadahameed.com.

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