Fahlen v. Sutter Central Valley Hospitals: Supreme Court Allows Physician To Bring Whistleblower Action

In Fahlen v. Sutter Central Valley Hospitals (8/14/12) (discussed here), the Court of Appeal held that a doctor claiming he lost his hospital privileges as a form of whistleblower retaliation need not exhaust his judicial remedy of pursuing review, via writ of mandate, of the hospital's action before he can file a whistleblower lawsuit under California Health and Safety Code section 1278.5.

On February 20, 2014, in a per curiam opinion written by Justice Baxter, the California Supreme Court affirmed in full. I normally don't like to quote opinions at great length, but the introduction to this opinion does an excellent job of setting forth the legal background and holding: 

In Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465 (Westlake), we held that, before 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, 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 (Runyon); State Bd. of Chiropractic Examiners v. Superior Court (2009) 45 Cal.4th 963 (Arbuckle); but see Miklosy v. Regents of University of California (2008) 44 Cal.4th 876 (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 Health and Safety Code section 1278.5.  

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 (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 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. (§ 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.  

Slip op. at 1-3. 

The Supreme Court's opinion is available here.