Kadlec Medical Center v. Lakeview Anesthesia Associates

Brief Fact Summary. Kadlec Medical Center (Plaintiff) sued Dr. Robert Berry (Defendant), an anesthesiologist and former shareholder/employee of Louisiana Anesthesia Associates (LAA) (Defendant) and Lakeview Medical Center (Lakeview) (Defendant), on the basis that he used narcotics on-duty and nearly caused a patient to die.  Plaintiff claimed that LAA’s (Defendant) and Lakeview’s (Defendant) referral letters were misleading as they did not disclose Berry’s (Defendant) past negligence and addiction to narcotics.

Synopsis of Rule of Law.  A former employer is liable for misleading referral letters that do not disclose a doctor’s past negligence and addiction to narcotics.

Facts. Dr. Berry (Defendant) was a licensed anesthesiologist who practiced with, among others, Drs. William Preau and Mark Dennis at Louisiana Anesthesia Associates (LAA) (Defendant).  From November 2000 until he was terminated on March 13, 2001, Berry (Defendant) was a shareholder of LAA (Defendant), which was the exclusive provider of anesthesia services to Lakeview Medical Center (Lakeview) (Defendant).  In November 2000, Lakeview (Defendant) investigated Berry (Defendant) after nurses expressed concern about his undocumented and suspicious withdrawals of the narcotic Demerol.  The team that investigated found excessive narcotic withdrawals by Berry (Defendant) and missing documentation.  Dennis brought the situation to Berry’s (Defendant) attention, however, instead of following the agreement that he would account for his continued narcotic withdrawals, he did not.  Three months later, Berry (Defendant) did not answer a page while on-duty at Lakeview (Defendant) and when discovered, he was found asleep, groggy, and unfit to work.  On March 27, 2001, Dennis and the other partners at LAA (Defendant) fired Berry (Defendant) “for cause.”  Although Berry’s (Defendant) drug problem and the danger he posed to patients had been recognized, no one reported his impairment to Lakeview’s (Defendant) Medical Executive Committee or the Board of Trustees, or to the State Board of Medical Examiners or the National Practitioner’s Data Bank.
  After leaving LAA (Defendant) and Lakeview (Defendant), Berry (Defendant) applied for privileges at Kadlec Medical Center (Plaintiff).  When Kadlec received the application, it began the credentialing process and examined a variety of materials, including the referral letters from LAA (Defendant) and Lakeview (Defendant).  LAA’s (Defendant) Preau and Dennis, two months after they fired Berry (Defendant) for using drugs on the job, submitted referral letters for on his behalf.  The letter from Dennis stated he had worked with Berry (Defendant) for four years, that he was an excellent clinician, and that he would be an asset to any anesthesia service.  Preau’s letter said he had worked with Berry (Defendant) at Lakeview (Defendant) and that he highly recommended him as an anesthesiologist.  Plaintiff sent a similar request to Lakeview (Defendant) for credentialing information about Berry (Defendant).  Lakeview (Defendant) responded to the request with a short letter, stating, “Our records indicate that Dr. Robert L. Berry was on the Active Medical Staff of Lakeview Regional Medical Center in the field of Anesthesiology from March 04, 1997 through September 04, 2001.”  LAA (Defendant) did not disclose their termination of Berry (Defendant); his on-duty drug use; the investigation into his undocumented and suspicious withdrawals of narcotics or any other negative information.
  Plaintiff then credentialed Berry (Defendant), and he began working there.  Berry (Defendant) worked at Kadlec (Plaintiff) without incident for a number of months, and was then moved temporarily to another state and suffered a back injury as a result of a car accident he was involved in.  After Berry (Defendant) returned to Kadlec (Plaintiff), some nurses thought that he appeared unwell and had mood swings.  In the months that followed, Berry (Defendant) gave too much morphine to a patient during surgery, and she had to be revived using Narcan.  On November 12, 2002, Berry (Defendant) was assigned to the operating room and one nurse stated he was “screwing up all day” and several of his patients suffered adverse effects because they had not been anesthetized properly.  During one procedure, he seemed to almost pass out.  Kimberley Jones was admitted for what should have been a routine, fifteen-minute tubal ligation.  Following surgery, a nurse noticed that Jone’s fingernails were blue and she was not breathing.  Berry (Defendant) had failed to resuscitate her which left her in a permanent vegetative state.  Berry (Defendant) later admitted to Plaintiff’s staff his addiction to narcotics.  Jones’s family brought suit against Berry (Defendant) and Kadlec (Plaintiff), which ultimately settled the claim.  Plaintiff then filed suit against LAA (Defendant) and Lakeview (Defendant) on the basis of intentional and negligent misrepresentation, which arose from the alleged misrepresentations and omissions from the Defendants’ referral letters to Berry (Defendant).  The trial court set aside the jury’s verdict in favor of Plaintiff and granted a motion for a new trial, which was then appealed.

Issue. Is a former employer liable for misleading referral letters that do not disclose a doctor’s past negligence and addiction to narcotics?

Held. (Reavley, J.)  Yes.  A former employer is liable for misleading referral letters that do not disclose a doctor’s past negligence and addition to narcotics.  The Plaintiffs allege that the Defendants committed two torts: intentional misrepresentation and negligent misrepresentation.  The elements of a claim for intentional misrepresentation are: (1) a misrepresentation of a material fact; (2) made with intent to deceive; and (3) causing justifiable reliance that results in injury.  To establish a claim for intentional misrepresentation when it is by silence or inaction, plaintiffs must also show that the defendant owed a duty to the plaintiff to disclose the information.  In order to make a claim for negligent misrepresentation: (1) there must be a legal duty on the part of the defendant to supply correct information; (2) there must be a breach of that duty, which can occur by omission or affirmative misrepresentation; and (3) the breach must have caused the plaintiff damages on the basis of the plaintiff’s reasonable reliance on the misrepresentation.
  After the defendants chose to write referral letters, they assumed a duty not to make affirmative misrepresentations in the letters.  LAA’s (Defendant) letters were misleading, but Lakeview’s (Defendant) letter was not.  The defendants did not have an affirmative duty to disclose negative information about Berry (Defendant) in their referral letters.  However, they owed a duty to Plaintiff to avoid affirmative misrepresentations in the referral letters.  A party may keep absolute silence and no rule of law or equity would be violated; however, if the party chooses to speak and to convey information that may influence another party’s conduct, he is bound to disclose the whole truth.  In negligent misrepresentation cases, courts have held that even when there is no initial duty to disclose information, once information has been offered by a party, it assumes a duty to insure that the information offered is accurate.
  Consistent with these cases, the LAA (Defendant) and Lakeview (Defendant) had a legal duty not to make affirmative misrepresentations in their referral letters.  A party does not incur liability every time it casually makes a statement that is incorrect.  However, if an employer makes a misleading statement in a referral letter regarding the performance of a former employee, the former employer may be liable for its statements if the facts and circumstances call for it.  In this case, the defendants were recommending an anesthesiologist, who held the lives of patients in his hands every day.  Policy considerations dictate that the defendant had a duty to avoid misrepresentations in their referral letters if they misled plaintiffs into thinking that Berry (Defendant) was an “excellent” anesthesiologist, when they knew he was a drug addict.  Certainly if statements by defendants create a misapprehension about Berry’s (Defendant) suitability to work as an anesthesiologist, they were bound to disclose the whole truth when they volunteered to speak and to convey information that influenced the conduct of Plaintiff.  In other words, if they created a misapprehension about Berry (Defendant) due to their own statements, they incurred a duty to disclose the information about his drug use and “for cause” firing to complete the whole picture.
  The letter from Preau stated that Berry (Defendant) was an “excellent anesthesiologist” and that he “recommended him highly.”  The letter from Dennis said that Berry (Defendant) was “an excellent physician” who “he is sure will be an asset to [a future employer’s] anesthesia service.”  On their face these letters are false and materially misleading.  Note in particular, these letters came only sixty-eight days after Dennis and Preau, on behalf of LAA (Defendant), signed a letter terminating Berry (Defendant) for narcotic use while on duty and stating that Berry’s (Defendant) behavior presented a significant risk to patients.  Furthermore, because of the misleading statements in the letters, Dennis and Preau had a duty to fix these misleading statements by disclosing to Plaintiff that Berry (Defendant) had been fired for drug use while on the job.
  Whether Lakeview’s (Defendant) letter was misleading is more difficult.  The letter does not recommend Berry (Defendant) to Plaintiff, and does not comment on his proficiency as an anesthesiologist.  For whatever the reason Lakeview (Defendant) did not respond in full to Plaintiff’s inquiry, Plaintiff presented no evidence that this could have affirmatively misled it into thinking that Berry (Defendant) had a good history at Lakeview (Defendant).  Plaintiff states the letter is also misleading in that it reported in error that Berry (Defendant) was on the active medical staff at Lakeview (Defendant) until September.  While the September 4 date does not reflect accurately when Berry (Defendant) was no longer on the active medical staff, it did not mislead Plaintiff into thinking that he had less of a gap in employment than he really did.  Lakeview (Defendant) cannot be held liable on the basis of its alleged affirmative misrepresentations.
  A duty to disclose does not exist except for special circumstances, for instance a fiduciary or confidential relationship between the parties, which, under the circumstances, justifies imposing the duty.  Case law suggests that the defendant must have had a financial interest in the transaction before a duty to disclose can be imposed.  LAA (Defendant) did not have a fiduciary or contractual duty to disclose knowledge to Plaintiff.  Although it might have had an ethical obligation to disclose their knowledge of Berry’s (Defendant) drug use, they were also rightly concerned about a possible defamation claim if they disclosed negative information about him.  As a general policy matter, even if an employer is under the impression that its disclosure is protected because the matter communicated is true, it would be a burden to employers to impose a duty that, upon receipt of an employment referral request, to investigate whether the negative information known about an employee fits within the courts’ description of which negative information must be disclosed to future employers.  Finally, the concerns over employee privacy protection weigh in favor of not mandating a potentially broad duty to disclose. 
  [The court held that LAA (DA) negligently and intentionally misled Plaintiff regarding Berry’s (Defendant) addiction.]  Reversed in part, vacated in part, and remanded.

Discussion. The key to the Kadlec holding is that when a former employer chooses to provide a referral letter, it creates liability based on any omission that affects a future employer.  LAA (Defendant) would not have been held responsible if it had done as Lakeview (Defendant) in its decision to provide only a minimal letter acknowledging Berry’s (Defendant) employment.  The court in Kadlec was no doubt motivated by seemingly impossible recommendations by LAA (Defendant), which the court noted were “false on their face and materially misleading.”  One has to wonder why LAA (Defendant) would provide such letters, knowing the issues that led to Berry’s (Defendant) termination.