Tuesday, May 20, 2008

No Duty to Disclose Bad Acts of Former Employee in Louisiana

Shakyscales In Kadlec Medical Ctr v Lakeview Anesthesia Associates (5thCir. May 8, 2008) (free registration required), the court writes:

The LAA shareholders worked with Dr. Robert Berry—an anesthesiologist and former LAA shareholder—at Lakeview Medical, where the defendants discovered his on-duty use of narcotics. In referral letters written by the defendants and relied on by Kadlec, his future employer, the defendants did not disclose Dr. Berry's drug use.

While under the influence of Demerol at Kadlec, Dr. Berry's negligent performance led to the near-death of a patient, resulting in a lawsuit against Kadlec. Plaintiffs claim here that the defendants' misleading referral letters were a legal cause of plaintiffs' financial injury, i.e., having to pay over $8 million to defend and settle the lawsuit. The jury found in favor of the plaintiffs and judgment followed. We reverse the judgment against Lakeview Medical, vacate the remainder of the judgment, and remand . . . .

In Louisiana, a duty to disclose does not exist absent special circumstances, such as a fiduciary or confidential relationship between the parties, which, under the circumstances, justifies the imposition of the duty. Louisiana cases suggest that before a duty to disclose is imposed the defendant must have had a pecuniary interest in the transaction. In Louisiana, the existence of a duty is a question of law, and we review the duty issue here de novo . . . .

The defendants have the better argument on the lack of pecuniary interest and, in addition, the requisite "special relationship"between the defendants and Kadlec, necessary to impose a duty to disclose, is lacking.17

Plaintiffs argue that policy considerations weigh in favor of recognizing a duty to disclose. They contend that imposing a duty on health care employers to disclose that a physician's drug dependence could pose a serious threat to patient safety promotes important policy goals recognized by Louisiana courts. Plaintiffs point to the decision in Dornak v. Lafayette General Hospital, where the Louisiana Supreme Court imposed on a hospital the duty to disclose to its employee the results of a pre-employment physical which showed tuberculosis, "especially considering the fact that . . . [her] duties plac[ed] her in contact with co-employees and hospital patients."18 The Louisiana legislature recently adopted legislation that requires health care entities to "report [to the appropriate professional licensing board] each instance in which the health care entity . . . [t]akes an adverse action against a health care professional due to impairment or possible impairment."19 This shows that the legislature has recognized the importance of reporting possible impairments that could affect patient safety.

Despite these compelling policy arguments, we do not predict that courts in Louisiana—absent misleading statements such as those made by the LAA defendants—would impose an affirmative duty to disclose. The defendants did not have a fiduciary or contractual duty to disclose what it knew to Kadlec. And although the defendants might have had an ethical obligation to disclose their knowledge of Dr. Berry's drug problems, they were also rightly concerned about a possible defamation claim if they communicated negative information about Dr. Berry.

Now, I have had this debate about whether it ever makes sense to disclose negative information about a former employee given the state of defamation law, but I have never seen a court, no less an appellate court, admit that someone disclosing relevant, important information rightly might believe that they may be subject to a defamation claim!

In any event, I think the court is wrong, Louisiana law or not.  The better policy argument does stem from cases like Randi W. v. Muroc Joint Unified School District, 929 P.2d 582 (Cal. 1997), in which the California Supreme Court (recently rated the best in the land!) found a school district who gave a positive reference to an employee who was discharged for sexual misconduct could be liable for sexual abuse on a 13-year old student at the new school.  And I don't think it matters whether it was a positive reference or silence.  Haven't we gotten by this whole act/omission distinction thing years ago?



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