Case Law: Fahlen v. Sutter Central Valley Hospitals

Attorney Case Law Update: Fahlen v. Sutter Central Valley Hospitals – California Court of Appeal. Branigan Robertson is a California labor lawyer who focuses his practice on whistleblowers, overtime issues, harassment, retaliation, and wrongful discharge. Contact the firm for a free consultation.

Facts of the Case

Dr. Mark Fahlen reported to hospital authorities that some of his nurses at Memorial Medical Center failed to follow his instructions. In some instances, he believed that the nurses endangered his patients’ lives. One nurse refused to follow Fahlen’s order to use a defibrillator on a patient. Another disobeyed his order to transfer a patient to intensive care.

The hospital’s COO allegedly blamed Fahlen and helped persuade the group to fire him. The hospital then declined to renew Fahlen’s staff privileges. A judicial review committee of six physicians reviewed the nonrenewal of Fahlen’s staff privileges. They found no professional incompetence and reversed the decision. Then the hospital board reversed the committee. The board found that Fahlen’s conduct was not acceptable and was “directly related to the quality of medical care at the Hospital.” This outcome was reported to the Medical Board of California. Fahlen did not file a petition for a writ of mandate challenging the decision. Instead, he filed this lawsuit, asserting a section 1278.5 claim among others.

One Issue in the Case

Health & Safety Code § 1278.5 is a whistleblower protection law designed to encourage health care workers (not just doctors!) to notify authorities of “suspected unsafe patient care and conditions.” I’ve written about this powerful Health & Safety Code statute before.

The court had to decide whether a doctor claiming that he lost his hospital privileges as a form of whistleblower retaliation must exhaust his judicial remedy of pursuing peer review of the hospital’s action before he can file a whistleblower lawsuit under section 1278.5. A section 1278.5 claim cannot be asserted in peer review proceedings, obviously, so applying the exhaustion requirement would delay relief for a whistleblower.

In its demurrer, the hospital contended that because Fahlen failed to seek judicial review of the board of trustees’ decision, that decision was final, preventing Fahlen from challenging it in court. Basically, the defendant argued that Fahlen had failed to exhaust his administrative remedies.

The Court’s Holding

The Court stated that while the doctrine of administrative exhaustion was important the quasi-judicial proceeding could be part of the retaliatory action itself. Since an administrative action would only be overturned if the underlying decision was “arbitrary and capricious,” if the court did not rule this way it would narrow an individual’s right to redress under the statute if required to exhaust the administrative remedy.

The Court made clear that it did not want to make it more difficult for potential whistleblowers to seek relief under the statute in a court of law. The Court did not want to create any delays by seeking judicial review of the final administrative decision when the alleged adverse decision was based on whistleblowing.

At the end of the day this is a good result for employees (especially doctors) who work at large health care institutions.

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