Kadlec Medical Center v. Lakeview Anesthesia Associates
527 F.3d 412 (5th Cir. 2008)

Facts:

  • Dr. Berry was a shareholder of Louisiana Anesthesia Associates (LAA), the exclusive provider of anesthesia services to Lakeview Medical.
  • He became hooked on Demerol, using even while on-duty. His partners fired him for cause.
  • Dr. Berry later applied through a staffing firm for a position at Kadlec Medical.
    • As part of its credentialing process, Kadlec reviewed referral letters from two of the doctors that Dr. Barry worked with at LAA.
      • Both letters spoke highly of Dr. Berry and made no mention of the fact that they had just fired him 68 days prior for putting patients at risk.
    • Kadlec also sent Lakeview detailed questionnaires that asked about disciplinary action and behavior problems, but Lakeview didn’t return the form and instead drafted a short letter.
      • The letter basically said they had a “large volume of inquiries” and to call them if need be.
      • However, out of 14 total requests for other doctors, Dr. Berry’s was the only questionnaire not completed.
  • One day, while treating patient Kimberley Jones for what should have been a routine, fifteen minute tubal ligation, Dr. Berry botched the procedure and failed to resuscitate her, leaving her in a permanent vegetative state.
  • Kadlec had to pay around $8 million to settle the case and then went after LAA and Lakeview for intentional and negligent misrepresentation due to the referral letters.

History:
These claims were tried to a jury, which returned a verdict in favor of the plaintiffs on both claims. The jury awarded plaintiffs $8.24 million.

Issues:
(1) Whether defendants had a duty not to make affirmative misrepresentations to clinic in their referral letters concerning anesthesiologist.
(2) Whether statements in the shareholders’ referral letters were materially misleading.
(3) Whether the hospital’s referral letter was misleading.
(4) Whether the defendants had have an affirmative duty to disclose in their referral letters, absent misleading statements.

Holdings:
(1) Yes.
(2) Yes.
(3) No.
(4) No.

Reasoning:

(1) Duty to Avoid Affirmative Misrepresentations.

  • “Although a party may keep absolute silence and violate no rule of law or equity, if he volunteers to speak and to convey information which may influence the conduct of the other party, he is bound to disclose the whole truth.”
    • Here, the doctors chose to write the referral letters, therefore the duty arose.
    • Considering that they were recommending an anesthesiologist, who holds the lives of patients in his hands, policy considerations dictate this duty.

(2) The Statements Were Misleading.

  • The letter from Dr. Preau stated that Dr. Berry was an “excellent anesthesiologist” and that he “recommended him highly,” while Dr. Dennis’s letter said that Dr. Berry was “an excellent physician” who “he is sure will be an asset to his future employer’s anesthesia service.”
  • These letters were false on their face and materially misleading.

(3) Lakeview’s Letter Was Not Misleading.

  • The letter didn’t comment on Dr. Berry’s proficiency as an anesthesiologist, and it didn’t recommend him to Kadlec.

(4) There Is No Affirmative Duty To Disclose.

  • Out of concern for defamation claims as well as the privacy of employees, the court rejected the public policy argument and continued with the tradition rule regarding the duty to disclose:
  • “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.”