Labor & Employment Law

5th Circuit Court of Appeals Issues Major Decision Concerning Employer Liability For Misleading Employment References

5^th Circuit Court of Appeals Issues Major Decision Concerning Employer Liability For Misleading Employment References
Source: Adjunct Law Prof Blog; http://lawprofessors.typepad.com/adjunctprofs/

Reproduced with permission. Copyright © 2008, Mitchell H. Rubinstein, Esq., Adjunct Professor of Law, St. Johns Law School and New York Law School, All rights reserved.

http://lawprofessors.typepad.com/.shared/image.html?/photos/uncategorized/2008/06/04/5thcir.jpg Kadlec Medical Center v. Lakeview Anesthesia Assoc., ___F.3d___(5th Cir. May 30, 2008), is a major 5th Circuit decision, applying Louisiana law, concerning employer liability for misleading references.

A physician anesthesiologist was dismissed from his position because he reported for work in an impaired condition due to the use of drugs. About 2 months after he was terminated, his former supervisor wrote a positive reference letter to "Staff Care" (the decision describes Staff Care as a staffing firm) referring to this doctor as an "excellent clinician" and "an asset to any anesthesia service." That letter was intended for future employers. Additionally, the doctor's former hospital where he had staff privileges wrote a neutral letter to the doctor's perspective new employer confirming dates of employment.

This doctor then gets a job as an anesthesiologist and almost kills a patient who wound up in a permanent vegetative state because he failed to resuscitate her. The doctor admitted to using Demerol and checked himself into a drug rehabilitation program.

The doctor's new employer settled the malpractice claim for millions and sued both his prior employer and his prior hospital because of the references they gave. The 5th Circuit held that a cause of action for intentional and negligent misrepresentation was stated against the doctor's former employer, but not his former hospital, stating:

The defendants owed a duty to Kadlec to avoid affirmative misrepresentations in the referral letters. In Louisiana, ?[a]lthough 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.? In negligent misrepresentation cases, Louisiana courts have held that even when there is no initial duty to disclose information, ?once [a party] volunteer[s] information, it assume[s] a duty to insure that the information volunteered [is] correct.? Consistent with these cases, the defendants had a legal duty not to make affirmative misrepresentations in their referral letters. A party does not incur liability every time it casually makes an incorrect statement. But if an employer makes a misleading statement in a referral letter about the performance of its former employee, the former employer may be liable for its statements if the facts and circumstances warrant. Here, defendants were recommending an anesthesiologist, who held the lives of patients in his hands every day. Policy considerations dictate that the defendants had a duty to avoid misrepresentations in their referral letters if they misled plaintiffs into thinking that Dr. Berry was an ?excellent? anesthesiologist, when they had information [9 Sunset Realty, 23 So. 2d at 455?56]. that he was a drug addict. Indeed, if defendants? statements created a misapprehension about Dr. Berry?s suitability to work as an anesthesiologist, then by ?volunteer[ing] to speak and to convey information which . . . influence[d] the conduct of [Kadlec], [they were] bound to [disclose] the whole truth.? In other words, if they created a misapprehension about Dr. Berry due to their own statements, they incurred a duty to disclose information about his drug use and for-cause firing to complete the whole picture.

We now review whether there is evidence that the defendants? letters were misleading. We start with the LAA defendants. The letter from Dr. Preau stated that Dr. Berry was an ?excellent anesthesiologist? and that he ?recommend[ed] him highly.? 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 are false on their face and materially misleading. Notably, these letters came only sixty-eight days after Drs. Dennis and Preau, on behalf of LAA, signed a letter terminating Dr. Berry for using narcotics while on-duty and stating that Dr. Berry?s behavior put ?patients at significant risk.? Furthermore, because of the misleading statements in the letters, Dr. Dennis and Dr. Preau incurred a duty to cure these misleading statements by disclosing to Kadlec that Dr. Berry had been fired for on-the-job drug use.

The question as to whether Lakeview Medical?s letter was misleading is more difficult. The letter does not comment on Dr. Berry?s proficiency as an anesthesiologist, and it does not recommend him to Kadlec. Kadlec says that the letter is misleading because Lakeview Medical stated that it could not reply to Kadlec?s detailed inquiry in full ?[d]ue to the large volume of inquiries received.?

But whatever the real reason that Lakeview Medical did not respond in full to Kadlec?s inquiry, Kadlec did not present evidence that this could have affirmatively misled it into thinking that Dr. Berry had an uncheckered history at Lakeview Medical.

Kadlec also says that the letter was misleading because it erroneously reported that Dr. Berry was on Lakeview Medical?s active medical staff until September 4, 2001. Kadlec presented testimony that had it known that Dr. Berry never returned to Lakeview Medical after March 13, 2001, it would have been suspicious about the apparently large gap in his employment. While it is true that Dr. Berry did not return to Lakeview Medical after March 13, this did not terminate his privileges at the hospital, or mean that he was not on ?active medical staff.? In fact, it appears that Dr. Berry submitted a formal resignation letter on October 1, 2001, weeks after September 4. Therefore, while the September 4 date does not accurately reflect when Dr. Berry was no longer on Lakeview Medical?s active medical staff, it did not mislead Kadlec into thinking that he had less of a gap in employment than he actually had.

In sum, we hold that the letters from the LAA defendants were affirmatively misleading, but the letter from Lakeview Medical was not. Therefore, Lakeview Medical cannot be held liable based on its alleged affirmative misrepresentations. It can only be liable if it had an affirmative duty to disclose information about Dr. Berry.

The court also held that the doctor's employer and former hospital did NOT have a "duty" to disclose, reasoning:

The Louisiana court in Louviere recognized that no court in Louisiana has imposed on an employer a duty to disclose information about a former employee to a future employer.
Furthermore, we have not found a single case outside of Louisiana where a court imposed an affirmative duty on an employer to disclose negative information about a former employee. Some courts have held that employers have a legal duty to disclose negative information about former employees who later cause foreseeable physical harm in their new jobs, at least when there are misleading statements made by the former employer. But each of these cases based its conclusion on the fact that the former employer had made affirmative misrepresentations in its referral, and none imposed a duty based on the employer?s mere nondisclosure. These cases reinforce our conclusion that the defendants had a duty to avoid misleading statements in
their referral letters, but they do not support plaintiffs? duty to disclose theory.

In fact, one court explicitly held that a hospital did not have an affirmative duty to disclose a nurse?s past sexual misconduct toward patients when asked for an evaluation by a prospective employer, but that ?[the defendant did] not challenge the proposition that, in undertaking to provide . . . a reference, and in volunteering information about [the employee?s] qualities as a nurse, it incurred a duty to use reasonable care to avoid disclosing factually misleading
information.

This is a lengthily decision (24 pages) which is extremely well written and full of cites. Given the facts of this case are extreme, but extreme cases often result in important decisions. Look for this case to be cited in every Employment Law text and for courts around the country to follow it.

Mitchell H. Rubinstein

Full post as published by New York Public Personnel Law on June 09, 2008 (boomark / email).