Kadlec Medical Center v. Lakeview Anesthesia Associates
2008 U.S. App. LEXIS 10267, 2008 WL 1976591, 527 F.3d 412 (2008)
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Rule of Law:
While a former employer has no general affirmative duty to disclose negative information about a former employee to a prospective employer, an employer who chooses to provide a recommendation assumes a duty to not make affirmative misrepresentations and may be liable if their misleading statements cause foreseeable harm.
Facts:
- Dr. Robert Berry, an anesthesiologist at Louisiana Anesthesia Associates (LAA), practiced exclusively at Lakeview Regional Medical Center.
- In late 2000, Lakeview Medical investigated Dr. Berry for suspicious and undocumented withdrawals of the narcotic Demerol.
- In early 2001, Dr. Berry was found asleep, groggy, and unfit to work while on-duty at Lakeview Medical after failing to answer a page.
- On March 27, 2001, LAA partners, including Drs. Dennis and Preau, terminated Dr. Berry 'for cause,' stating in his termination letter that his impaired condition 'puts our patients at significant risk.'
- Two months later, Drs. Dennis and Preau wrote letters of recommendation for Dr. Berry, calling him an 'excellent clinician' and recommending him highly, without disclosing his drug use or termination for cause.
- In response to a detailed credentialing questionnaire from Kadlec Medical Center, Lakeview Medical sent a brief form letter stating only Dr. Berry's dates of service.
- Relying on the positive letters from the LAA doctors, Kadlec Medical Center hired Dr. Berry.
- While working at Kadlec and under the influence of Demerol, Dr. Berry's negligence during a routine surgery caused a patient, Kimberley Jones, to enter a permanent vegetative state.
Procedural Posture:
- Kadlec Medical Center and its insurer, Western Professional Insurance Company, filed a diversity suit in the U.S. District Court for Louisiana against Louisiana Anesthesia Associates (LAA), its shareholder doctors, and Lakeview Regional Medical Center.
- The plaintiffs asserted claims for intentional and negligent misrepresentation based on misleading referral letters.
- The case was tried before a jury, which returned a verdict in favor of the plaintiffs on both misrepresentation claims.
- The jury awarded plaintiffs $8.24 million and apportioned fault among the defendants, Kadlec, and Dr. Berry.
- The district court entered judgment against LAA and Lakeview Medical.
- LAA and Lakeview Medical, as defendants, appealed the judgment to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Under Louisiana law, is a former employer liable for misrepresentation when it provides an affirmatively misleading, positive recommendation for a physician it knew was impaired and a danger to patients, leading a subsequent employer to hire the physician who then injures a patient?
Opinions:
Majority - Reavley, Circuit Judge
Yes, a former employer is liable for misrepresentation if it provides an affirmatively misleading recommendation. The court held that while there is no general duty to disclose negative information, once an employer volunteers to speak, they are bound to disclose the whole truth to avoid creating a misleading impression. The letters from the LAA doctors, describing Dr. Berry as 'excellent' only two months after firing him for being a 'significant risk' to patients, were 'false on their face and materially misleading.' These affirmative misrepresentations created a duty to disclose the full story of his drug use and termination. In contrast, Lakeview Medical's letter was not misleading because it made no positive assertions and merely confirmed dates of service; thus, Lakeview had no duty to disclose and cannot be held liable. The court further reasoned that the harm caused by Dr. Berry was a foreseeable result of LAA's misleading recommendations, establishing legal causation, and that Kadlec's own negligence was a basis for comparative fault, not a superseding cause that would absolve LAA of liability.
Analysis:
This case establishes a critical distinction in employer liability for employee references, balancing the risk of defamation claims against the duty to prevent foreseeable harm. It clarifies that while silence is a safe harbor, providing a deceptively positive reference for a known dangerous employee constitutes an actionable affirmative misrepresentation. The ruling warns employers that they cannot mislead prospective employers to rid themselves of a problem employee. This decision reinforces the principle that a voluntary undertaking, such as writing a recommendation, can create a legal duty where none previously existed, particularly in professions like medicine where public safety is paramount.
