Peterson v. Sutter Medical Foundation

Background

Ralph Peterson, a medical doctor, alleged that defendants associated with the Medical Board of California (MBC), Sutter Bay Medical Foundation, Sutter Bay Hospitals doing business as Alta Bates Summit Medical Center, and three doctors engaged in unlawful conduct connected to his hospital privileges, peer review, and MBC disciplinary proceedings.

Peterson alleged that Sutter used a “MediCal Strategy” involving profitable procedures, referrals of less profitable procedures, payments to cooperating physicians, and medical discipline against physicians who did not cooperate. He alleged that the Doctor Defendants ordered him to increase call coverage or pay a fee, that his privileges were suspended or effectively terminated after he refused, and that an adverse-action report was sent to the MBC and a national database. He also alleged that the MBC investigated him, that a patient complaint was made against him with Sutter’s encouragement, and that he ultimately agreed to surrender his medical privileges and license in a 2013 settlement with the MBC while represented by counsel.

Peterson brought claims for First Amendment and due-process violations, federal discrimination, failure to prevent discrimination and retaliation, federal antitrust violations, breach of contract, torts, and violations of California statutes. The MBC Defendants, Sutter Defendants, and Doctor Defendants filed motions to dismiss. The Sutter Defendants also filed a motion to strike the state-law claims under California’s anti-SLAPP law, which allows early challenges to claims based on protected speech or petitioning activity.

MBC Defendants’ Motion

The court held that the MBC Defendants were entitled to absolute prosecutorial or quasi-judicial immunity. Absolute immunity protects officials from damages claims for certain functions that are closely connected to judicial or prosecutorial work, regardless of the officials’ identities.

The court concluded that the MBC Defendants’ alleged conduct involved investigating complaints, opening and conducting disciplinary proceedings, creating public records of those proceedings, or declining to pursue discipline. Those actions were sufficiently connected to the MBC’s judicial and prosecutorial functions. The court rejected Peterson’s argument that alleged fraud or an improper MediCal strategy eliminated immunity, explaining that the relevant question was the nature of the officials’ functions, not whether Peterson alleged that they acted improperly.

The court granted with prejudice the MBC Defendants’ motion to dismiss and dismissed them from the suit. It found that amendment would be futile.

Sutter Defendants’ Motion

The Sutter Defendants argued that they could not be liable under 42 U.S.C. § 1983 because they were private actors and did not act under state authority. The court rejected that argument at the pleading stage. Peterson plausibly alleged that Sutter and the MBC acted together and that the MBC used its disciplinary powers as part of the alleged strategy. The court therefore allowed the constitutional claims against the Sutter Defendants to proceed on that basis.

The Sutter Defendants also argued that Peterson had not alleged a protected property interest because he voluntarily surrendered his medical privileges and license. The court disagreed at this stage. Peterson alleged that his surrender was not knowing because the MBC’s investigation and adjudication allegedly concealed improper motives. The court found a plausible deprivation of a protected property interest, while noting that the issue could be reconsidered after more complete briefing.

The court dismissed the federal discrimination claims, the Unruh Civil Rights Act claim, and the antitrust claims as time-barred. It rejected Peterson’s reliance on the continuing-violation theory because he did not identify a discriminatory violation against him within the limitations period. The continued availability of his disciplinary record was treated as a continuing effect of an earlier event, not a new violation. The allegations about later warnings were too conclusory, and Peterson did not adequately plead delayed discovery or tolling for the antitrust claims.

The court dismissed those claims without leave to amend because it had already dismissed them on the same basis, the complaint was in its third version, and Peterson had not identified additional allegations that could make the claims timely.

Anti-SLAPP Motion

The Sutter Defendants sought to strike Peterson’s state-law claims under California’s anti-SLAPP statute. The court held that the communications underlying those claims were protected activity for purposes of the statute.

Statements made during the peer-review proceeding, reports of physician discipline to the MBC, filings in related litigation, and communications intended to prompt an administrative investigation were protected by California privileges or immunities. The court also held that alleged communications to third parties about Peterson’s disciplinary record qualified as protected activity concerning the public interest in a licensed physician’s qualifications, competence, and professional ethics.

At the second anti-SLAPP step, the court found that Peterson could not show the required probability of prevailing. Privileged communications could not create liability, and Peterson did not respond to the Sutter Defendants’ arguments that the other statements were substantially true and lacked allegations of actual malice. The court therefore granted the Sutter Defendants’ anti-SLAPP motion to strike the state-law claims.

Doctor Defendants’ Motion

The court reached the same conclusions for the Doctor Defendants on the issues shared with the Sutter Defendants. It found that the federal discrimination claims were time-barred, rejected the argument that the doctors were not acting under state authority for purposes of the constitutional claims, and rejected, at least at this stage, the argument that Peterson had not alleged a deprivation of property.

The court also rejected the Doctor Defendants’ renewed argument that the First Amendment and due-process claims were untimely. Peterson plausibly alleged that he could not reasonably have discovered the alleged secret policy involving kickbacks and punishment of noncooperating physicians until information about a California Attorney General investigation became public in November 2019. The court said that when Peterson knew the relevant facts was a factual question not resolvable from the complaint.

The Doctor Defendants argued that Peterson had not alleged that his protected activity motivated the peer-review proceedings. The court disagreed. Peterson alleged that he refused to participate in the MediCal Strategy and that the doctors used peer review to punish noncooperating physicians. Assuming for purposes of the motion that this refusal was protected speech, the court found a plausible connection between the protected activity and the doctors’ conduct.

The court denied the Doctor Defendants’ motion to dismiss the First Amendment and due-process claims and granted without leave to amend the motion as to the federal discrimination claims.

Disposition

The MBC Defendants’ motion to dismiss was granted with prejudice, and they were dismissed from the suit. The Sutter Defendants’ motion to dismiss was denied on the First Amendment and due-process claims and granted without leave to amend on the federal discrimination, Unruh Act, and antitrust claims. Their anti-SLAPP motion to strike the state-law claims was granted. The Doctor Defendants’ motion to dismiss was denied on the First Amendment and due-process claims and granted without leave to amend on the federal discrimination claims. The Sutter Defendants and Doctor Defendants were ordered to answer the remaining claims within 14 days.