Noble v. Sutter Health

• Court: District Court, E.D. California
• Decided: August 29, 2022
• Docket: 2:21-cv-01433
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 STEPHEN NOBLE, M.D., No. 2:21-cv-01433-MCE-CKD 12 Plaintiff, 13 v. MEMORANDUM AND ORDER 14 GOULD MEDICAL GROUP, INC., et al., 15 Defendants. 16 17 18 Through the present action, Plaintiff Stephen Noble, M.D. (“Plaintiff”), seeks 19 damages and injunctive relief, in part, from the following group of Defendants: Sutter 20 Health, Sutter Valley Medical Foundation (sued as “Sutter Gould Medical Foundation” 21 and “Sutter Valley Medical Foundation, Inc.”) (“SGMF”), and Sutter Valley Hospitals 22 (sued as “Sutter Memorial Medical Center”) (“MMC”) (collectively, “Sutter Defendants”). 23 See First Am. Compl., ECF No. 5 (“FAC”).1 Presently before the Court is Sutter 24 Defendants’ Motion to Dismiss Plaintiff’s FAC pursuant to Federal Rule of Civil 25 Procedure 12(b)(6),2 which has been fully briefed. ECF Nos. 18 (“Sutter Defs.’ Mot.”), 26 1 Plaintiff also brings this lawsuit against the Gould Medical Group, Inc. (“GMG”), and Lit K. Fung, 27 M.D (“Dr. Fung”). These parties have elected to file Answers to the FAC. ECF Nos. 23, 24.

28 2 All further references to “Rule” or “Rules” are to the Federal Rules of Civil Procedure. 1 26 (“Pl.’s Opp’n”), 28 (“Sutter Defs.’ Reply”). For the reasons set forth below, Sutter 2 Defendants’ Motion is GRANTED.3 3 4 BACKGROUND 5 6 A. Factual Background4 7 Plaintiff is a board-certified cardiothoracic surgeon with advanced fellowship 8 training in heart surgery and a decorated war hero for his service in the armed forces as 9 a general and cardiothoracic surgeon. Sutter Health is a non-profit corporation which 10 was established to provide assistance to other corporations, including SGMF. Plaintiff 11 was employed by GMG and in 2018, he joined the Gould Cardiothoracic Surgery 12 department and was granted full privileges in his specialty at both MMC and Doctors 13 Medical Center of Modesto Hospitals, including the ability to perform operations. Prior to 14 his arrival, most of the heart surgeries at MMC and within GMG were performed by 15 Dr. Fung, a senior partner and the head of the Cardiothoracic Surgery department. 16 According to the FAC, Dr. Fung and his fellow surgeons had a high rate of 17 negative outcomes and poor comparative surgery results compared to national 18 averages, and Dr. Fung also failed to keep current on newer and more precise surgery 19 techniques such as the use of robotics. Plaintiff was allegedly told during recruitment 20 that his role was to introduce more modern skill sets, equipment, and techniques to 21 improve Sutter Defendants and GMG’s record of poor outcomes. As a result, Plaintiff 22 believed that he would be integrated into this medical group, introduce more modern 23 cardio techniques, and improve their performance ratings in terms of patient outcomes. 24 However, Plaintiff alleges that Dr. Fung did not embrace him and from the outset barred 25 Plaintiff from participating in complex surgeries, failed to train Plaintiff in areas where 26 3 Because oral argument would not have been of material assistance, the Court ordered this 27 matter submitted on the briefs. E.D. Local Rule 230(g).

28 4 The following recitation of facts is taken, sometimes verbatim, from Plaintiff’s FAC. 1 Dr. Fung’s knowledge was current, and blocked Plaintiff’s attempts to obtain more 2 modern surgical supplies and equipment. 3 According to Plaintiff, Dr. Fung’s attacks were insidious and racially motivated, 4 which belittled Plaintiff as a person and physician in the eyes of the public and staff. For 5 example, immediately upon Plaintiff’s arrival at MMC, GMG and Dr. Fung took steps to 6 hide the fact that Plaintiff is African-American, such as failing to put Plaintiff’s name and 7 photograph on GMG’s website. Dr. Fung and GMG repeatedly obstructed Plaintiff’s 8 attempts to establish and build his practice by preventing him from building a patient 9 base and failing to introduce him to the public or other physicians through notices or 10 personal contact. Plaintiff also alleges that Dr. Fung refused to put Plaintiff’s name on 11 the office door and that Plaintiff’s office was tucked away so that it was difficult to locate 12 him. Despite his stellar surgical achievements and years of experience, Plaintiff was 13 allegedly treated as a novice and was excluded from participating in the major medical 14 activities, implying that an African-American surgeon did not deserve his position. 15 Plaintiff also alleges that Dr. Fung openly disparaged Plaintiff and prevented him from 16 performing surgical procedures for which he was fully trained and credentialed. Given 17 that Dr. Fung was the main source of income for the cardiothoracic surgery department 18 at MMC, none of the other physicians or administrators opposed Dr. Fung or came to 19 Plaintiff’s defense despite Plaintiff’s repeated requests and complaints. 20 As the early surgical data was presented, Plaintiff’s outcomes were as good or 21 better than the national averages whereas Dr. Fung and other surgeons demonstrated 22 high failure rates. Rather than promote Plaintiff and provide better patient care, 23 however, GMG and Dr. Fung allegedly increased their interference with Plaintiff by 24 limiting his surgeries and giving him second rate surgical teams in order to make his 25 success rate drop. Plaintiff also alleges that he saw other physicians, intimidated into 26 complicity, snicker as he attempted to speak with Dr. Fung about necessary changes to 27 improve patient care and safety. Apparently, it was a running joke that Dr. Fung would 28 not even speak to Plaintiff unless he called or emailed Dr. Fung’s wife, Judy Fung, and 1 made an appointment. Prior to Plaintiff’s arrival, Dr. Fung took 90 percent of the cardiac 2 cases at MMC and continued to do so after Plaintiff was hired even though Plaintiff was 3 more recently and better trained in heart surgery than Dr. Fung. GMG made no effort to 4 redistribute the cases. 5 Plaintiff also alleges that, during his entire year-and-a-half tenure, GMG 6 deliberately left him off the emergency room call schedule, which was controlled by 7 Dr. Fung and his wife, even though Plaintiff had full privileges at MMC. Despite 8 Plaintiff’s repeated requests to be put on the schedule, Dr. Fung allegedly refused 9 without providing a reason. Plaintiff discussed his exclusion from the call schedule with 10 Dr. John Talieh, MMC’s Chair of Credentialing as well as Chief of Surgery and 11 Department Chair. In those capacities, Dr. Talieh was a member of the 12 evaluation/decision-making team along with the Physician Compensation Committee 13 and a member of the Peer Review Committee. Although he had the ability to intervene, 14 Dr. Talieh claimed that Plaintiff had “limited experience in vascular surgery,” which was 15 not true, and told Plaintiff he would not be put on the schedule until Dr. Talieh “felt 16 comfortable.” Plaintiff repeatedly reached out to others in leadership positions at MMC 17 and GMG to discuss the issues he was facing but to no avail. 18 On March 21, 2019, Plaintiff was scheduled to perform a procedure, but the 19 assigned anesthesiologist refused to put the patient to sleep, allegedly citing baseless 20 and illegitimate concerns over Plaintiff’s privileges to perform the procedure. Shortly 21 thereafter, Dr. Talieh informed Plaintiff about a “letter of concern” from the anesthesia 22 department regarding Plaintiff’s clinical abilities, which turned out to be a list of patient 23 names and cases that needed review. Plaintiff claims he never saw this letter or list, but 24 it was forwarded to the Quality and Safety Department at GMG with Dr. Fung’s 25 knowledge and approval. Plaintiff soon learned that seven of his cases from Dr. Fung’s 26 department were under review and as a result, Plaintiff could not resign without being 27 reported to the National Practitioners’ Data Bank. 28 /// 1 On September 4, 2019, Plaintiff was notified that his salary would be cut by 2 23 percent without justification. The decision was made by members of the Physician 3 Compensation Committee, which included Drs. Fung and Talieh. A few weeks later, on 4 September 29, 2019, Dr. Talieh allegedly tried to coerce Plaintiff into “voluntarily” 5 agreeing to a Performance Improvement Plan (“PIP”); however, any resignation during 6 the pendency of a PIP is considered a “resignation while under investigation” and is 7 reportable to the California Medical Board and the National Practitioners’ Data Bank. 8 Plaintiff refused to sign the PIP and on October 8, 2019, Plaintiff was notified that the 9 Medical Executive Committee had initiated an investigation into Plaintiff’s remaining 10 cases. In response, Plaintiff hired an attorney and notified GMG via email that he had 11 not agreed to a PIP. 12 On December 5, 2019, Plaintiff’s salary was reduced again, meaning that within 13 one year, Plaintiff’s salary was cut by 60 percent, making him the lowest paid full-time 14 cardiothoracic surgeon in the country. The peer review process ultimately ended in 15 February 2020, with the Medical Executive Committee voting not to impose discipline on 16 Plaintiff. The following month, in March 2020, Plaintiff resigned from GMG and the 17 medical staff of MMC. 18 B. Procedural History 19 On August 11, 2021, Plaintiff filed his original Complaint in this Court. ECF No. 1. 20 Subsequently, on October 27, 2021, Plaintiff filed the operative FAC, which asserts the 21 following causes of action: (1) Violation of 42 U.S.C. § 1981 (“Count 1”); (2) Race 22 Discrimination in Violation of California’s Fair Employment and Housing Act, California 23 Government Code §§ 12900 et seq. (“FEHA”) (“Count 2”); (3) Race Harassment in 24 Violation of FEHA (“Count 3”); (4) Failure to Prevent Discrimination, Harassment, and 25 Retaliation in Violation of FEHA (“Count 4”); (5) Wrongful Constructive Termination of 26 Employment in Violation of Public Policy (“Count 5”); (6) Retaliation for Engaging in 27 Protected Activity in Violation of FEHA (“Count 6”); (7) Violations of California Labor 28 Code §§ 1102.5 et seq. (“Count 7”); (8) California Equal Pay Act, California Labor Code 1 §§ 1197.5 et seq. (“Count 8”); (9) Discrimination and Retaliation in Violation of California 2 Health and Safety Code § 1278.5 (“Count 9”); (10) Intentional Infliction of Emotional 3 Distress (“IIED” or “Count 10”); (11) Negligent Infliction of Emotional Distress (“NIED” or 4 “Count 11”); (12) Breach of Contract against Defendants “Sutter” and “Sutter Gould” 5 (“Count 12”); and (13) Deliberate Inducement to Breach of Contract against Dr. Fung 6 (“Count 13”). 7 8 STANDARD 9 10 On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all 11 allegations of material fact must be accepted as true and construed in the light most 12 favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 13 (9th Cir. 1996). Rule 8(a)(2) “requires only ‘a short and plain statement of the claim 14 showing that the pleader is entitled to relief’ in order to ‘give the defendant fair notice of 15 what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, 16 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A 17 complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual 18 allegations. However, “a plaintiff’s obligation to provide the grounds of his entitlement to 19 relief requires more than labels and conclusions, and a formulaic recitation of the 20 elements of a cause of action will not do.” Id. (internal citations and quotations omitted). 21 A court is not required to accept as true a “legal conclusion couched as a factual 22 allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 23 555). “Factual allegations must be enough to raise a right to relief above the speculative 24 level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, 25 Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must 26 contain something more than “a statement of facts that merely creates a suspicion [of] a 27 legally cognizable right of action”)). 28 /// 1 Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket 2 assertion, of entitlement to relief.” Twombly, 550 U.S. at 555 n.3 (internal citations and 3 quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard 4 to see how a claimant could satisfy the requirement of providing not only ‘fair notice’ of 5 the nature of the claim, but also ‘grounds’ on which the claim rests.” Id. (citing Wright & 6 Miller, supra, at 94, 95). A pleading must contain “only enough facts to state a claim to 7 relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their 8 claims across the line from conceivable to plausible, their complaint must be dismissed.” 9 Id. However, “a well-pleaded complaint may proceed even if it strikes a savvy judge that 10 actual proof of those facts is improbable, and ‘that a recovery is very remote and 11 unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). 12 A court granting a motion to dismiss a complaint must then decide whether to 13 grant leave to amend. Leave to amend should be “freely given” where there is no 14 “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 15 to the opposing party by virtue of allowance of the amendment, [or] futility of [the] 16 amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 17 Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 18 be considered when deciding whether to grant leave to amend). Not all of these factors 19 merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 20 carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 21 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 22 “the complaint could not be saved by any amendment.” Intri-Plex Techs., Inc. v. Crest 23 Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 24 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 25 (9th Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . 26 constitutes an exercise in futility . . . .”)). 27 /// 28 /// 1 ANALYSIS5 2 3 Sutter Defendants assert that Plaintiff’s claims premised on violations of FEHA 4 (Counts 2, 3,6 4, 6) and wrongful constructive termination (Count 5) all require the 5 existence of an employee-employer relationship in order to be actionable against them. 6 See Cal. Gov’t Code § 12940(a), (h), (j), (k), (m), (n); Yau v. Santa Margarita Ford, Inc., 7 229 Cal. App. 4th 144, 154 (2014) (stating one of the elements for a claim of wrongful 8 discharge in violation of public policy is an employer-employee relationship). Similarly, 9 they contend that Plaintiff’s claims for violation of California Health and Safety Code 10 § 1278.5 (Count 9), IIED (Count 10), and NIED (Count 11) also depend on Sutter 11 Defendants’ status as Plaintiff’s employer. Consequently, according to Sutter 12 Defendants, the claims asserted by Plaintiff against them fail in the absence of an 13 employment relationship. 14 In the FAC, Plaintiff alleges that he was employed by GMG. See FAC ¶ 20. 15 Nevertheless, Plaintiff seeks to hold Sutter Defendants liable as a single enterprise with 16 GMG, arguing that they are corporate affiliates given that all entities in the Sutter Health 17 system use the word “Sutter” and report to a single chief executive officer. Id. ¶ 17. 18 “There is a presumption that separate corporate entities have distinct identities, and 19 plaintiffs bear a heavy burden under both California and federal law when they seek to 20 rebut this presumption and hold multiple corporate entities liable as a single employer.” 21 Rhodes v. Sutter Health, No. CIV. 2:12-0013 WBS DAD, 2012 WL 1868697, at *6 (E.D. 22 Cal. May 22, 2012) (citing Laird v. Capital Cities/ABC, Inc., 68 Cal. App. 4th 727, 737 23 (1998)). Attaching the name “Sutter” to all corporate Defendants and claiming that 24

25 5 Plaintiff specifies that Counts 8 and 13 do not apply to Sutter Defendants and concedes that Count 7 should be dismissed as to Sutter Defendants only. See Pl.’s Opp’n at 5. Accordingly, those causes of action are hereby DISMISSED without leave to amend as to Sutter Defendants. 26

6 The parties agree that harassment claims under FEHA may be brought against individual 27 employees. See Pl.’s Opp’n at 17; Sutter Defs.’ Reply at 5 n.1. However, Sutter Defendants contend that there is “no authority suggesting that FEHA harassment claims can be brought against a non-employer 28 entity.” Id. 1 Sutter Defendants frequently change their corporate names and structures to confuse 2 others are insufficient on their own to overcome this burden, as Plaintiff concedes. FAC 3 ¶ 17; see Pl.’s Opp’n at 7 (recognizing that “[n]one of these allegations are sufficient by 4 themselves, but they do put into play the question as to whether” Sutter Defendants are 5 liable). 6 Plaintiff attempts to overcome this presumption through an integrated enterprise 7 theory in which four factors are considered: (1) the interrelation of operations between 8 the two entities; (2) whether they share common management; (3) the degree to which 9 centralized control of labor relations exists; and (4) whether there is common ownership 10 or financial control. Laird, 68 Cal. App. 4th at 737–38 (citations omitted); see Pl.’s Opp’n 11 at 6–16. “Although courts consider the four factors together, they often deem centralized 12 control of labor relations the most important.” Laird, 68 Cal. App. 4th at 738. To satisfy 13 the “control” prong, the first entity must control the day-to-day operations of the second. 14 Id. Ultimately, “[t]he critical question is, what entity made the final decisions regarding 15 employment matters related to the person claiming discrimination?”7 Id. (internal 16 quotation marks and alterations omitted). 17 Plaintiff seeks to show an integrated enterprise, in part, by alleging that (1) “Sutter 18 participated in [Plaintiff’s] recruitment,” and that (2) Dr. Fung’s wife, Judy Fung, 19 “scheduled cardiothoracic surgeries for Sutter Gould patients” despite not being an 20 employee of GMG or Sutter Defendants, and that all Defendants were aware of her 21 doing so. FAC ¶¶ 27, 199. However, neither of these allegations demonstrate that 22 Sutter Defendants exercised ongoing control over the day-to-day operations of GMG or 23 that Sutter Defendants maintained control over Plaintiff’s employment. 24 Plaintiff further alleges that he discussed his exclusion from the call schedule with 25 Dr. Talieh, MMC’s “Chair of Credentialing as well as Chief of Surgery,” who also served

26 7 There is a question as to whether the integrated enterprise test applies in cases not involving a parent-subsidiary corporate relationship such as here. See Rhodes v. Sutter Health, 949 F. Supp. 2d 997, 27 1006–07 (2013). None of the parties raise this contention but regardless, for the reasons set forth below, the Court finds that the FAC as pleaded does not contain any allegations suggesting the existence of a 28 single integrated enterprise. 1 as “a member of the evaluation/decision-making team along with the Physician 2 Compensation Committee, and a member of the Peer Review Committee.” FAC ¶ 63. 3 First, this allegation does not implicate either Sutter Health or SGMF. As for MMC, 4 Sutter Defendants argue that even if Plaintiff alleged Dr. Talieh was employed by MMC, 5 Sutter Defs.’ Reply at 7, California law prohibits the corporate practice of medicine which 6 means that “[h]ospitals are required by law to have a medical staff association which 7 oversees physicians who are given staff privileges to admit patients and practice 8 medicine in the hospital.” Bichai v. Dignity Health, 61 Cal. App. 5th 869, 878–79 (2021) 9 (quoting Hongsathavij v. Queen of Angels/Hollywood Presbyterian Med. Ctr., 10 62 Cal. App. 4th 1123, 1130 n.2 (1998)). “A hospital’s medical staff is a separate legal 11 entity, an unincorporated association, which is required to be self-governing and 12 independently responsible from the hospital for its own duties and for policing its 13 member physicians.” Id. Accordingly, because MMC cannot employ Dr. Talieh, this 14 argument also fails. See Sutter Defs.’ Reply at 7. 15 Aside from the aforementioned allegations, Plaintiff has not alleged that Sutter 16 Defendants “hired him, set his compensation, or maintained any of his personnel 17 records.” Sutter Defs.’ Reply at 8; see Pl.’s Opp’n at 17 (clarifying that the California 18 Equal Pay Act claim does not apply to Sutter Defendants). Nor does Plaintiff allege that 19 Sutter Defendants imposed any discipline on Plaintiff. “The key question in the 20 integrated enterprise inquiry is who is responsible for the employment decisions at issue, 21 and [Plaintiff] has alleged no facts to suggest that Sutter [Defendants] played any role in 22 the decisions” alleged in the FAC. Rhodes, 2012 WL 1868697, at *7. As such, the 23 Court finds that the FAC fails to allege the existence of an integrated enterprise. 24 In regard to all causes of action asserted against Sutter Defendants, Plaintiff has 25 failed to allege any specific actions taken by Sutter Defendants in accordance with 26 applicable pleading standards. Indeed, Plaintiff’s entire theory of liability as to Sutter 27 Defendants is based on their alleged corporate affiliation with GMG. As set forth in the 28 Background section, all of the alleged adverse actions, including the peer review 4 process and Plaintiff's exclusion from the call schedule, were done by GMG and/or 2 | Dr. Fung. As pleaded, the FAC does not specify any actions taken by any of the Sutter 3 | Defendants and therefore, dismissal is warranted on this ground as well. Accordingly, 4 | Sutter Defendants’ Motion to Dismiss is GRANTED, and Counts 1, 2, 3, 4, 5, 6, 9, 11, 5 | and 12 as to Sutter Defendants are hereby DISMISSED with leave to amend. 6 7 CONCLUSION 8 9 For the foregoing reasons, Sutter Defendants’ Motion to Dismiss, ECF No. 18, is 10 | GRANTED. Counts 7, 8, and 13 are DISMISSED without leave to amend whereas all 11 | remaining counts are DISMISSED with leave to amend as to Sutter Defendants only. 12 | Not later than twenty (20) days following the date this Memorandum and Order is 13 | electronically filed, Plaintiff may (but is not required to) file a second amended complaint. 14 | If no second amended complaint is timely filed, the causes of actions dismissed by virtue 15 | of this Memorandum and Order will be dismissed with prejudice without further notice to 16 | the parties. 17 IT IS SO ORDERED. 18 19 | Dated: August 29, 2022 = Mater LEK Whig { AX Xo - " SENIOR UNITED STATES DISTRICT JUDGE 22 23 24 25 26 27 28 11