Keeping Tabs on the Ninth Circuit
May 26, 2023 - This Week at the Ninth

This Week At The Ninth: Due Process and Immunity

This Week at the Ninth:  Biomaterials and Unclean Hands

This week, the Court addresses the standard of causation for a “stigma-plus” due process claim under Section 1983 and the scope of the immunity granted to entities deemed Public Health Service employees.

The Court affirms the district court’s finding that defendants’ conduct was not the but-for cause of plaintiffs’ loss of employment opportunities. 

The panel: Judges Friedland, Nelson, and Katzmann (Court of International Trade), with Judge Katzmann writing the opinion.

Key highlight: “[T]he district court assessed that ‘the tragic events surrounding Perez’s surgery’ and Dr. Chaudhry’s violations of certain hospital policies—and not the ostensibly stigmatizing state Statement of Deficiencies—were the causes of Plaintiffs’ alleged deprivations of their ‘financial ability to make a living,’ ‘stellar reputation,’ and ‘standing and associations in [the] community.’ . . . [T]he district court’s negative causation finding is plausible in light of the record evidence . . . .”

Background: Dr. Chaudhry, a cardiothoracic surgeon, performed open-heart surgery on a patient Silvino Perez at Community Regional Medical Century (the “Hospital”). Dr. Chaudhry allegedly left the operating room before the surgery was finished. Perez experienced a complication and suffered hypoxic brain injury. The Hospital initiated an internal investigation. Anonymous reports also led the California Department of Public Health (CDPH) to investigate. When CDPH identifies violations of health and safety standards (called “deficiencies”), it presents a “Statement of Deficiencies” to the hospital. In this case, CDPH found deficiencies, presented a Statement of Deficiencies to the Hospital, and published the Statement on its website. Dr. Chaudhry suffered a number of professional losses, including removal from his position as the Hospital’s Medical Director of Cardiac Surgery and Thoracic Services, loss of contracts with the Hospital, a number of malpractice lawsuits (including one from Perez’s family), and termination of his malpractice insurance. Without insurance, Dr. Chaudhry was unable to continue practicing medicine in the United States.

Dr. Chaudhry and his medical group sued employees of CDPH, asserting a “stigma-plus” due process claim under Section 1983. A “stigma-plus” due process claim requires a plaintiff to show that “the public disclosure of a stigmatizing statement by the government,” “the accuracy of which is contested,” caused him reputational harm and deprivation of “some more tangible interest such as employment” (alteration and quotation marks omitted). Here, Dr. Chaudhry alleged that CDPH’s false Statement of Deficiencies caused him to lose, among other things, his position and contracts with the Hospital and his ability to practice medicine. The district court held a five-day bench trial and entered judgment for the defendants. It found that plaintiff failed to establish several of the elements of a “stigma-plus” due process claim, including, as relevant here, causation.

Result: The Ninth Circuit affirmed. It reviewed the district court’s causation finding for clear error. Under that standard, it must uphold the district court’s finding if it is “plausible in light of the record viewed in its entirety” (emphasis in original). Following that deferential standard, the Ninth Circuit held there was no clear error in the district court’s conclusion that the challenged Statement of Deficiencies was not the but-for cause of Dr. Chaudhry’s employment losses. 

First, the Ninth Circuit held that it was plausible the Hospital would still have removed Dr. Chaudhry as director and declined to renew his contracts even if it had not received the Statement of Deficiencies. The Hospital began its own investigation into Perez’s surgery without CDPH’s involvement and before the CDPH’s investigation, and the Hospital’s internal investigation led to the same conclusions as the Statement of Deficiencies. Thus, the Ninth Circuit concluded it was plausible the internal investigation alone would have resulted in the same discipline. 

Second, the Ninth Circuit held it was plausible that the Statement of Deficiencies was not the but-for cause of Dr. Chaudhry’s inability to practice. Dr. Chaudhry admitted that he could not practice due to the loss of his malpractice insurance and that his insurer dropped him because of the malpractice lawsuits against him. The Ninth Circuit in turn concluded it was plausible that at least the Perez family’s malpractice lawsuit would have succeeded without the Statement of Deficiencies. They learned of Dr. Chaudhry’s conduct during the surgery from an independent witness and presented substantial evidence other than the Statement of Deficiencies at trial.

The Court holds that health centers and their employees that are deemed Public Health Service employees under 42 U.S.C. § 233 are entitled to the same statutory immunity from suit as are actual Public Health Service employees.

The panel: Judges Paez, Nguyen, and Tunheim (D. Minn.), with Judge Paez writing the opinion and Judge Nguyen dissenting.

Key highlight: “[I]t is clear that deemed PHS employees are entitled to immunity from claims resulting from providing medical, surgical, dental, or related services to patients and some individuals who are not patients of the entity. The statutory text clearly shows that immunity is not tied to whether the tort transpired in caring for the patient. Rather, the language illustrates that as long as a claim is derived from providing services to subjects of the healthcare provider, the deemed PHS employee is immune from suit. Furthermore, there is nothing in the legislative history that suggests deemed PHS employees receive lesser protection than actual PHS employees.” (Internal quotation marks omitted.)

Background: Federal law provides that community health centers that receive funding under the Public Health Service Act (PHSA) for the purpose of serving underprivileged communities may be deemed Public Health Service (PHS) employees. These deemed PHS employees are distinct from actual PHS employees, who are either commissioned officers or employees of the Public Health Service (a collection of HHS agencies). Actual PHS employees are granted immunity from claims arising out of their performance of “medical, surgical, dental or related functions.” 42 U.S.C. § 233(a). § 233 further provides that in such cases, the United States should be substituted as the defendant and the action should be treated as one brought under the FTCA.

Defendant Lane County Mental Health (LCMH) receives PHSA funding. In June 2014, HHS formally deemed Defendant Lane County, its health centers, and health center employees— including LCMH and its employees—PHS employees. The notice states that, for any action based on acts or omissions that occurred during calendar year 2015, LCMH and its employees had “liability protection . . . for damage for personal injury, including death, resulting from the performance of medical . . . or related functions . . . while acting within the scope of such employment.”

In 2015, Michael Bryant was convicted of criminal mischief and criminal trespass. As a condition of probation, the court ordered Bryant—who suffers from mental-health disorders—to report to LCHM for treatment and follow all LCMH directives. Bryant allegedly violated his probation by refusing to take prescribed medication and missing appointments without reason. LCMH allegedly failed to report these violations to the court. Later in 2015, Bryant suffered a psychotic breakdown and killed or seriously injured several individuals. Plaintiffs sued Lane County, LCHM, and LCMH employees, bringing claims of negligence and wrongful death. Defendants removed the case to federal court on the grounds that they were absolutely immune from suit under § 233 as deemed PHS employees.

The district court ruled that it lacked jurisdiction, reasoning that § 233 immunity for deemed PHS employees extends only to claims brought by patients of a health center or non-patients who received direct services as approved under the statute. It ordered the case remanded to state court.

Result: The Ninth Circuit reversed.

As a threshold matter, the Court held it had jurisdiction over the appeal of the remand order. Although remand orders are ordinarily not reviewable on appeal, an exception exists for cases removed pursuant to § 1442. § 1442 allows federal officers and their agents to remove cases that are based on their actions performed under color of federal law if the defendants assert a federal defense. The Court agreed with Defendants that “even though they [had] focused their removal strategy on § 233, they [had] also cited § 1442 as an alternative basis for removal.” 

Turning to the merits, the Court held that § 233 immunity applied. 

The focus of the Court’s analysis was on whether deemed PHS employees enjoy the same scope of statutory immunity as do actual PHS employees. It concluded, based on a “plain reading of the statute,” that § 233 immunity depends solely on whether the claim arose out of the defendant’s performance of “medical, surgical, dental, or related functions.” 42 U.S.C. § 233(a). Plaintiffs’ primary counterargument was that § 233(g)(1)(B), which provides that “[t]he deeming of any entity . . . [applies] to services provided . . . to all patients of the entity,” meant that deemed PHS employees were immune only in cases where the tortious conduct “occurs during the provision of medical services to a patient.” The Court disagreed, explaining that this language merely “illustrates that as long as a claim is derived from providing services to subjects of the healthcare provider, the deemed PHS employee is immune from suit.” It also found nothing in the legislative history indicating that deemed PHS employees have lesser immunity than actual PHS employees. 

The Court then determined that (1) Defendants’ alleged conduct of not informing the court of Bryant’s violations of his treatment plan qualified as a medically “related” function; and (2) this alleged conduct fell within the scope of their statutory funding grant. Accordingly, Defendants were immune from suit under § 233.

Judge Nguyen dissented. She would have held the Court lacked jurisdiction because Defendants did not remove the case under § 1442. Judge Nguyen pointed to the fact that the notice of removal “cites § 1442 in passing just three times,” opining that this did not give sufficient notice of Defendants’ reliance on that basis for removal.