FAHLEN v. SUTTER CENTRAL VALLEY HOSPITALS

Appellants’ Reply Brief on the Merits

Cal.May 15, 2013

No. 8205568 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA SUPREME C OURT Efe? © MARKT. FAHLEN, MAY 18 2013 Plaintiff and Respondent, Frank A. McGuire Clerk Vv. Deputy SUTTER CENTRAL VALLEY HOSPITALS, STEVE MITCHELL,etal., Defendants and Appellants. After a Published Decision by the Court of Appeal, Fifth Appellate District Case No. F063023 REPLY BRIEF ON THE MERITS HANSON BRIDGETT LLP *Joseph M. Quinn, SBN 171898 Glenda M. Zarbock, SBN 178890 Lori C. Ferguson, SBN 230586 425 Market Street, 26th Floor San Francisco, California 94105 Email: jquinn@hansonbridgett.com Telephone: (415) 777-3200 Facsimile: (415) 541-9366 Attorneys for Defendants and Appellants SUTTER CENTRAL VALLEY HOSPITALS and STEVE MITCHELL No. 8205568 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA MARK T. FAHLEN, Plaintiff and Respondent, Vv. SUTTER CENTRAL VALLEY HOSPITALS, STEVE MITCHELL,et al., Defendants and Appellants. After a Published Decision by the Court of Appeal, Fifth Appellate District Case No. F063023 REPLY BRIEF ON THE MERITS HANSON BRIDGETT LLP *Joseph M. Quinn, SBN 171898 Glenda M. Zarbock, SBN 178890 Lori C. Ferguson, SBN 230586 425 Market Street, 26th Floor San Francisco, California 94105 Email: jquinn@hansonbridgett.com Telephone: (415) 777-3200 Facsimile: (415) 541-9366 Attorneys for Defendants and Appellants SUTTER CENTRAL VALLEY HOSPITALS and STEVE MITCHELL TABLE OF CONTENTS Page INTRODUCTION oo... ccccccccccceeceeeeceeseeeeeeeeeeeesussaaeeeeeseeeeeeneanaaas 1 ARGUMENTooo. o cocci cccccccccccecceeceeeseeeeeesaeeessssssesseeeeseeeeeseseaaaaensaeeeeses 3 I. ‘THE ISSUE IS WHETHERA PHYSICIAN BRINGING A SECTION 1278.5 CLAIM BASED ON QUASI-JUDICIAL PEER REVIEW MUST FIRST EXHAUST REMEDIES1.00.ccccccccccecesetsesceceeeeeeeeeeneees 3 Ul. THE COURT OF APPEAL'S FACTS GOVERN..........0....0.. 4 Il. THE CLEAR INTENT RULE GOVERNS AND SECTION 1278.5 SHOULD BE CONSTRUED CONSISTENT WITH EXISTING PEER REVIEW LAW woo eeeccccccccccceceeeceeeeaeeeeeeeeeeeeeeeeeesaesaeeeeaasesseseaeesereeeaaaaaanageaaa 5 A. There Is No Categorical Exception to the Clear Intent Rule for Whistleblower Statutes ...........ceeeee 5 B. Section 1278.5 Should Be Construed in the Context of Peer Review Law ...........cccccecseeesseeeeeeesenentens 8 IV. THE EXHAUSTION RULE IS WELL ESTABLISHED 000.0... ccccccceceensceeeeteceeeseeeeeeeseeaauageaenes 11 V. THE EXHAUSTION RULE APPLIES TO CLAIMS BASED ON QUASI-JUDICIAL PEER REVIEW................ 13 A. In Amending Section 1278.5, the Legislature Did Not Clearly Disclose an Intent to Abrogate the Exhaustion Rule.................... Lecce tbeeeeeeaaseneeeeteeas 13 B. Harmonizing Section 1278.5 and the Rule Removes Doubt as to the Statute's Constitutionality 0... ccccecceeeseceeesseeessseseeeeessesseeeees 18 C. The Court of Appeal Erred in Its Construction Of Section 1278.5 ....c.cccccccccccceseeceeeeeeeeestsseseceeeeeeeeteeees 20 1. The Court of Appeal Relied on Inapposite Case LAW .....cccccccccccccccseeescesecseneeseeceseeeseseennnesens 20 2. The Statutory Injunction Provision and the Exhaustion Rule Can be Harmonized...... 20 3. The Statutory Burden Provision and the Exhaustion Rule Can Be Harmonized............ 23 4, Harmonization Does Not Render Superfluous the Statutory Reinstatement ReEMEY ooo. ccceeeeccceccccccseeeeeececeessecssesseecssesseuaeesess 24 5. The Rule Is Not-Inconsistent with the Intent Behind Section 1278.5.......0...ccseeeeecee 25 6. Fahlen's Additional Arguments in Support of Abrogation Are Unfounded........... 27 VI. THE FIRST AND SECOND CAUSES OF ACTION SHOULD BE STRICKEN......ceccccceceeeneereeeeeeseeceseaes 32 CONCLUSION0... cic cccccescsccsscceneecnssssecseesceseccessscceususssuseeeccesseeters 32 ul TABLE OF AUTHORITIES Page CASES Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 123820... icccceccecececssserstssseeesessseeeeeeeens 28 Apple, Inc. v. Superior Court (Krescent) (2013) 56 Cal4th 128.0... cccccceccccecceeseeeecesesssesesesssnssreeees 9 Applebaum v. Board of Directors (1980) 104 Cal.App.3d 648 0... iccecccsccccceeeeesserenereeeseeees 24 Arnett v. Dal Cielo (1996) 14 Cal.4th 4... cccccccccesececeseeseseeeessesttstereesseneeeees 10 Aryeh v. Canon Business Solutions, Inc. (2018) 55 Cal.4th 1185.ccceeseeeececceesnesceeeneespassim Ascherman v. St. Francis Memorial Hospital (1975) 45 Cal.App.3d 507 .o..ccccccccccccccccseseesececensreesessssneneees 24 Austin v. McNamara (9th Cir. 1992) 979 F.2d 728...cccccccceeecescseseveesessssseenes 19 Bailey v. Superior Court (1977) 19 Cal. 8d 970 occcccccsscccceceeccceseeseeesessessesessretseesseees 9 Bergeron v. Desert. Hosp. Corp. (1990) 221 Cal.App.3d 146 oo... ccccccessseeceeeccessestsseteesenecs 24 Bode v. Los Angeles Metropolitan Medical Center (2009) 174 Cal.App.4th 1224.00 cccccceceeeeeeeseeseeeeees 24 California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal. 4th 284... cccccccsscccseeeeceseeeeeseceeseeeeseres 1,14 Campbell v. Regents of University of California (2005) 85 Cal4th 811cccccccccsssccsceseeseeeeseceseeceseseeseeees 2,5 Estate of McDull (1975) 14 Cal.3d 881 oiccccccssssssseeeeeceeeeseecesesseanaeeeess 9 Fahlen v. Sutter Central Valley Hosps. (Aug. 14, 2012, FO63028)0.ccceeeeesereeeeees 1, 14, 26, 28 Fox v. Good Samaritan L.P. (N.D. Cal. 2010) 801 F.Supp.2d 888 .....cccccccccceeeceeeeeeees 19 il Freilich v. Upper Chesapeake Health System (2011) 423 Md. 690... ccccccseeec es eessteseeeseeneeeeeeeeeanaeeeee boven 19 Hackethal v. Loma Linda Community Hospital Corp. (1979) 91 Cal.App.8d 59 ...ccccccccccescessseseeceeseesaseeseeeseeees 24 Haller v. Burbank Community Hospital Foundation (1983) 149 Cal.App.3d 650oo...cccetree eee eeetneeeey 24 Harris v. City of Santa Monica (2013) 56 Cal.4th 208.0...ccc ccccccneccccssseeeeeeeeeeeeeseeseeesanes 16 Huang v. Board of Directors (1990) 220 Cal.App.3d 1286 ooo... cceeeeccecccceeeeteeeeeeeeeeneteans 24 Jadwin v. County of Kern (H.D. Cal. 2009) 610 F.Supp.2d 1129... eeceeeeeenteees 16 Kubler v, Northern Inyo County Local Hospital District (2006) 39 Cal.4th 192... ccccccccscessessseesssersesettsseeeeeeees 29, 31 Lexin v. Superior Court (2010) 47 Cal.4th 1050... eccccceccceceeeeeceneeseeeeeseesenenes 5, 9 Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686 .0......cecececcscssececstetereeteteenenseeees 16 Martino v. Concord Cmty. Hosp. Dist. (1965) 233 Cal.App.2d 51 oo... ccecccccccceccceseetseeestereeeeeeeceeeesees 24 Miletkowsky v. West Hills Hospital & Medical Center (2009) 45 Cal.4th 1259... eccccccccceceeeeeeateneseeeeseasaseaeees 24 Miller v. Eisenhower Medical Center (1980) 27 Cal.3d 614wcceccescccecsesseesessecesesteeteseseeeeseeeees 24 Nasim v. Los Robles Regional Medical Center (2008) 165 Cal.App.4th 1588.0...feces eeeeeeerseteneeeees 24 Nesson v. Northern Inyo County Local Hospital District (2012) 204 Cal. App.4th 65... cccccccceeceeceeeeeeeeseceeeeseeeeees 5 PacificLumber Company v. State Water Resources Control | oar (2006) 37 Cal.4th 921oocccceccccessesesesetsteeeeeeeteeeneeeees 22, 28 People v. Avila (2006) 88 Cal.4th 491.ccccccceceeeeeeseaeeeeteeeeeeeeaeaaaane ees 7 People v. Cruz (1996) 13 Cal. 4th 764...ccc ccceceecneseeeeeceeeaneerseeseeeeneeeees 5 People v. Hudson (2006) 38 Cal.4th 1002... ccccccccccccccccesesseeeeeeeteerseeseeeeeeees 12 lv People v. Overstreet (1986) 42 Cal.8d 891] ooo. ceeccecccccccecsscsseeeeeeseeeeeeeeeeseesnaanees 9 People v. Weidert (1985) 89 Cal.8d 886 0... cccccccccceseeececssseeeesesessersrsstnreneres 9 Poliner v. Texas Health System (5% Cir. 2008) 537 F.3d 868 oo... eeeeececeeeeeceeeceeserensneeenenes 19 Powers v. City of Richmond (1995) 10 Cal.4th 85. ccccccccccccscsecssssssssessessessvesteseesessessvesseeeee 15 Rosenblit v. Superior Court (1991) 231 Cal.App.3d 1434 cocccccccccccccccsccsssscvescescessesseesevesee 94 Rosner v. Eden Township Hospital District (1962) 58 Cal.2d 592 ooo. iccccccccccccc cee ueesseeeeeseseseseeeesssuanees 24 Runyon v. Board of Trustees of the California State University (2010) 48 Cal.4th 760.0... ccccecccccccecccecesseseeeeeeeeees 6, 7, 8, 20 Smith v. Adventist Health System /West (2010) 190 Cal.App.4th 40 oo.ccccceeccecsceessesseenseenes 25 Smith v. Selma Community Hospital (2008) 164 Cal.App.4th 1478 .ccccccccccccsccscsssessssceseecseesceseesseees 24 State Board of Chiropractic Examiners v. Superior Court (2009) 45 Cal.4th 968.0... cccccseeceseesesseeeseeees 6, 7, 8, 20 Torres v. Automobile Club of Southern California (1997) 15 Cal. 4th 771i. ccccccccccccccecsecseeceeseseseeeeceeeeeeeeess 2,5 Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164...cccccccccceeceeeeceneeeseeseeseees 14, 15 Westlake Community Hospital v. Superior Court (1976) 17 Cal.3d 465 oooceeeeecccesseseseaeerseseseesspassim Yaqub v. Salinas Valley Memorial Healthcare System (2004) 122 Cal.App.4th 474 00... eccccccceccseseeeseecceseeaeeses 24 STATUTES Federal United States Code, Title 42, SDD D ecceecccccccesescescscsessesesesuesesesvessacsresesessessavseasavesseateeceseesveseeve 18 § LLL LQ. ccc ccccccccssesessesecsessecsvsevsueecsvensaresususaveseesacsnsevsneseeaveaeente 18, 19 § L111 3 vececccccceccssececsecsesessessesesueecavsusussesesavavsasavsusassesvsnsaeassseeenseeeen 19 State Cal. Business and Professions Code, § S09 oeccceccecsccsesssssssetsscssessessssvseeseserssessesessessessesevescsveseseeeess 3, 10, 26 § 809.05 oecececceccssesseessesssssseesecsssessecsessisssesessetssesersiesstsetsssesesavsenseeeees 7 § SOQ. Le ccceccecsscsecssesecsevssesevssevsvcevsecsesevsresevsessussucevsacsucaveresaneaneaeaneevens 29 § 809.2.seveeessnsnsecsussesansecessutsessnisseentseeesiveseessneeesanieeen 17 § 809.8 vo cccccccccesessvssesssessvssrecsessesevsevsesssesseesessessssesersseeeveen 7, 10, 26, 31 Cal, Civil Code, GAT cooccccsccosscecssresestitssistivestissiibesiiessiivsssitessstestisessisieesesessasieeen 28 Cal. Code of Civil Procedure, § 1094.5 occccccccccesecsvesessesuessesecsesersaseverivsveresusavsaveeesueaveseesneans 10, 17, 26 § ADB 1G} oie cccccccccccccccccccceccecsecueueescesescssuaeesesesecetsuseesesetertereeceesesened 31 Cal. Government Code, § LODL.B cccccccccccscscesecsessessesecevsusecsvsussusssecsvsaseusavsvsavevsaresnseceneansavaveees 9 Cal. Health and Safety Code, § LQTBicc cccccccececcccccceecceccececuuuaeeeceeccueuesaeesseeseseesuseseeeeteeeeeenenespassim val RULES Cal. Rules of Court, § 8.500. cccccccsscsscesessessseseeseeesessssvsuesressisssatssseaseasssesvesseesiveveseesvesveees 4 OTHER AUTHORITIES Lumetra Healthcare Solutions, Comprehensive Study of Peer Review in California: Final Report (2008)........... 29, 30 Melchior, Revolution in Disputes Between Hospitals and Their Physicians?, S.F. Daily Journal (Aug. 24, 2012) De ceceeeteetteererteeestseseseeessersnsctsseetsessstesseresssettteersiteeseees OO Shorter Oxford English Dictionary (6th ed. 2007) at p. 1577 oo. cecccccccccccccscsesssceessssserseeesevsnrecenaas 12 vil INTRODUCTION In his answeringbrief, Fahlen delays discussing the controlling legal test—theclear intent rule—until page 38. He then spends a total of seven lines on a statementof the rule that avoids any analysis. The Court of Appeal similarly eschewed the rule, finding an "exception" for whistleblower statutes. (See Fahlen v. Sutter Central Valley Hosps. (Aug. 14, 2012, F063023) (Slip Op.), at p. 19). But no such exception exists and the clear intent rule controls. In amending Section 1278.5, the Legislature did not disclose a clear intent to abrogate the common law exhaustion rule. Fahlen's Section 1278.5 claims mustbe stricken because hefailed to exhaustjudicial remedies. Earlier this year, this Court confirmed the clear intent rule holding that a statute should be construed consistent with settled common law, unless the Legislature clearly and unequivocally discloses an intent to abrogate: "As a general rule, ‘[uJnless expressly provided, statutes should not be interpreted to alter the common law, and should be construed to avoid conflict with common law rules. ([Citation.] "A statute will be construed in light of common law decisions, unless its language "clearly and unequivocally discloses an intention to depart from, alter, or abrogate the common-law rule concerning the particular subject matter... ." [Citations.]' [Citation.].""" (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 297 [].) (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1193 (Aryeh), all editorial marks except last brackets in Aryeh; see also Campbell v. Regents of Univ. of Cal. (2005) 35 Cal.4th 311, 329 (Campbell) [similar]; Torres v. Automobile Club of So. Cal. (1997) 15 Cal.4th 771, 779 (Torres) [similar].) Whenthe Legislature amended Section 1278.5 to cover physician reports of safety concerns, the exhaustion rule was well established and elemental to quasi-judicial medical peer review. The courts and the Legislature had repeatedly endorsed—even bolstered——the exhaustion rule. Nothing that the Legislature said or did in amending Section 1278.5 clearly and unequivocally disclosed an intent to scuttle the rule or thwart this foundational element of quasi-judicial medical peer review. The Legislature more likely intended the statute and the peer review rules to be harmonized. A complaint about safety is only valuable if something is done about it. Exhaustion makes investigation and correction through peer review possible by encouraging physician participation. This is lost when physicians are unwilling to participate in peer review, either because their professional judgment will be second-guessed by judges and juries or because participation exposes them to burdensomelitigation. This common-sense notion is supported by Section 1278.5's text and history. When the issue of the amendments’ effect on quasi-judicial peer review wasraised, the Legislature added a provision protective of existing peer review: Nothing in this section shall be construedto limit the ability of the medical staff to carry out its legitimate peer review activities in accordance with Sections 809 to 809.5, inclusive, of the Business and Professions Code. (§ 1278.5, subd. (1).) Section 809 and following address medical peer review, and specifically provide for review by mandamus. The Legislature did not intend to scrap the exhaustion rule, a fundamental tenet of peer review. Below, Memorial respondsto each of Fahlen's arguments in support of the Court of Appeal's abrogation holding.! In the end, the Court will see that the holding is untenable because, when it amended Section 1278.5, the Legislature did not clearly disclose an intent to abrogate the rule. On this issue, the Court of Appeal's judgment should be reversed. ARGUMENT I. THE ISSUE IS WHETHERA PHYSICIAN BRINGING A SECTION 1278.5 CLAIM BASED ON QUASI- JUDICIAL PEER REVIEW MUST FIRST EXHAUST REMEDIES "The issue to be briefed and argued," this Court has ordered, "is limited to the issue set forth in the petition for review." (Order, filed Nov. 14, 2012, at p. 1.) The issue set forth was whether by amending Section 1278.5, the Legislature intended to abrogate the established commonlawrule that a physician must exhaust judicial remedies before bringing a civil claim on the grounds that quasi-judicial peer review was maliciously motivated. (See Pet. for Rev., Sept. 24, 2012, at p. 1.) 1 This case involves events at Memorial Medical Center in Modesto. Defendant and Appellant Sutter Central Valley Hospitals operates Memorial and Defendant and Appellant Steve Mitchell was Memorial's COO. Werefer to them collectively as "Memorial." Fahlen opens his Answering Brief with a misstatement of the issue. (See Answering Brief on the Merits, filed Apr. 8, 2013 ("ABM"), at p. 1.) The issue is not "whether physicians have a right to initiate civil actions for the retaliatory termination of their hospital privileges under [Section 1278.5]." A physician may pursue civil claims after exhausting remedies. Nor is the issue whether the Court of Appeal erred in allowing the Section 1278.5 claims and the claim not based on peer review to proceed without exhaustion but requiring that the non-Section 1278.5 claims based on peer review be exhausted. (See ABM at p. 40.) Fahlen asked this Court to review this issue (see Answerto Petition for Review,etc., filed Oct. 14, 2012, at pp. 32-33); but, the Court denied his request (see Order,filed Nov. 14, 2012, at p. 1). His attempt to inject the issue back into this case during the merits briefing is improper. Il. THE COURT OF APPEAL'S FACTS GOVERN Where no party sought rehearing for omission or misstatement, this Court normally accepts the Court of Appeal's statement of the facts. (See Cal. Rules of Court, rule 8.500(c)(2).) Here, no party sought rehearing. Thus, Memorial limited its discussion to the facts addressed by the Court of Appeal. Fahlen should have done the same. But, in the answering brief, Fahlen inappropriately relies on additional facts. (See ABM at pp. 2-10.) In any event, the additional facts are not probative on the issue presented, the Legislature's intent when it amended Section 1278.5. Ill. THE CLEAR INTENT RULE GOVERNSAND SECTION 1278.5 SHOULD BE CONSTRUED CONSISTENT WITH EXISTING PEER REVIEW LAW The parties agree that the issue is one of statutory construction reviewed de novo. (See, e.g., Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1072 (Lexin).) They further agree that the Court must ascertain the Legislature's intent to effectuate the purposeof the law and that the analysis begins with the text.2 (See People v. Cruz (1996) 18 Cal.4th 764, 774-775.) They disagree, however, about two important interpretive issues. A. There Is No Categorical Exception to the Clear Intent Rule for Whistleblower Statutes The parties disagree on application of the clear intent rule. (See Opening Brief on the Merits, filed Feb. 4, 2013 OBM"),at pp. 26-34; see ABM, passim.) Where, as here, the issue is whether a statute abrogates a settled common law rule, abrogation should be found only where the Legislature expressly abrogates the rule or abrogation is necessary to give the statute effect. (See Aryeh, supra, 55 Cal.4th at p. 1193; Campbell, supra, 35 Cal.4th at p. 329; Torres, supra, 15 Cal.4th at p. 779.) In amending Section 1278.5, the 2 Fahlen argues that Section 1278.5's text compels an abrogation finding; but, he fails to identify any provision expressly abrogating the rule and as discussed in the Opening Brief and explicated below, abrogation is not a necessary implication. (See ABMat pp. 15-16; Nesson v. Northern Inyo County Local Hosp. Dist. (2012) 204 Cal.App.4th 65, 78-85.) Legislature did not expressly abrogate the exhaustion rule nor is abrogation necessary to give effect to the statute. Section 1278.5 covers patients, employees, health care workers and medicalstaff. (See § 1278.5, subd. (b)(1).) It covers a wide variety of circumstances, including, but not limitedto, "discharge, demotion, suspension, or any unfavorable changes in, or breachof, the terms or conditions of a contract, employment, or privileges of the employee, memberof the medical staff, or any other health care workerof the health facility, or the threat of any of these actions." (§ 1278.5, subd. (d)(2).) The clear common law rule is that a physician may seekcivil remedies on the grounds that a quasi-judicial peer review action was maliciously motivated only after exhausting administrative and judicial remedies. (See Westlake Comm. Hosp. v. Superior Court (1976) 17 Cal.3d 465, 469, 482-483 (Westlake).) Thus, where the alleged adverse action is quasi-judicial peer review, the physician must exhaust remedies before pursuing a Section 1278.5 claim. As did the Court of Appeal, Fahlen argues for an exception to the clear intent rule for whistleblowerstatutes, relying on State Board of Chiropractic Examiners v. Superior Court (Arbuckle) (2009) 45 Cal.4th 963 (Arbuckle) and Runyon v. Board of Trustees of the California State University (2010) 48 Cal.4th 760 (Runyon). (See ABM at pp. 1, 28-31, 35-39.) As explained more fully in the Opening Brief at pages 38 to 42, these cases are inapposite. They involve whistleblower legislation that at the same time established (1) a barebones administrative claim process not judicial in character and (2) a civil remedy, both governing retaliation claims. The issue for the Court was whether the Legislature intended to require administrative or judicial exhaustion. In other words, Arbuckle and Runyon construedself-contained statutes to determine how the Legislature likely intended their claim and remedy provisionsto operate. (Arbuckle, supra, 45 Cal.4th at pp. 971-976; Runyon, supra, 48 Cal.4th at pp. 763-774 [following Arbuckle analysis].) Those cases did not involve any settled commonlaw rule. (See, e.g., People v. Avila (2006) 38 Cal.4th 491, 566 [it 1s axiomatic that an opinion is not support for a proposition not addressed therein].) Also, significant in those cases was the Court's determination that the Legislature likely did not intend barebonesclaims procedures to have preclusiveeffect in civil actions. (See Arbuckle, supra, 45 Cal.4th at pp. 977-978; Runyon, supra, 48 Cal.4th at p. 774.) Quasi-judicial medical peer review is not barebones;it is judicial in character. Moreover, peer review is driven by the medical staff, not the health facility. Medical staff leaders regularly identify concerns that trigger peer review, investigate the concerns, and recommendcorrective action, while other medical staff memberssitting as a judicial review committee ("JRC") determine the reasonableness of any actions. (See Bus. & Prof. Code, §§ 809 — 809.8; see also 1 CT 95- 102 [peer review provisionsof bylaws].) While the governing board may disagree with the JRC's findings,its discretion is limited and its final action is subject to judicial review. (See Bus. & Prof. Code, §§ 809.05, 809.8; see also 1 CT 99 [board must "give great weight" to the JRC's actions].) Quasi-judicial peer review does not give rise to the concerns of easy manipulation in play in Arbuckle and Runyon. Fahlen casts Arbuckle as holding that no exhaustion is required where the Legislature "expressly acknowledge|[s] the existence of a parallel administrative remedy but [does] not require an adverse decisionto be set aside," then contends that since Section 1278.5 addresses peer review but does not expressly require exhaustion, the Legislature intended to abrogate the Westlake rule, at least "where a physician ha[s] grounds to bring a retaliation case." (See ABM at pp. 35-39.) Of course, the Westlake rule wascreatedprecisely for cases in which a physician has groundsto claim that quasi-judicial peer review was maliciously motivated, including by retaliatory animus. (See Westlake, supra, 17 Cal.3d at pp. 483-484.) If the Legislature intended abrogation, it needed to do more than "acknowledge" peer review; it neededto clearly and unequivocally disclose an intent to abrogate. (See, e.g., Aryeh, supra, 55 Cal.4th at p. 1193.) This it did not do. B. Section 1278.5 Should Be Construedin the Context of Peer Review Law Fahlen prefers a construction of Section 1278.5 blind to existing peer review law. (See ABM at pp. 17-18.) But context matters. "T]he Legislature is deemed to be awareof existing laws andjudicial decisions in effect at the timelegislation is enacted and to have enacted and amendedstatutes "in the light of such decisions as have a direct bearing upon them." (Estate of McDill (1975) 14 Cal.3d 831, 839 []; People v. Weidert [(1985)] 39 Cal.3d 836, 844-846 []; Bailey v. Superior Court (1977) 19 Cal.3d 970, 977-978, fn. 10 [].)" (People v. Overstreet (1986) 42 Cal.3d 891, 897; see also Apple Inc. v. Superior Court (Krescent) (2013) 56 — Cal.4th 128, 146 [same].) | Lexin is instructive. At issue was Government Code section 1091.5, subdivision (a)(3) ("Section 1091.5(a)(38)"), a conflict-of- interest rule for public contracts. (Lexin, supra, 47 Cal.4th at pp. 1085-1092.) The Court observed that a statute should be construed consistent with other laws that deal with similar issues and share a purpose or object: It is a basic canon of statutory construction that statutes in pari materia should be construed together so thatall parts of the statutory scheme are given effect. (People v. Lamas (2007) 42 Cal.4th 516, 525 []; American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1129 []; City of Huntington Beach v. Board of Administration (1992) 4 Cal.4th 462, 468 [].) Two "[s]tatutes are considered to be in part materia when they relate to the same person or thing, to the same class of person[s or] things, or have the same purpose or object." (Walker ov. Superior Court (1988) 47 Cal.3d 112, 124, fn. 4 [], quoting 2A Sutherland, Statutory Construction (Sands, 4th ed. 1984) § 51.03, p. 467; see also Altaville Drug Store, Inc. v. Employment Development Department (1988) 44 Cal.3d 231, 236, fn. 4 [] [in pari materia means "[o]f the same mt mtmatter" or "on the same subject," quoting Black's Law Dict. (5th ed. 1981) p. 1004].) Ud. at pp. 1090-1091.) The Court found that Section 1091.5 and the separate Political Reform Act of 1974 were in pari materia: "They both deal with a relatively small class of people, public officers and employees, and share the same purpose or objective, the prevention of conflicts of interests, and hencecan fairly be said to be in pari materia. [Citations.]" Ud. at p. 1091.) The Court went on to construe the statutes consistent with one another. (See id. at pp. 1091-1092.) Here, Business and Professions Code section 809.8 codifies the exhaustion rule, ensuring that quasi-judicial peer review actions are reviewed in a mandamusproceeding "underSection 1094.5 of the Code of Civil Procedure." By Section 1094.5(d), the Legislature replaced the common law independent judgment test with the more deferential substantial evidence test. Sections 1278.5, 809.8 and 1094.5(d) share a purpose, patient safety.® Section 1278.5 can and should be harmonized with these lawsto preserve mandamusreview andthe exhaustion requirement. 3 See § 1278.5, subd. (a) ["The Legislature encourages this reporting tn order to protect patients and tn order to assist those accreditation and government entities charged with ensuring that health care is safe... ." (Emphasis added)]; Bus. & Prof. Code, § 809, subd. (a)(6) ["To protect the health and welfare of the people of California, it is the policy of the [State] to exclude, through the peer review mechanism as provided for by California law, those healing arts practitioners who provide substandard care or who engage in professional misconduct, ..." (Emphasis added)]; see also Arnett v. Dal Cielo (1996) 14 Cal.4th 4, 12 ["[T]he ‘public’ protected by the peer review process is not the public at large, but is limited to the patients of the particular hospital in question."].) 10 IV. THE EXHAUSTION RULE IS WELL ESTABLISHED The following notionsare settled: (1) quasi-judicial peer review actions at private hospitals are reviewed by mandamus (OBM at pp. 14-16); (2) a physician must exhaust judicial remedies before pursuing damagesfor allegedly malicious quasi- judicial peer review and the Legislature has directed that actions supported by fair process and substantial evidence must be upheld (id. at pp. 16-20; ABM at pp. 15-21); (8) the Legislature has codified quasi-judicial peer review standards, including mandamusreview (OBM at pp. 20-24); and, (4) courts have repeatedly reinforced the exhaustion rule's elemental importance in peer review (id. at pp. 24-26). Fahlen insists that by amending Section 1278.5, the Legislature intended to undo mandamusreview and the exhaustion requirement. But whenthe issue of the amendments' effect on quasi-judicial peer review wasraised,* (see Memorial's RJN, Ex. 7 at pp. 3-4), the Legislature added a subdivision protective of existing peer review (see § 1278.5, subd.(1); see Memorial's RJN, Ex. 8 at p. 5). 4 Memorial has demonstrated that the amendments’ sponsor never suggested that the changes were directed at quasi-judicial peer review. (See OBM atpp. 29-34.) Fahlen's answer: The sponsor "cited the example of Tenet Healthcare System having silenced physicians at a Redding [California] hospital who knew about unnecessary open-heart surgeries and Medicare[billing] fraud." (ABM at p. 18, citing 1 CT 234.) There is no evidence that those physicians were "silenced" by way of quasi-judicial peer review. (See 1 CT 234.) 11 Fahlen argues that subdivision (1)'s phrase "legitimate peer review activities" is intended to distinguish between non- retaliatory and retaliatory peer review, the former governed by the exhaustion rule, the latter not. (See ABM at p. 20.) But, under this construction, a court would have to resolve a physician's claim before subdivision (1) would afford any protection for peer review; in which case, why have subdivision (1)? (See People v. Hudson (2006) 38 Cal.4th 1002, 1010 ("[I]nterpretations that render statutory terms meaningless as surplusage are to be avoided."].) A more natural reading is that the Legislature is referring to peer review underexisting legal standards. (See Shorter Oxford English Dictionary (6th ed. 2007) at p. 1577, col. 1 [defining legitimate as "a. Conformable to, sanctioned or authorized by law or principle; lawful justifiable; proper. [] b. Normal, regular, conformable to a recognized standard type... ."].) Whether peer review conformed to legal standardsis precisely the issue addressed in a mandamus proceeding. This construction is consistent with the notion that subdivision (1) was intended to address CHA's concern that Section 1278.5 not adversely affect quasi-judicial peer review. (See OBMat pp. 31-33.) . Fahlen contends that "the Legislature rejected the CHA's pleas that physicians should be required to exhaust administrative and judicial remedies before filing a Section 1278.5 action." (See ABM atpp. 21-22.) But, the Senate responded to CHA by adding subdivision (1), which provides that the statute should not be construed to limit legitimate peer 12 review activities. And the Assembly understood it "to ensure that the health facility peer review committee continues to operate as it has undercurrent law." (See OBM at pp. 32-34.) Every indication is that the Legislature intended to preserve the peer review rules. V. THE EXHAUSTION RULE APPLIES TO CLAIMS BASED ON QUASI-JUDICIAL PEER REVIEW A. In Amending Section 1278.5, the Legislature Did Not Clearly Disclose an Intent to Abrogate the Exhaustion Rule In the Opening Brief at pages 24 through 37, Memorial explains that by Section 1278.5, the Legislature did not clearly disclose an intent to abrogate the exhaustion rule. Fahlen's contentions to the contrary are unsupported. Fahlen contends that "one of the specific purposesof the [sic] Section 1278.5, as amended in 2007,is to protect physicians from retaliatory peer review actions against their hospital privileges." (See ABM at p. 14.) As support, he points to the inclusion of unfavorable changesin staff privileges in thelist of actions that maybe retaliatory and the remedies of reinstatement and reimbursement for wrongful change in privileges. (See ABM at pp. 13-14.) But, this case is limited to claims based on quasi-judicial peer review; as demonstrated in the Opening Brief, certain staff privilege determinationsare made without quasi-judicial peer review. (SeeOBM at p. 43.) In those cases, there is no exhaustion requirement. 13 Echoing the Court of Appeal, Fahlen argues that by creating a causeof action that covers retaliatory quasi-judicial peer review, the Legislature must have intended to abrogate the exhaustion rule. (ABM at pp. 14-15, citing Slip Op., at p. 19; see also ABM at pp. 15-17.) Again, though, in connection with Section 1278.5 the Legislature never discussed quasi-judicial peer review. Assumingthat it intended the amendmentsto encompasssuchactions,it does not follow that the Legislature intended abrogation of the exhaustion rule. To the contrary, the record suggests that the Legislature intended to preserve peer review, including the exhaustion rule. Section 1278.5 is remedial and should be "liberally construed on behalf of the class of personsit is designed to protect." (See California Assn. of Health Facilities, supra, 16 Cal.4th at p. 295; see also Wells v. One2One Learning Found. (2006) 39 Cal.4th 1164, 1196 (Wells) [construction informed by statute's ultimate purpose].) The statute is primarily directed at patient safety.® (§ 1278.5, subd. (a).) Quasi-judicial peer review is also directed at patient safety and is the established method for identifying, investigating, and correcting unsafe conditions posed by physicians whosecare or conduct jeopardizes patients. 5 Fahlen initially recognizes that Section 1278.5 is directed at "patient safety" (see ABM at p. 2); later though, he arguesthat "the purposeof [Section 1278.5] is [] to protect public safety by giving whistleblowers legal protection from retaliation" (ABM at p. 11 [emphasis added]). The Legislature declared that Section 1278.5 is directed at patient safety. (See § 1278.5, subd. (a).) It should be construed in light of other patient-safety statutes and laws. 14 Exhaustion is fundamental to peer review in that it makes physician participation possible by providing a measure of deference to professional judgment andprotecting participants from burdensomelawsuits. To construe the reporting protection afforded by Section 1278.5 as undoing a fundamentaltenet of peer review would compromise, not further, patients’ interests. On the other hand, harmonizing Section 1278.5 and the exhaustion rule would further peer review and the statutory reporting protections by allowing physicians whosuffer unreasonable or unwarranted quasi-judicial peer review to prove that the action was motivated by retaliatory animus. (See Wells, supra, 39 Cal.4th at p. 1190 ["In cases of uncertain meaning, we may also consider the consequencesof a particular interpretation, includingits impact on policy."].) This analysis is especially compellingin light of the fact that CMA, the sponsorof the amendments, never suggested that the amendments would have anyeffect on quasi-judicial peer review. According to Fahlen, "[nlothing suggests that the CMA intendedits list of examples to be exclusive, and the Legislature did not adopt the CMA'slist as its definition of ‘discriminatory treatment.” (ABM at pp. 27-28.) But the Assembly Committee on Health incorporated CMA'slist into its report on the bill. (See Memorial's RJN, Ex. 2 at p. 4; see, e.g., Powers v. City of Richmond (1995) 10 Cal.4th 85, 111 [consideringlegislative committee's explanation of evils at which bill directed].) The Legislature focused on actions that a hospital may take unilaterally; it did not consider actions such as quasi-judicial 15 medical peer review that require participation by the medical staff and are governedby fair-processrules. Fahlen argues that the Legislature must have intended abrogation because, given rules of mandamusreview, including a discovery ban andthe substantial evidence standard,it is "effectively [] impossible for a physician to prove that a healthcarefacility's reasons for terminating his privileges were pretextual."® (ABMat p. 34.) Fahlen focuses on the wrong 6 Fahlen proffers "the method of proof" for Section 1278.5 claims. (See ABM at pp. 33-34, citing Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 713-714 (Mamou).) The mechanics of a statutory claim should be determined consistent with the legislative intent. (See, e.g., Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 215 [procedure for adjudicating claim is issue of statutory interpretation directed at giving effect to Legislature's intent].) Fahlen's methodology is based on a case decided under FEHA,not Section 1278.5. (See Mamou, supra, 165 Cal.App.4th at pp. 713-714.) To date, no appellate court has published an opinion on the procedure for Section 1278.5 claims. Onefederaldistrict court opinion provides that "[t]o establish a primafacie case of retaliation under § 1278.5, a plaintiff must show that: (1) he engaged in protected activity under the statute; (2) he wasthereafter subjected to an adverse employmentaction; and (3) a causal link between the two. See [Mendiondov. Centinela Hosp. Med. Ctr. (9th Cir. 2008) 521 F.3d 1097, 1105 (Mendiondo)]." (Jadwin v. County of Kern (E.D. Cal. 2009) 610 F.Supp.2d 1129, 1144 (Jadwin).) The case cited by the Jadwin court—Mendiondo—wasdecided on the pleadings and does not purport to decide a procedurefor resolution on the merits. Even if Jadwin is correct, however, it is far from settled that showing "a causal link" between a report and an adverseaction requires only, as Fahlen contends, "some evidence that suggests that the two were linked by a retaliatory motive, ..." (See ABM atpp. 33- 34.) Nor does it appear that a single procedurefor all Section 1278.5 claims would necessarily serve the statute's purpose— (footnote continued) 16 proceeding. The record is established during peer review (see Bus. & Prof. Code, § 809.2 [physician has right to documentary discovery, pre-hearing witnesslist, to present case, to examine and cross-examine witnesses, and to argue issues]); nothing prevents a physician from developing a record on pretext or retaliatory animus. Nor is mandamusreview as narrow as Fahlenalleges. It includes review of evidentiary findings (see Code Civ. Proc., § 1094.5, subd. (d)), as well as whether the peer review bodies proceededin excess of jurisdiction and whether proceedings were fair (see id., § 1094.5, subd. (b)). A finding on these issues in the physician's favor could support a pretext determination in a subsequent Section 1278.5 action. According to Fahlen, courts need not respect the judgment of medical professionals now that "the Legislature has recognized that peer review decisions can be usedillegitimately for retaliatory purposes." (ABM atpp. 36-37.) But, the possibility that quasi-judicial peer review could be motivated by animus has long been recognized. (See Westlake, supra, 17 Cal.3d at pp. 483- 484.) Fahlen's suggestion that by Section 1278.5 the Legislature meant to convert privileging decisions affecting patient safety into jury issues is not supported by the statute's text or history. (See ABM at p. 36.) Nor is there any support for Fahlen's claim that the Legislature intended to drop the exhaustion-related patient safety—especially if uniformity means abrogation of the exhaustion rule, which itself is elemental to ensuring patient safety. 17 protections for peer review participants. (See ibid.) Indeed, subdivision (1) strongly suggests otherwise. B. Harmonizing Section 1278.5 and the Rule Removes Doubtasto the Statute's Constitutionality In the Opening Brief, Memorial explains that harmonizing Section 1278.5 and the exhaustion rule would help remove doubt as to the statute's constitutionality. (See OBM at pp. 34-37.) Fahlen's objection to the argumentis ill founded and his response on the merits misses the mark. Fahlen claims that the argumentis factual and has been forfeited. (See ABM atpp. 43-44.) The argument, however, 1s legal. It seeks to reconcile Section 1278.5 with the federal Health Care Quality Improvement Act of 1986 ("HCQIA"). (See OBM at pp. 34-37.) HCQIA confers a qualified immunity on peer review bodies and participants where the action is reasonable andfair (with a rebuttable presumption that all peer review is reasonable and fair). (See 42 U.S.C. §§ 11111(a)(1) and 11112(a).) Since this immunity is largely consistent with the qualified immunity afforded by the exhaustion rule, continued enforcementof the rule, even as to Section 1278.5 claims, is most consistent with federal law and mostlikely to avoid preemption issues. On the merits, Fahlen's arguments that HCQIA immunity is irrelevant or inapplicable are incorrect. Contrary to Fahlen's assertion, HCQIA impactsalllitigation arising from peerreview, not just claims for damages. Although HCQIA's immunityis specific to liability for damages (42 U.S.C. § 11111(a)), HCQIA 18 also protects peer review participants by allowing costs and attorney's fees for defendants who prevail on a claim for either damagesor injunctive relief. (42 U.S.C. § 11113.) Moreover, Fahlen's unsupported assertion that HCQIA's immunities do not apply if the peer review actions were motivated by retaliatory animus ignores the vast body of case law suggesting otherwise. The motivation behind the peer review action is irrelevant. (See 42 U.S.C. § 11112(a); Austin v. McNamara (9th Cir. 1992) 979 F.2d 728, 734 [assertions of hostility toward physician irrelevant to reasonableness inquiry because "[t]he test is an objective one, so bad faith is immaterial."]; Poliner v. Texas Health Sys. (5Cir. 2008) 537 F.3d 368, 377 [agreeing with foursister circuits that HCQIA's reasonableness requirements create objective standard of performance, rather than a subjective good faith standard]; see also Fox v. Good Samaritan L.P. (N.D. Cal. 2010) 801 F.Supp.2d 8838, 890, affd. (9% Cir. 2012) 467 Fed. Appx. 731, cert den. (2012) 133 S.Ct. 218 [evidence of bad faith or hostility is irrelevant and cannotserve to create a material issue of fact].) Even minority courts that are willing to considered retaliatory animusto do only in the context of the record as a whole. (See, e.g., Freilich v. Upper Chesapeake Health Sys. (2011) 423 Md. 690, 711 ["evidence of retaliatory animusis one of many types of evidence that can contribute, in the totality of the circumstances, to a finding that an action did not meet” HCQIA immunity standard].) Harmonizing Section 1278.5 and the exhaustion rule helps remove doubt as to the statute's constitutionality. 19 C. The Court of Appeal Erred in Its Construction of Section 1278.5 Nothing that Fahlen says in his Answering Brief changes the reality that the Court of Appeal's abrogation holdingis untenable. (See OBM at pp. 38-47.) 1. The Court of Appeal Relied on Inapposite Case Law In the Opening Brief, Memorial shows that the Courtof Appeal based its abrogation holding on inapposite authority. (See OBM at pp. 38-42.) Above, we demonstrate why Fahlen's attempt to resuscitate those authorities fails. (Supra at § IIT(A).) The fact is that neither Arbuckle nor Runyon governsthe issue presentedin this case. 2. The Statutory Injunction Provision and the Exhaustion Rule Can be Harmonized As explained in the Opening Brief, subdivision (h)—the injunction provision—addresses "peer review" generally, not solely quasi-judicial peer review.’ (See OBM at pp. 42-44.) If the pending Section 1278.5 claim is based on quasi-judicial peer review, the issue of interference would not arise because by 7 Fahlen points to subdivision (h)'s reference to."a peer review hearing, as authorized in Section 805 and Sections 809 to 809.5, inclusive." (See ABM at p. 18.) But subdivision (h) covers both peer review hearings and the peer review "process," which includes non-judicial peer review, such as denials of privileges that do not give rise to hearing rights. (See OBM atp. 43.) 20 virtue of the exhaustion requirement, the physician would have exhausted her claim before pursuingcivil remedies. Further, the peer review proceeding that is the subject of the evidentiary demand maynot be the adverse action upon which the Section 1278.5 claim is based (if it were, then why not provide that the medical staff may seek an injunction to protect the peer review committee from being required to comply with evidentiary demands?). The Legislature may have foreseen that a physician would want information on proceedings brought against him after he filed suit in order to establish retaliatory motive. Or, it may have foreseen that a physician may seek information on peer review actions involving others to support a disparate treatment claim. Indeed, Fahlen suggests he will seek precisely such discovery. (See ABM at pp. 34-35.) The Legislature may well have intended the injunction provision for these situations. "This subdivision establishes," according to Fahlen, "that the Legislature intended to give physicians a rightto litigate a Section 1278.5 action while a hospital peer review proceedingis pending." (See ABM at pp. 18.) Even if true, as discussed, this would not mean that the Legislature clearly and unequivocally abrogated the exhaustion rule. Fahlen maintains that subdivision (h) demonstrates that the Legislature intended to deny peer review bodies exclusive jurisdiction over privilege determinations whenever a physician alleges that a quasi-judicial peer review action is motivated by 21 retaliatory animus.§ (ABMat pp. 18-19.) Such an objective would entirely undo Westlake and its exhaustion requirement. A finding that the Legislature clearly and unequivocally disclosed an intent to undo an established commonlaw rule fully integrated into patient safety protections should be based on more than a single subsection that can be construed any number of ways. For the notion that overlappingjurisdiction is an "uncontroversial concept," Fahlen cites Pacific Lumber Company v. State Water Resources Control Board (2006) 37 Cal.4th 921 (Pacific Lumber). (ABM at pp. 18-19.) There, this Court addressed the issue of whether the Z'berg-Nejedly Forest Practice Act of 1973 and its implementing regulations provide the exclusive mechanism for review of timber harvesting plans and their environmental effects, including effects on water quality. (See Pacific Lumber, supra, 37 Cal.4th at p. 926.) The Court's finding that the Act did not preempt other environmental laws turned on the text of a savings clause, which made room for other environmental review. (Id. at pp. 933-934.) Thus, agencies, like the State Board, had jurisdiction as well. "This approach simply 8 In its discussion of "unintended consequences,” CHA suggested that the bill could be read to allow adjudication of alleged sham quasi-judicial peer review Section 1278.5 claimsprior to exhaustion. (See Memorial’s RJN, Ex. 9, at pp. 1-3; see also ABM at pp. 23-24.) Whether the proposed statute could be so read is a question far different from whether the statute must be read to abrogate the exhaustion requirement. (See, e.g., Aryeh, supra, 55 Cal.4th at p. 1193 [abrogation will not be found unless such intent is clear and unequivocal.) 22 creates a system of overlapping jurisdiction, an uncontroversial concept under our law even absent a savings clause like the one implicated here. [Citations.]" Ud. at p. 936.) Overlapping jurisdiction is uncontroversial. The issue here, though, is whether by Section 1278.5, the Legislature created such a scheme. When the Legislature amended Section 1278.5, the common law clearly conferred exclusive jurisdiction, first on the peer review body, then on the courts in a mandamus proceeding. Thus, a new rule of overlapping jurisdiction may be found only if the Legislature's intent to override the common law rule is clear. (See Aryeh, supra, 55 Cal.4th at p. 1193.) There is no clear evidence that the Legislature intended to create a new system of overlapping jurisdiction. Fahlen argues that prior to exhaustion courts must be able to adjudicate physicians' claims that quasi-judicial peer review was conductedbecause of retaliatory animus, otherwise "there would be no needfor either subdivision (h) or subdivision(])." (ABM at pp. 19-20.) As explained above, the injunction provision can be given effect without abrogation. As can subdivision (1); the record demonstrates that the Legislature intended the subdivision to promote, not undo, existing peer review rules. 3. The Statutory Burden Provision and the Exhaustion Rule Can Be Harmonized The Opening Brief demonstrates that subdivision (d)(1)'s burden provision and the exhaustion rule are readily harmonized. (See OBM at pp. 44-45.) Fahlen's arguments to the contrary are unavailing. 23 Fahlen asserts that physicians "nearly always" lose in mandamusproceedings and from that premise argues that "lr]Jequiring exhaustion would effectively nullify the presumption ...." (ABM at p. 25.) The premise, however, is belied by the published opinions in which the physician prevails.? The premise that the presumption is substantive is also wrong. It shifts only the burden of production. (See ABM at pp. 24-25.) 4, Harmonization Does Not Render Superfluous the Statutory Reinstatement Remedy The Opening Brief shows that subdivision (g)'s reinstatement remedy can be construed consistent with the 9 See, e.g. Mileikowsky v. West Hills Hosp. & Med. Center (2009) 45 Cal.4th 1259 [directing issuance of peremptory writ]; Miller v. Eisenhower Med. Center (1980) 27 Cal.3d 614 [same]; Bode v. Los Angeles Metro. Med. Center (2009) 174 Cal.App.4th 1224 [affirming peremptory writ]; Nasim v. Los Robles Reg'l Med. Center (2008) 165 Cal.App.4th 1538 [same]; Smith v. Selma Cmty. Hosp. (2008) 164 Cal.App.4th 1478 [same]; Yaqub v. Salinas Valley Mem. Healthcare System (2004) 122 Cal.App.4th 474 [directing issuance of peremptory writ]; Rosenblit v. Superior Court (1991) 231 Cal.App.3d 1434 [same]; Bergeron v. Desert Hosp. Corp. (1990) 221 Cal.App.3d 146 [affirming peremptory writ]; Huang v. Board of Directors (1990) 220 Cal.App.3d 1286 [directing issuance of peremptory writ]; Haller v. Burbank Cmty Hosp. Found. (1983) 149 Cal.App.3d 650 [same]; Applebaum v. Board of Directors (1980) 104 Cal.App.3d 648 [affirming peremptory writ]; Hackethal v. Loma Linda Cmty. Hosp. Corp. (1979) 91 Cal.App.3d 59 [affirming (in part) peremptory writ]; Ascherman v. St. Francis Mem. Hosp. (1975) 45 Cal.App.3d 507 [directing issuance of peremptory writ]; Martino v. Concord Cmty. Hosp. Dist. (1965) 233 Cal.App.2d 51 [same]; Rosner v. Eden Township Hosp. Dist. (1962) 58 Cal.2d 592 [same]. 24 exhaustion rule. (See OBMat p. 46.) Fahlen's argument otherwise is based on an impractical construction of the law. Fahlen argues that exhaustion would render the reinstatement remedy "superfluous" because a mandamus proceedingitself may result in reinstatement. (ABM atpp. 25- 27.) Different causes of action or separate proceedingsoften allow the samerelief. This does not rendera relief provision superfluous. Further, the reinstatement remedy would beviable in a Section 1278.5 action in which the physician secured mandamusrelief but not reinstatement or in an action in which privileges were suspended, denied, revoked or not renewed without quasi-judicial peer review. Fahlen’s claim that the latter cases are too rare to matteris belied by two of the lead cases on peer review that deal with non-judicial peer actions. (See ABM at pp. 25-26; see also Westlake, supra, 44 Cal.4th at p. 472 [privileges denied based on peer review body’s investigation without notice or hearing]; Smith v. Adventist Health System West (2010) 190 Cal.App.4th 40, 62-63 [physician's application for privileges denied without hearing].) Nothing suggests that the facts of these cases were anomalous. 5. The Rule Is Not Inconsistent with the Intent Behind Section 1278.5 Memorial has demonstrated that Section 1278.5 and the rule can be construed consistently, without compromising the statute's intent. (See OBM atpp. 46-47.) Fahlen's claims to the contrary do not withstand even casual scrutiny. 25 Fahlen contends that "the Legislature obviously wanted Section 1278.5 to be a strong prohibition on retaliation with effective remedies for whistleblowers." (See ABM at p. 42.) But, the Legislature bolstered the exhaustion rule in 1979 when it added subdivision (d) to Section 1094.5 and reinforced it again years later with Section 809.8. Also true is that the Legislature in amending Section 1278.5 did not expressly abrogate the exhaustion rule. Nor is it reasonable to read Section 1278.5 orits history as clearly and unequivocally providing for abrogation. Instead, the strongest evidence of the Legislature's view is subdivision (1), which suggests that the Legislature intended to leave in place the existing peer review rules. Fahlen's response: "[I]t is inconceivable that the Legislature intendedto give health facilities a nearly foolproof ability to escape liability for retaliation by using peer review proceedings." (See ABM at p. 42.) As a meansforretaliation, quasi-judicial peer review is hardly "foolproof." It is controlled by the medicalstaff, not the healthfacility. (See Bus. & Prof. Code, § 809 et seq.) Proceedings are burdensome and expensive, as demonstrated here, where proceedings spanned two and a half years, involved 13 hearings over eight months and consumed countless staff and hospital resources. (See Slip Op. at pp. 5-7.) Once complete, quasi-judicial peer review is subject to judicial review for factual, as well as legal, error. (See Code Civ. Proc., § 1094.5, subds. (b) & (d).) Given these circumstances,it is unsurprising that CMA did not identify quasi-judicial peer review in its list of retaliatory actions. (See Memorial's RJN, Ex. 3 at pp. 26 6-7.) These circumstances also help explain subdivision (1)—the statute was not directed at quasi-judicial peer review and,thus, existing rules would remain intact. Fahlen argues that harmonization would "shield[] peer review from accountability under Section 1278.5." (See ABM at pp. 42-48.) To be clear, exhaustion does not "shield peer review from accountability." Quasi-judicial peer review is subject to active judicial scrutiny; where an action fails to pass muster, the physician may bringa civil suit on the groundsthat it was maliciously motivated. (See Westlake, supra, 17 Cal.3d at pp. 482-483.) Exhaustion only prevents a physician from bringing a premature action or an action where peer review was reasonable and warranted. The rule serves important purposes and by Section 1278.5, the Legislature did not abrogate it. 6. Fahlen's Additional Arguments in Support of Abrogation Are Unfounded Fahlen appears to argue that the Legislature must have intended abrogation, otherwise a threat of adverse action by way of quasi-judicial peer review would neverbe actionable. (See ABMatp. 20.) This case, however, involves peer review action.!° 10 Fahlen asks this Court to affirm the judgment on the alternative groundsthat his Section 1278.5 claim need not be exhausted to the extent it is based on the pre-peer review conduct "of getting [him] fired [from Gould] and then threatening him [with peer review]." (See ABM at pp. 39-40.) This issue is not within the issue presented. Fahlen does not even contend that he made the argumentin the lower courts. In any event, Fahlen's "setting fired from Gould"is covered in the fourth cause of action, (footnote continued) 27 Thus, the Court need not address the mannerfor adjudicating Section 1278.5 claims based solely on alleged threats of adverse quasi-judicial peer review. Fahlen contends that requiring exhaustion for claims based on quasi-judicial peer review actions but not for other claims (for example, those based on pre-peer review conduct) would be inefficient and would create "a perverse incentive" for hospitals to rush into a peer review proceeding "to eliminate [a] physician's ability to sue... ." (See ABM at pp. 39-40.) But there is no evidence that hospitals are using quasi-judicial peer review as an end-run around Section 1278.5. Ifa hospital tried,it is likely that the medical staff, which largely controls peer review, would put an endto theeffort. He argues that no harm can come from allowing a Section 1278.5 claim to proceed following the administrative process but before a mandamusaction because at that point, "there is no risk of a Section 1278.5 action interfering with the proceeding." (ABM at pp. 20-21.) But, the exhaustion rule is designed to promote professional and expert quasi-judicial proceedings and findings, whichis not currently at issue. (See Slip Op. at p. 8, n.3.). And, Mitchell's advisement that Fahlen could avoid peer review and a Section 805 Report by relocating was a pre-proceeding communication related to an official proceeding authorized by law contemplated in good faith and underserious consideration. (See Slip Op. at p. 5.) Thus, it is more than likely covered by the litigation privilege. (See Civ. Code, § 47, subd.(b); see Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1251 [privilege covers communication relating to litigation contemplated in good faith and underserious consideration].) 28 limit judicial second-guessing, and promote participation by way of protecting participants from burdensomelitigation. (See, e.g., Westlake, supra, 17 Cal.3d at p. 484; see also Kibler v. Northern Inyo County Local Hosp. Dist. (2006) 39 Cal.4th 192, 200-201 (Kibler) [finding quasi-judicial peer review "official proceeding authorized by law" under anti-SLAPP statute serves an "important public interest," and facilitates peer review by discouraging "harassing lawsuits against hospitals and their peer review committee members"|.) These objectives would be. underminedifjudicial exhaustion were abandoned. Fahlen gives several reasons whya finding that the Legislature abrogated the rule would not change much. (See ABMat pp. 40-41.) None is availing. First, for the proposition that "there are very few peer review hearings held each year in California," he relies on the Lumetra Report. (See ABM at pp. 40-41; see also Fahlen's RJN, Ex. D at p. 90.) If the Court grants judicial notice,!! it will see that the report covers a brief period of time and is based on narrow data. (See Fahlen's RJN, Ex. D. at pp. 1, 31.) Even so, nearly 14 percent of respondents reported that their entity spent more than $50,000 in one year on 809 hearings, with seven percent estimating costs of over $250,000. Ud. at pp. 90-91.) Further, the report documents that 127 Section 805 Reports were filed in 2006-2007. Ud. at p. 13.) A quasi-judicial peer review action likely preceded or ensued following most reports. (See Bus. & Prof. Code, §§ 809.1, subd. 11 But see Memorial's Opp. to Fahlen's Req. for Judicial Notice, filed Apr. 22, 2013, at pp. 7-9. 29 (b)(3), 809.5, subd. (a).) It is difficult to square Fahlen's claim of "veryfew peer review hearings" with the data in the report. Next, he represents that "since the Legislature enacted Section 1278.5 in 2007, there have been few cases in either state or federal courts in which Section 1278.5 was an issue, indicating that physicians are not using the remedy often." (ABM at p. 41.) He provides no support for his claim.!” Even if true, the claim does not address the circumstances that may prevail if the exhaustion rule is deemed abrogated. At least some observers believe that abrogation may cause a rise in Section 1278.5 claims challenging quasi-judicial peer review actions and those claims may substantially change the natureof peer review in California. (See, e.g., Melchior, Revolution in Disputes Between Hospitals and Their Physicians? S.F. Daily Journal (Aug. 24, 2012) p. 4.) Finally, he asserts that "there is no reason to expect physicians to file spurious claimsof retaliation." (ABM at p. 41.) The Westlake court, however, interposed an exhaustion requirement out of respect for private hospitals’ quasi-judicial process, to ensure that responsibility for medical decisions rested principally with medical professionals, and to promote the integrity of peer review by, amongotherthings,protecting medical staff from burdensomelitigation. (Westlake, supra, 17 12 Fahlen cites the Lumetra Report for the proposition that "ohysicians with valid retaliation claims will often be unable to sue a healthcare facility because of the difficulties inherent in litigating such claims." (ABM at p. 41.) The report, however, says nothing about retaliation claims; it focuses on internal peer review processes at health care entities. 30 Cal.3d at p. 484.) The Legislature and the courts have repeatedly ~ endorsed the exhaustion rule. (See, e.g., Bus & Prof. Code, § 809.8 [preserving review of peer review actions by way of administrative mandamus]; AKzibler, supra, 39 Cal.4th at pp. 200- 201 [determination that quasi-judicial peer review is "official proceeding" under Codeof Civil Procedure section 425.16 supported by importance of peer review and need to promote integrity of peer review process].) And, in amending Section 1278.5, the Legislature did not clearly and unequivocally disclose an intent to abrogate the rule. Thus, regardless of the numberof claims that might be filed,!3 no Section 1278.5 claim based on allegedly sham quasi-judicial peer review should proceed unless the physician has exhausted remedies. 138 Fahlen claims that few physicians will file Section 1278.5 claims because "[rJetaliation is difficult to prove." (See ABM at pp. 41.) At the same time, though, he claims that a physician's prima-facie burden is minimal, he need only "present evidence of protected activity and action taken against him, and some evidence that suggests the two were linked by a retaliatory motive,..." (ABM at pp. 33-34.) The last element will "almost always" be established by "circumstantial evidence." (See ABM at p. 41.) If so, it is easy to imagine a route toaclaim: A physician facing peer review needonly file a report. If he is displeased with peer review, he can initiate a civil action, thereby bypassing deferential judicial review, transferring patient-safety decisions from experts to juries, and exposing medical staff and others to burdensomelitigation. This is precisely the scenario that the exhaustion rule was designed to avoid. ol VI. THE FIRST AND SECOND CAUSES OF ACTION SHOULD BE STRICKEN The viability of Fahlen's first and second causesof action turns on the Court's ruling on the abrogation issue. (See OBM at p. 48; see ABM at p. 45.) Because the exhaustion rule continues to apply, the first and second causes of action should be stricken. CONCLUSION The Court should find that by Section 1278.5, the Legislature did not intend to abrogate the commonlaw rule that a physician must exhaust remedies before bringing civil claim on the grounds that a quasi-judicial peer review was maliciously motivated. Because Fahlen failed to exhaust remedies, the Court should direct the lower court to strike his Section 1278.5 claims, the first and second causesof action. DATED: May/3, 2013 HANSON BRIDGETT LLP endants and CER CENTRAL ALLEY HOSPITALS and STEVE MITCHELL 32 WORD CERTIFICATION I, Joseph M. Quinn, counsel for SUTTER CENTRAL VALLEY HOSPITALS and STEVE MITCHELL,hereby certify, in reliance on a word count by Microsoft Word, the program used to prepare the foregoing Reply Brief on the Merits, that it contains 8,088 words, including footnotes (and excluding caption, tables, signature block, and this certification). Dated: May /F_, 2013 inn 33 5139879. 1 PROOF OF SERVICE I, Melinda Less, declare that Iam a resident of the State of California. I am over the age of 18 years and not a party to the within action; that my business address is Hanson Bridgett LLP, 425 Market Street, 26th Floor, San Francisco, California 94105. On May15, 20138, I served a true and accurate copy of the document(s) entitled: REPLY BRIEF ON THE MERITS on the party(es) in this action as follows: Stephen D. Schear, Esq. Law Office of Stephen Schear 2831 Telegraph Avenue Oakland, CA 94609 Jenny C. Huang, Esq. ‘Justice First, LLP 180 Grand Avenue, Suite 1300 Oakland, CA 94612 Court of Appeal of the State of California Fifth Appellate District 2424 Ventura Street Fresno, CA 93721 The Honorable Timothy W. Salter Department 22 Stanislaus County Superior Court 801 10th Street Modesto, CA 95353 Counselfor Plaintiff Mark T. Fahlen, M.D. Counsel for Plaintiff Mark T. Fahlen, M.D. Court of Appeal Superior Court 5138440.1 BY MAIL:I enclosed the document(s) in a sealed envelope or package addressedto the personsat the addresseslisted in the Service List and placed the envelopefor collection and mailing, following our ordinary business practices. lam readily familiar | with Hanson Bridgett LLP's practice for collecting and processing correspondence for mailing. On the same day that the correspondenceis placedfor collection and mailing,it is deposited in the ordinary course of business with the United States Postal Service, in a sealed envelope with postage fully prepaid. I declare under penalty of perjury under the lawsof the State of California that the foregoing is true and correct. Executed on May 1S, 2013, at San Francisco, California. Melinda Less 5138440.1