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Hospital might have defamed research fellow by telling employer she was terminated for cause

By Robert Margolis, J.D.

A hospital’s communication to a former research fellow’s employer that the hospital terminated her fellowship for cause may have been false and may not be privileged, ruled the District of Columbia Circuit, reversing summary judgment against the student’s defamation claim against MedStar Georgetown University Hospital. The appellate court did affirm summary judgment dismissing the student’s breach of contract claims against the hospital and Georgetown University Medical Center, and her tortious interference claim (Burns v. Levy, October 13, 2017, Williams, S.).

The student, employed as a Lieutenant Colonel in the U.S. Air Force, entered into a postgraduate clinical research fellowship at the university and hospital in 2011. Several agreements were signed related to that fellowship. Central to the lawsuit was a Research Fellowship Agreement she signed with the university, requiring the student to meet university research and educational requirements and render clinical services through the hospital. The university promised to provide research training and a suitable environment for educational research. The university could terminate the student for cause, subject to notice and a right to appeal under a grievance procedure (absent her gross negligence or intentional misconduct). In addition, the university and hospital had an agreement with each other, as did the Air Force and the university, all relating to her fellowship.

Withdrawal from program. When the student had a falling out with her supervisor, she initially was terminated from her fellowship for cause, before reaching an agreement by which she voluntarily withdrew from the program. She met with her supervisor and the chair of the university pediatrics department on April 3, 2012, at which time she received a letter (on university letterhead) dismissing her for gross delinquency. The letter cited her agreement with the university, permitting termination without notice under that condition. In December 2012, she reached an agreement with the chair allowing for her voluntary withdrawal from the fellowship rather than involuntary termination.

Hospital reports termination for cause. However, the hospital later reported to the Air Force that she was terminated for cause. She sued for breach of contract, defamation, and tortious interference with a prospective economic advantage. Her theory was that her fellowship was singular, albeit with multiple parts, and she resigned that one fellowship, so the letter to the Air Force that she was fired constituted breach because the termination and grievance procedures were not followed. It also constituted defamation and tortious interference because the report was false—the hospital never fired her. The defendants contended, on the other hand, that she had separate agreements with the university and hospital, and although she resigned from the former, she was fired by the latter, making the report to the Air Force true.

No breach of contract. The student alleged breach of contract based on the notice provision in her contract with the university. The district court had ruled that the university did not breach its contract with the student, and that because the hospital was not a party to any agreement between the student and the university, it was not bound to observe the notice and other procedures in her agreement with the university. The appellate court agreed. No agreement existed between the hospital and the student that entitled her to notice and due process before termination; any notice provision relevant to the hospital would have been within its contract with the university, an agreement affording the student no rights.

Issues of fact on defamation. On the defamation counts, the district court had ruled that the common interest privilege shielded the supervisor and the hospital from liability for reporting to the Air Force their critical assessment and firing of the student. Before addressing that issue, the appellate court concluded that disputed factual issues as to whether the report was true required reversal of the summary judgment for the hospital.

The appeals court agreed with the district court that there were separate agreements among the student, the university, and the hospital, but noted that there was a material dispute on whether she was fired by the hospital. The agreement between the university and the hospital imposed certain duties on the hospital to supervise her fellowship, but those duties ended immediately upon termination of the university’s agreement with the student. Thus, if the university and the student voluntarily terminated their agreement first, the hospital could not have terminated her. In that case, the hospital’s report to the Air Force that it fired her would be false. Because a reasonable jury could decide that the university agreement was voluntarily terminated prior to the hospital’s attempt to dismiss her, the court reversed summary judgment on the defamation claim.

The appellate court also rejected the hospital’s argument based on the common interest privilege, as well as Washington, D.C. statute providing a privilege for peer review materials. Generally speaking, both insulate a defendant from liability, except for statements made maliciously. The court noted a difference between the common interest privilege and the D.C. statute in that the former accepts a reckless disregard for falsity as its standard of malice, while the statute requires knowledge of falsity. Thus, only an intentional defamation theory could survive under the statute. The court found fact issues as to whether the hospital knew its statements were false. In addition, a factual dispute exists as to whether the letter to the Air Force falls qualifies as “peer review” under the statute, because the student’s supervisors may not have been officers or employees of a health care facility (as the statute requires), but rather of a military agency.

Tortious interference. The appeals court affirmed the district court’s holding that the expectancy alleged to have been interfered with was too speculative. The Air Force has a rule that after 28 years of first commission, an officer must be promoted to full colonel or leave the Air Force. As she was commissioned in 1995, this opt-out promotion must take place no later than 2023. A possible promotion within six years is too speculative to support the claim, the court held.