INSIGHT: Texas Doctors Get New Cause of Action for Malicious Peer Review

March 6, 2020, 9:00 AM

In a stunning decision Jan. 30, the Texas Court of Appeals, Corpus Christi Division, recognized for the first time in Texas a cause of action for malicious medical peer review in the form of “malicious civil prosecution.”

This odd case, decided under moribund statutory language, arguably creates an appellate district split and conflicts with longstanding Texas law

Dr. Madhavan Pisharodi is a neurosurgeon who underwent a series of medical peer reviews at Valley Regional Medical Center (VRMC). These peer reviews—addressing cases that included a patient’s death—resulted in reports to the Texas Medical Board (TMB). Pisharodi disputed the results of the peer review, and claimed that they were, in fact, instituted in retaliation for him raising concerns about another physician’s treatment.

Free Speech

Pisharodi had already watched his claims for malicious peer review dismissed repeatedly in the trial court and the court of appeals under the Texas Citizens Participation Act (TCPA) , an anti-SLAPP (strategic lawsuit against public participation) statute designed to protect, for example, a defendant’s right to free speech. He had also seen a dozen or so federal court claims based on many of the same facts dismissed for failure to state a claim.

But none of these stopped Pisharodi from filing yet another amended petition (based on the same operative facts as the claims in his first two petitions), which included a new claim for “malicious civil prosecution” based on his peer review proceedings. Naturally, the defendants once again filed a TCPA motion to dismiss.

However, something in the facts must have caught the eye of the court of appeals this time, because it latched onto the rarely pled “malicious civil prosecution” as a basis for Pisharodi to proceed past the pleadings stage and on to discovery.

No Interference With Property Right

Finding first that the TCPA applied, the court then made an unprecedented holding in Texas that by engaging in medical peer review against Pisharodi, the defendants had instituted both “administrative” and “civil proceedings” against him.

The court then concluded there was clear and specific evidence of malice (thereby avoiding dismissal under the TCPA). Finally, it concluded that the suspension of Pisharodi’s privileges as part of the peer reviews constituted interference with a “property right” and established special damages.

It is interesting to note that of all the cases cited by the court discussing malicious civil prosecution (both in Texas and elsewhere), none of them addressed medical peer review. Instead they addressed civil lawsuits, criminal complaints, proceedings before zoning boards, and various licensing proceedings.

In his appellant brief, Pisharodi did cite one case, Nicholson v. Lucas, (1994), recognizing medical staff peer review as the potential basis for a claim for malicious civil prosecution. In that case, a California appeals court noted that in the state, “[d]enial of a doctor’s right to practice his profession at a hospital … requires a fair procedure which affords the doctor an opportunity to answer the ‘charges’ upon which his exclusion rests.” (Cites and internal quotes omitted.)

Accordingly, the court found the decision to “delete” the practitioner’s privileges constituted the initiation of an administrative proceeding.

No Cause of Action in Texas

Pisharodi may be right in California, and he may still be in wrong in Texas. That’s because the “longstanding common law in Texas has been that doctors generally have no cause of action for the denial or termination of staff privileges even where the action was arbitrary and capricious or where rights to due process have been violated.Stephan v. Baylor Med. Ctr. (Tex. App—Dallas 2000) (emphasis added).

Even with the passage of various Texas statutes mandating due process for peer review, the Texas Court of Appeals concluded that “existing Texas law cannot form the basis of [the plaintiff’s] claim that he is entitled to recover damages [against the defendant] because it violated mandated standards in making its decision to deny him staff privileges.” In others words, “there are no privately enforceable standards relating to hospital staffing decisions.”

The ruling in Pisharodi’s case may have far reaching consequences. Previously, physicians had no “property right” associated with their medical staff privileges and were required to shoe-horn their grievances with the peer review process into collateral claims, such as defamation or tortious interference.

Going Forward

Now, at least in the Corpus Christi-Edinburg appellate district, physicians may try to attack the medical peer review process itself and claim that adverse actions are infringements on alleged property rights associated with their privileges. One could argue that it was these types of attacks that the opinion in Stephan was seeking to prevent.

The timing of this case is also fortuitous for physician plaintiffs. Texas actions filed post-Sept. 1, 2019, are not subject to the TCPA if the defendant raises state and federal medical peer review immunities. Had these legislative changes taken effect earlier, this issue would not likely have come up in this TCPA-related interlocutory appeal, and the court may not have had the opportunity to mint what is essentially a new cause of action.

Bad facts and bad law, and all that …

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Jesse M. Coleman is a partner in the Houston office of Seyfarth Shaw LLP. He serves as co-chair of the firm’s Health Care, Life Sciences and Pharmaceuticals Group.

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