Novotny v. Sacred Heart Health Servs.

887 N.W.2d 83

Ryan NOVOTNY, Plaintiff and Appellee,

v.SACRED HEART HEALTH SERVICES, a South Dakota Corporation d/b/a Avera Sacred Heart Hospital, Avera Health, a South Dakota Corporation, Defendants and Appellants,andAllen A. Sossan, D.O. also known as Alan A. Soosan, also known as Allen A. Soosan, Reconstructive Spinal Surgery and Orthopedic Surgery, P.C., a New York Professional Corporation, Lewis & Clark Specialty Hospital, LLC, a South Dakota Limited Liability Company, Defendants.

Clair Arens and Diane Arens, Plaintiffs and Appellees,

v.Curtis Adams, David Barnes, Mary Milroy, Robert Neumayr, Michael Pietila, and David Withrow, Defendants and Appellants,andAlan A. Sossan, also known as Allen A. Soosan, also known as Allen A. Soosan, D.O., Sacred Heart Health Services, a South Dakota Corporation d/b/a Avera Sacred Heart Hospital, Avera Health, a South Dakota Corporation, Matthew Michels, Thomas Buttolph, Douglas Neilson, Charles Cammock, Lewis & Clark Specialty Hospital, LLC, a South Dakota Limited Liability Company, Don Swift, David Abbott, Joseph Boudreau, Paula Hicks, Kynan Trail, Scott Shindler, Tom Posch, Daniel Johnson, Nueterra Healthcare Management, LLC, Various John Does and Various Jane Does, Defendants.

Clair Arens and Diane Arens, Plaintiffs and Appellees,

v.Lewis & Clark Specialty Hospital, LLC, a South Dakota Limited Liability Company, Defendant and Appellant,andAllen A. Sossan, D.O. also known as Alan A. Soosan, also known as Allen A. Soosan, Reconstructive Spinal Surgery and Orthopedic Surgery, P.C., a New York Professional Corporation, Sacred Heart Health Services, a South Dakota Corporation, d/b/a Avera Sacred Heart Hospital, Avera Health, a South Dakota Corporation, Don Swift, D.M., Kynan Trail, M.D. Curtis Adams, David Barnes, Thomas Buttolph, Mary Milroy, Douglas Neilson, Robert Neumayr, Michael Pietila, Charles Cammock, David Withrow, Various John Does, and Various Jane Does, Defendants.

Nos. 27615

27626

27631.

Supreme Court of South Dakota.

Argued Oct. 4, 2016.

Decided Oct. 26, 2016.

Leslie A. Brueckner of Public Justice, P.C., Oakland, California, Michael D. Bornitz, Robert D. Trzynka, Brendan F. Pons of Cutler Law Firm, LLP, Sioux Falls, South Dakota and Timothy L. James of James & Larson Law, Yankton, South Dakota, Attorneys for plaintiffs and appellees.

Edwin E. Evans, Mark Haigh of Evans, Haigh & Hinton, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellants Curtis Adams, David Barnes, Mary Milroy, Robert Neumayr, Michael Pietila & David Withrow # 27626.

Roger A. Sudbeck, Matthew D. Murphy of Boyce Law Firm, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellants Sacred Heart Health Services & Avera Health # 27615.

Jeff Wright, John Gray of Heidman Law Firm, LLP, Sioux City, Iowa, Attorneys for defendant and appellant Lewis & Clark Specialty Hospital, LLC # 27631.

Gregory J. Bernard of Thomas Braun, Bernard & Burke, LLP, Rapid City, South Dakota, Attorneys for defendant and appellant Kynan Trail joining # 27631.

SEVERSON, Justice.

[¶ 1.] In this action against various health organizations and individuals involved at those organizations, Plaintiffs moved to compel production of peer review materials and asked the circuit court to find SDCL 36–4–26.1, which grants privilege to peer review materials, unconstitutional. The circuit court determined that the statute was constitutional but only if it applied a “crime-fraud exception.” It determined that the exception had been met and ordered Defendants to produce, without in camera review, “objective information gathered or considered by the peer review committees.” The court also ordered any other “remaining materials” to be submitted to the court for in camera review. We granted Defendants' petition for intermediate appeal. Defendants assert that the court erred by compelling production of third-party items held by a peer review committee and by creating a crime-fraud exception to SDCL 36–4–26.1. We reverse and remand.

Background

[¶ 2.] Plaintiffs in this action, Ryan Novotny and Clair Arens, were treated by Dr. Alan Sossan. After treatment, Plaintiffs filed lawsuits against Dr. Sossan, his medical clinic, Avera Sacred Heart Hospital, Lewis & Clark Specialty Hospital, and other individual defendants, collectively referred to throughout this opinion as Defendants. The Plaintiffs alleged various causes of action including negligence, negligent credentialing, fraud, deceit, bad faith peer review, unjust enrichment, racketeering, and conspiracy. When Plaintiffs sought production of documents from Defendants, Defendants asserted that some of the materials sought were peer review materials protected under SDCL 36–4–26.1. Plaintiffs moved to compel production and asked the circuit court to determine that SDCL 36–4–26.1, protecting “[t]he proceedings, records, reports, statements, minutes, or any other data whatsoever, of any committee described in § 36–4–42[,]” is unconstitutional.

[¶ 3.] The court held a hearing on the matter and issued a memorandum decision.¹ It determined that SDCL 36–4–26.1 is constitutional only if an exception applies. Therefore, it created and applied a “crime-fraud exception.” Under its exception, the court determined that Plaintiffs “submitted sufficient evidence to make out a prima facie case of fraud and deceit sufficient for [the] court to allow access to the peer review records of the Defendants.” It determined that an in camera review was not necessary before production of some peer review material to Plaintiffs. It directed that the “objective information gathered or considered by the peer review committees ... shall be disclosed and copies provided to Plaintiff's counsel under a protective order without in camera inspection, as that information is not considered private deliberative information as contemplated by the statute.”² It further directed that the remaining materials be submitted to the circuit court for in camera review with a privilege log as required.

[¶ 4.] We granted Defendants' petition for an intermediate appeal from the circuit court's order. Defendants contend that the court erred in two aspects. First, Defendants assert that the court erred by compelling peer review committees to produce documents obtained by the committees from independent sources. Second, Defendants maintain that the court erred by judicially creating a crime-fraud exception to SDCL 36–4–26.1.³

Standard of Review

[¶ 5.] “Ordinarily, ‘we review the circuit court's rulings on discovery matters under an abuse of discretion standard.’ ” Milstead v. Smith, 2016 S.D. 55, ¶ 7, 883 N.W.2d 711, 716 (quoting Anderson v. Keller, 2007 S.D. 89, ¶ 5, 739 N.W.2d 35, 37 ). “However, when we are asked to determine whether the circuit court's order violated a statutory privilege, it raises a question of statutory interpretation requiring de novo review.” State v. Vargas, 2015 S.D. 72, ¶ 19, 869 N.W.2d 150, 158 (quoting Andrews v. Ridco, 2015 S.D. 24, ¶ 14, 863 N.W.2d 540, 546 ).

Analysis

[¶ 6.] We have not previously addressed the questions whether litigants may discover independent—source material directly from a peer review committee or whether an exception to SDCL 36–4–26.1 exists. We address these narrow issues in this intermediate appeal. First, we consider whether Plaintiffs may obtain materials directly from peer review committees.

[¶ 7.] SDCL 36–4–42 establishes that:

a peer review committee is one or more persons acting as any committee of a state or local professional association or society, any committee of a licensed health care facility or the medical staff of a licensed health care facility, or any committee comprised of physicians within a medical care foundation, health maintenance organization, preferred provider organization, independent practice association, group medical practice, provider sponsored organization, or any other organization of physicians formed pursuant to state or federal law, that engages in peer review activity. For the purposes of this section, a peer review committee is also one or more persons acting as an administrative or medical committee, department, section, board of directors, shareholder or corporate member, or audit group, including the medical audit committee, of a licensed health care facility.

Peer review committees engage in activities defined by SDCL 36–4–43 :

For the purposes of §§ 36–4–25, 36–4–26.1 and 36–4–42, peer review activity is the procedure by which peer review committees monitor, evaluate, and recommend actions to improve the delivery and quality of services within their respective facilities, agencies, and professions, including recommendations, consideration of recommendations, actions with regard to recommendations, and implementation of actions. Peer review activity and acts or proceedings undertaken or performed within the scope of the functions of a peer review committee include:

(1) Matters affecting membership of a health professional on the staff of a health care facility or agency;

(2) The grant, delineation, renewal, denial, modification, limitation, or suspension of clinical privileges to provide health care services at a licensed health care facility;

(3) Matters affecting employment and terms of employment of a health professional by a health maintenance organization, preferred provider organization, independent practice association, or any other organization of physicians formed pursuant to state or federal law;

(4) Matters affecting the membership and terms of membership in a health professional association, including decisions to suspend membership privileges, expel from membership, reprimand, or censure a member, or other disciplinary actions;

(5) Review and evaluation of qualifications, competency, character, experience, activities, conduct, or performance of any health professional, including the medical residents of health care facility; and

(6) Review of the quality, type, or necessity of services provided by one or more health professionals or

...