Shannon v. Testen , 243 N.C. App. 386 ( 2015 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA15-64
Filed: 6 October 2015
Wake County, No. 13 CVS 15711
WILLIAM SHANNON, M.D., Plaintiff,
v.
BOB TESTEN, JOSPEH P. JORDAN, and NORTH CAROLINA PHYSICIANS
HEALTH PROGRAM, INC., Defendants.
Appeal by plaintiff from judgment entered 5 September 2014 by Judge Paul C.
Ridgeway in Wake County Superior Court. Heard in the Court of Appeals 11 August
2015.
Wyrick, Robbins, Yates & Ponton, LLP, by Tobias S. Hampson, for plaintiff-
appellant.
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, by Michael E.
Weddington and Robert E. Desmond, and Cranfill Sumner & Hartzog LLP, by
Beth R. Fleishman, Jaye E. Bingham-Hinch, and Ginger B. Hunsucker, for
defendants-appellees.
DIETZ, Judge.
In 2010, Defendants performed an assessment of Plaintiff William Shannon, a
physician, at the request of Gaston Memorial Hospital, where Dr. Shannon had staff
privileges. Based on Defendants’ evaluation, the hospital terminated Dr. Shannon’s
staff privileges.
SHANNON V. TESTEN
Opinion of the Court
Dr. Shannon then sued Defendants alleging that they breached statutory
duties owed to him during the evaluation process. Dr. Shannon also alleged that
Defendants violated statutory due process rights established by applicable federal
and state peer review laws. The trial court dismissed Dr. Shannon’s complaint for
failure to state a claim upon which relief could be granted, and Dr. Shannon timely
appealed.
We affirm the trial court. Dr. Shannon concedes that N.C. Gen. Stat. § 90-
21.22(f) provides a statutory immunity to Defendants absent allegations of bad faith.
Here, Dr. Shannon’s complaint alleges that Defendants’ evaluation contained factual
errors and omissions, but does not allege that those errors and omissions were
intentional or otherwise done in bad faith. As a result, the complaint fails to allege
facts sufficient to overcome Defendants’ statutory immunity.
Likewise, Dr. Shannon’s due process allegations fail to state a claim upon
which relief can be granted. Even assuming Dr. Shannon can bring a direct cause of
action against Defendants under the statutory due process language on which he
relies, that language requires only that “peer review agreements shall include
provisions assuring due process.” N.C. Gen. Stat. § 90-21.22(b). Here, Dr. Shannon’s
complaint alleges that the agreement contains provisions ensuring that Defendants’
activities will “be in accordance with due process.” Thus, on its face, the complaint
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fails to allege facts sufficient to state a claim for violation of the statute. Accordingly,
we affirm the trial court’s judgment.
Facts and Procedural History
The following facts are taken from Dr. Shannon’s complaint, accepting all
allegations as true and drawing all reasonable inferences in his favor. See Thompson
v. Waters, 351 N.C. 462, 462-63, 526 S.E.2d 650, 650 (2000) (citations omitted).
Dr. Shannon is a licensed medical doctor practicing ophthalmology in
Gastonia, North Carolina. He had staff privileges at Gaston Memorial Hospital,
where he had been on the medical staff since 1980. As a result of two patient
incidents, Gaston Memorial requested Dr. Shannon “undergo a comprehensive
neuropsychiatric assessment as part of their evaluation.” Gaston Memorial made
this request to assess whether Dr. Shannon had any physical, psychiatric, emotional,
or substance abuse related illness, or personal health issues that may have
contributed to the incidents in question. Dr. Shannon’s Gaston Memorial privileges
were temporarily suspended, pending the results of this requested evaluation.
Dr. Shannon cooperated with Gaston Memorial’s request and submitted to
evaluations by both a psychologist and a psychiatrist in Charlotte in late August and
early September of 2010. The psychiatrist reported that his and the psychologist’s
evaluations revealed no cognitive defects, psychiatric disorders, delusional thinking,
hallucinations, or memory issues. He also concluded that Dr. Shannon did not exhibit
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dementia or psychiatric illnesses that would affect his performance as a medical
doctor.
Gaston Memorial then referred Dr. Shannon to North Carolina Physicians
Health Program, Inc. (“NCPHP”) and the two individual defendants for further
evaluation. Dr. Shannon met with Defendants Testen and Jordan for approximately
two hours on or about 29 November 2010. At the time of the meeting, Testen was a
licensed clinical social worker and served as a consultant and clinical coordinator for
NCPHP. Jordan was a counselor and employee of NCPHP. NCPHP is a North
Carolina not-for-profit corporation operating under an agreement with the North
Carolina Medical Board pursuant to N.C. Gen. Stat. § 90-21.22(b), a state law
governing peer review agreements.
During the meeting, Dr. Shannon gave Testen and Jordan names of witnesses
he believed would have relevant information regarding his behavior and the incidents
that gave rise to the evaluation by NCPHP. He also identified documents, including
hospital and patient records, that supported his position and explained the two
incidents. However, Testen and Jordan did not consult these witnesses and
documents.
Following the 29 November 2010 meeting, Testen and Jordan prepared an
“initial assessment” letter and gave it to the North Carolina Medical Board and
Gaston Memorial. The letter stated that Dr. Shannon had no alcohol or substance
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Opinion of the Court
abuse issues, no legal issues, and no history of psychiatric illness. The letter also
stated that Dr. Shannon was “cooperative and forthcoming,” and complied with their
drug testing and other informational requests “without hesitation.” But, according
to Dr. Shannon, the assessment letter contained factual errors and significant
omissions regarding the two incidents in question.1 Testen and Jordan concluded
their assessment letter with a recommendation that Dr. Shannon immediately obtain
further professional evaluation.
Testen and Jordan repeated their recommendation for further professional
evaluation in a 4 January 2011 letter sent to Dr. Shannon and copied to the North
Carolina Medical Board. In this letter Testen and Jordan also stated that they had
continued to gather information from Dr. Shannon’s earlier psychological and
psychiatric evaluations in Charlotte and that, “this information has been informative
and concerning.” The January letter did not explain what was “concerning” about
the information Testen and Jordan had gathered.
In December 2010, Gaston Memorial informed Dr. Shannon that, based on
information provided by Defendants, his staff privileges would not be reinstated. Dr.
Shannon volunteered his license to the North Carolina Medical Board in February
2011.
1 The complaint does not specifically identify these alleged errors and omissions.
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Opinion of the Court
On 26 November 2013, Dr. Shannon sued Testen, Jordan, and their employer,
NCPHP, alleging that Testen and Jordan were negligent in performing their
evaluations, and that NCPHP was vicariously liable as their employer. On 23 June
2014, Dr. Shannon filed an amended complaint, adding a claim for violation of due
process under federal and state statutory law governing the peer review process, but
leaving the original negligence claim unaltered.
Defendants moved to dismiss Dr. Shannon’s amended complaint pursuant to
Rule 12(b)(6), arguing that they were immune from suit under N.C. Gen. Stat. § 90-
21.22(f) and that Dr. Shannon had failed to state any claim upon which relief may be
granted. On 5 September 2014, the trial court granted the motion. Dr. Shannon
timely appealed.
Analysis
This Court reviews the grant of a Rule 12(b)(6) motion to dismiss de novo.
Bridges v. Parrish, 366 N.C. 539, 541, 742 S.E.2d. 794, 796 (2013). We examine
“whether the allegations of the complaint, if treated as true, are sufficient to state a
claim upon which relief can be granted under some legal theory.” Id. (citations
omitted). Dismissal is only appropriate if “it appears beyond a doubt that the plaintiff
could not prove any set of facts to support his claim.” Scadden v. Holt, 222 N.C. App.
799, 801, 733 S.E.2d 90, 91-92 (2012) (citations omitted).
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I. Negligence Claim
Dr. Shannon first argues that his complaint states a claim for breach of duties
that Defendants owed him under the applicable peer review statutes. Dr. Shannon
acknowledges that to state a claim in this context he must allege that the Defendants
acted in bad faith, thus overcoming the statutory immunity provided in N.C. Gen.
Stat. § 90-21.22(f). Dr. Shannon contends that the Court should infer bad faith from
the express allegations in the complaint. For the reasons discussed below, we reject
Dr. Shannon’s argument.
N.C. Gen. Stat. § 90-21.22 governs peer review agreements by the North
Carolina Medical Board concerning programs for impaired physicians. The statute
provides an immunity to suit for those participating in the peer review process: “Peer
review activities conducted in good faith pursuant to any agreement under this
section shall not be grounds for civil action under the laws of this State.” N.C. Gen.
Stat. § 90-21.22(f). As a result, a plaintiff suing individuals or corporations involved
in this statutory peer review process must allege bad faith in order to survive a Rule
12(b)(6) motion.
To allege bad faith, the complaint must do more than allege mere negligence.
Bad faith requires some showing of intentional dishonesty or a wrongful motive. As
our Supreme Court has observed, “[bad faith] implies a false motive or a false
purpose, and hence it is a species of fraudulent conduct. Technically, there is, of
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course, a legal distinction between bad faith and fraud, but for all practical purposes
bad faith usually hunts in the fraud pack.” Bundy v. Commercial Credit Co., 202 N.C.
604, 163 S.E. 676, 677 (1932).
Here, Dr. Shannon’s complaint fails to allege bad faith. Indeed, the complaint
does not even contain a conclusory allegation that Defendants acted in bad faith; to
the contrary, the allegations read like a run-of-the-mill negligence claim. The
complaint alleges that Defendants committed various mistakes in the peer review
process:
17. Upon information and belief, the individual defendants
did not interview necessary witnesses with knowledge of
what had occurred on the two incidents in question.
19. The initial assessment by the individual defendants
contained factual errors and significant omissions
regarding the two incidents in question that cast Dr.
Shannon in a poor light professionally.
23. Upon information and belief, the individual defendants
did not interview the individuals who Dr. Shannon
identified as having relevant information . . . and did not
review the relevant hospital and patient records with him
or with eyewitnesses to the events in question.
None of these allegations suggest the report’s alleged “factual errors” and “omissions”
were intentional. Moreover, the complaint contains a number of allegations
indicating the defendants acted in good faith:
20. The individual defendants in their initial assessment,
accurately stated that Dr. Shannon does not have
difficulties with alcohol or substance abuse, has no history
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of mental or psychiatric illness or legal issues; and the
defendants found Dr. Shannon “cooperative and
forthcoming.”
21. The individual defendants reported that Dr. Shannon
“without hesitation” completed their request for a urine
drug screen and complied with their request to sign a
release allowing the individual defendants to speak with
members of the hospital, as well as the psychologist and
psychiatrist who had previously evaluated him.
27. During the December 30, 2010, telephone conversation
. . . defendant Jordan extended the time limit for [Dr.
Shannon] making an appointment for evaluation to
January 30, 2011.
Dr. Shannon argues that this Court should infer bad faith from the fact that
defendants provided little specific information to him during their inquiry and that
their report ultimately contained at least some factual errors and omissions. But this
is an inferential leap too far. In essence, Dr. Shannon contends that the Court should
infer willfulness from carelessness. To do so would set aside the distinction between
negligence and bad faith established in cases from this Court and our Supreme Court.
See Edwards v. Northwestern Bank, 39 N.C. App. 261, 268, 250 S.E.2d 651, 656
(1979); Bundy, 202 N.C. at 607, 163 S.E. at 677. Accordingly, we hold that the
complaint fails to allege bad faith—a necessary step in overcoming the legal
immunity afforded by N.C. Gen. Stat. § 90-21.22(f)—and therefore fails to state a
claim upon which relief can be granted.
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II. Due Process Claim
Dr. Shannon next argues that his complaint states a claim for violation of
statutory due process protections provided by the applicable federal and state peer
review laws. We disagree.
As an initial matter, Dr. Shannon cannot pursue a claim under the federal law,
the Health Care Quality Improvement Act, because that statute does not provide a
private cause of action. Hancock v. Blue Cross Blue Shield of Kan., Inc., 21 F.3d 373,
375 (10th Cir. 1994); see also Bok v. Mut. Assurance, Inc., 119 F.3d 927, 928 (11th Cir.
1997) (per curiam); Wayne v. Genesis Med. Ctr., 140 F.3d 1145, 1147 (8th Cir. 1998);
Singh v. Blue Cross Blue Shield of Mass., Inc., 308 F.3d 25, 45 n.18 (1st Cir. 2002).
Dr. Shannon concedes that he does not—and cannot—pursue a private cause
of action under the Health Care Quality Improvement Act. But he argues that he
can pursue a state common law claim for the violation of his statutory due process
rights provided by the federal law. To support this novel theory, Dr. Shannon cites
our Supreme Court’s holding that “the common law, which provides a remedy for
every wrong, will furnish the appropriate action for the adequate redress of a
violation of that right.” Corum v. Univ. of N.C., 330 N.C. 761, 782, 413 S.E.2d 276,
289 (1992). This language from Corum concerns rights established in the North
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Carolina Constitution.2 Thus, Corum does not permit a litigant to bring a state
common law claim to enforce an alleged violation of a federal statute simply because
federal law does not permit a private cause of action. See Craig v. New Hanover Cnty.
Bd. of Educ., 363 N.C. 334, 339, 678 S.E.2d 351, 355 (2009); Copper v. Denlinger, 363
N.C. 784, 788, 688 S.E.2d 426, 428-29 (2010) (both limiting Corum to violations of the
state Constitution). Accordingly, Dr. Shannon’s claim based on federal law fails to
state a claim upon which relief can be granted.
Dr. Shannon also asserts a claim under N.C. Gen. Stat. § 90-21.22(b), which
provides that “peer review agreements shall include provisions assuring due process.”
We are not persuaded that the General Assembly intended for this provision to
provide a private cause of action against third parties like the defendants in this case,
who are subject to a peer review agreement with the North Carolina Medical Board.
Rather, if the Medical Board failed to comply with the statutory obligation to ensure
that “peer review agreements shall include provisions assuring due process,” Dr.
Shannon’s claim, if one exists at all, ought to be directed at the Medical Board.
In any event, even assuming Dr. Shannon can sue Defendants for the alleged
violation of N.C. Gen. Stat. § 90-21.22(b), the allegations in Dr. Shannon’s complaint
2 Dr. Shannon has not alleged a violation of his state constitutional due process rights in his
complaint. He only alleges that Defendants violated his statutory due process rights under the
applicable federal and state peer review laws, 42 U.S.C. § 11112 and N.C. Gen. Stat. § 90-21.22. But,
even if Dr. Shannon’s complaint could somehow be read to allege a constitutional violation, it never
alleges the trigger of state constitutional due process rights: state action. To the contrary, it alleges
that Defendant NCPHP is a private corporation and the individual Defendants are NCPHP employees.
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establish that Defendants complied with the statute. The statute requires only that
“peer review agreements shall include provisions assuring due process.” Id. Dr.
Shannon alleges that the “‘memorandum of understanding’ between Gaston
Memorial Hospital and the North Carolina Medical Board, pursuant to North
Carolina General Statute § 90-21.22(b) . . . requires the activities of Defendant
NCPHP to be in accordance with due process.” Simply put, the complaint itself
alleges that the peer review agreement includes provisions assuring due process.
Thus, Dr. Shannon’s complaint fails to state a claim for violation of N.C. Gen. Stat. §
90-21.22.3Conclusion
For the reasons discussed above, the trial court did not err in dismissing
Plaintiff William Shannon’s Amended Complaint for failure to state a claim upon
which relief can be granted.
AFFIRMED.
Judges BRYANT and STEPHENS concur.
3 We also note that agency regulations create a thorough process for NCPHP to follow in
conducting its assessment, and this process readily provides the sort of notice and opportunity to be
heard necessary to satisfy basic due process rights. See 21 NCAC 32K.0201, 32K.0202. Dr. Shannon
does not allege that these requirements were violated, and the allegations in the complaint establish
that they were satisfied.
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