SLAUGHTER v. FRIEDMAN

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Court of Appeal, Second District, Division 4, California.

Terry W. SLAUGHTER, Plaintiff and Appellant, v. Jay W. FRIEDMAN, et al., Defendants and Respondents.

Civ. 61709.

Decided: January 11, 1982

Noland, Hamerly, Etienne & Hoss, Myron R. Etienne, Jr., Michelle A. Welsh, Salinas, Iverson, Yoakum, Papiano & Hatch, Los Angeles, and John N. Baran, Pasadena, for plaintiff and appellant. Richard G. Flanagan and L. E. Schweiner, Panorama City, for defendant and respondent Friedman. Ives, Kirwan & Dibble, Martin J. Kirwan and Herbert Jung, Los Angeles, for defendant and respondent U. S. Administrators.

Plaintiff appeals from a dismissal of his action after an order sustaining a demurrer without leave to amend. We reverse the dismissal except as to certain causes of action.

Appellant (the plaintiff), Dr. Slaughter, is an oral surgeon. Defendant and respondent, U. S. Administrators, Inc., is a California corporation that administers dental insurance plans for some of Dr. Slaughter's patients. Defendant and respondent, Jay Friedman, was dental director for U. S. Administrators and had ultimate responsibility for determining the validity of claims submitted to the insurance company.

In 1978 plaintiff submitted claims for eight patients. Each claim was denied. In Friedman's role as dental director, he wrote letters to some patients explaining the reasons for denial of the claims. He stated that it is not usual or customary to section certain teeth that have to be removed; that plaintiff “overclassified” certain procedures; that a general anesthetic was unnecessary, and that certain work was unnecessary. Eventually, defendant sent letters to Dr. Slaughter with copies to certain patients, stating that the company will no longer process dental treatment plans from Dr. Slaughter because of continued overcharging to the patient and to the program. The letters stated that defendants have no alternative but to report plaintiff to the “California Dental Association” for disciplinary proceedings by the Peer Review Committee. Defendant advised the patients to make no additional payments to Dr. Slaughter pending resolution of the disagreement.

Plaintiff sued for libel, for interference with prospective economic advantage and for punitive damages.

Demurrers to eight causes of action in plaintiff's amended complaint were sustained because of the qualified privilege of section 47, subd. 3 and insufficient allegations of actual malice to defeat the privilege. Appellant filed a second amended complaint breaking the causes of action down to libel per quod, libel per se, and interference with prospective advantage. Appellant expanded his allegations of malice. After demurrers were sustained, plaintiff filed a third amended complaint and the demurrer was again sustained.

The issues before the court are whether the complaint states a cause of action for libel per se, libel per quod, interference with prospective economic advantage, and, if causes of action are stated, whether a privilege appears that would justify the sustaining of the demurrers without leave to amend.

I

We conclude that the third amended complaint, if read without reference to the exhibits attached thereto, states causes of action on the theories therein set forth. In ruling on a demurrer, the facts alleged must be taken as true. We must, therefore, for the purpose of this opinion, assume that the letters involved were sent by Friedman on behalf of the insurer and that they were received by the patients. If, in fact, those allegations are untrue, is a matter to be raised by answer and not by demurrer.

Also, in ruling on a demurrer to a complaint in defamation, the inquiry is solely whether a finder of fact would reasonably conclude that “the communication reasonably carries with it a defamatory meaning.” (Forsher v. Bugliosi (1980) 26 Cal.3d 792, 803, 163 Cal.Rptr. 628, 608 P.2d 716.) Accusing an oral surgeon of overcharging and doing unnecessary work, saying that a patient should not pay for the work done and that the surgeon should be disciplined for doing the work and overcharging for it is libelous on its face without the necessity of further allegations by way of innuendo.1

In addition, in his cause of action for libel per quod, plaintiff has set forth sufficient matters of inducement, colloquium and innuendo, which a trier of fact could find showed the defamatory meaning of certain of the statements alleged.

The allegations that the patients herein involved have not paid for work done and that he has lost patients because of the allegedly defamatory statements made to them adequately would support a finding of special damages and of interference with economic relations. (MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536, 538, 343 P.2d 36; Kanarek v. Bugliosi (1980) 108 Cal.App.3d 327, 166 Cal.Rptr. 526; Frazier, Dame, Doherty, Parrish & Hanawalt v. Boccardo, Blum, Lull, Niland, Teerlink & Bell (1977) 70 Cal.App.3d 331, 138 Cal.Rptr. 670.)

II

Defendants contend that the communications involved are not actionable because plaintiff had consented to the publication of the defamation, if any. Unlike Royer v. Steinberg (1979) 90 Cal.App.3d 490, 153 Cal.Rptr. 499, on which defendants rely, the plaintiff here had not, himself, published the communications herein involved. Plaintiff's consent to have the claims evaluated by defendants did not extend to a consent to the making of the allegedly defamatory communications now before us.

III

However, the complaint cannot be read without reference to the exhibits therein incorporated. Defendants contend that, so read, the complaint shows on its face that the statements made, even if untrue, were privileged. While, usually, privilege is a matter of fact to be raised by answer, where a complaint shows on its face that privilege exists as a matter of law, the issue may be raised by demurrer. (Kramer v. Ferguson (1969) 230 Cal.App.2d 237, 41 Cal.Rptr. 61; Swaffield v. Universal Ecsco Corp. (1969) 271 Cal.App.2d 147, 76 Cal.Rptr. 680; Swift & Co. v. Gray (1939) 9 Cir., 101 F.2d 976.) We proceed, therefore, to consider whether facts showing privilege as a matter of law appear on the face of the complaint.

We conclude that, read as a whole, the communications on which the causes of action based on Exhibits B and H are not susceptible of a defamatory meaning and that the demurrer to those causes of action was properly sustained. We conclude, for the reasons set forth below, that the causes of action based on Exhibit A, on the second letter included in Exhibit C, and on Exhibits D, E, F and G are not necessarily privileged defamatory communications.

IV

We agree with plaintiff that the complaint does not show on its face communications subject to the following statutory privileges:

(a) The absolute privilege applying to public officials. (Civ.Code, s 47; Gertz v. Robert Welch, Inc. (1974) 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789);

(b) The privilege for members of the staff of a licensed hospital;

(c) The privilege for members of a professional society;

(d) The privilege of a peer review committee; or

(e) The privilege of an underwriting committee involved in evaluating physicians and surgeons for the purpose of writing professional liability insurance. (Civ.Code, s 43.)

V

It does appear from the face of the complaint that the communications are ones within the privilege provided by subdivision 3 of section 47 of the Civil Code as being between interested persons. The patients herein involved clearly were persons interested in the rejection of their claims, particularly in light of the section of the Insurance Code herein after discussed.

However, by its express terms, the privilege given to communications between interested parties is limited to communications made without malice. Here, the complaint adequately alleges the existence of malice. It goes beyond the mere conclusionary allegation of malice and alleges facts which, if found true by the finder of fact, would support a finding that the communications were without the qualified privilege of section 43.

VI

Defendants also rely on paragraph 13 of subdivision (h) of section 790.03 of the Insurance Code, which declares it an unfair business practice for an insurer to fail “to provide promptly a reasonable explanation of the basis relied on ... for the denial of a claim....” Contrary to the contention of defendants, any privilege inherent in that provision is, like all other communications between interested parties, subject to the requirement of a lack of malice. (Cf. Moore v. Metropolitan Life Ins. Co. (Tex.Civ.App.1980) 604 S.W.2d 487, construing a similar statute.)

Furthermore, any privilege inherent in the cited statutory provision is limited to a communication merely setting forth the reason why the insurer is not covering the claim.

As we have said above, we conclude that the communications incorporated as Exhibits B and H are not defamatory and that the causes of action based on those exhibits were properly subject to demurrer.

The judgment is affirmed as to causes of action II, VIII, X, XVI, XVIII and XVIV; it is reversed as to the other causes of action. Plaintiff shall recover his costs on appeal.

FOOTNOTES

1.  Civil Code sec. 45a: “A libel which is defamatory of the plaintiff without the necessity of explanatory matter, such as an inducement, innuendo or other extrinsic fact, is said to be a libel on its face. Defamatory language not libelous on its face is not actionable unless the plaintiff alleges and proves that he has suffered special damage as a proximate result thereof.”

KINGSLEY, Associate Justice.

FILES, P. J., and DELL, J.,** concur.