GANNON v. SANTA ANA TUSTIN COMMUNITY HOSPITAL (1989)

OPINION

Plaintiff anesthesiologist obtained a judgment in excess of $2 million in general and punitive damages against a hospital, its executive director, and physician members of a peer review committee.   We reverse because plaintiff either voluntarily chose not to schedule herself for surgeries during most of the time she claimed to have been suspended or failed to exhaust her administrative and judicial remedies if she was in fact suspended during that time.¹  We remand for a new trial with respect to the period of her formal suspension.

I

On August 13, 1979, a five-year-old tonsillectomy patient at Santa Ana–Tustin Community Hospital became cyanotic and lapsed into a coma.²  The veteran anesthesiologist and plaintiff in this proceeding, Dr. Jeanne E. Gannon, was suspected of inadequately monitoring the patient's breathing and heart rate during surgery.   The child suffered permanent neurological damage;  and he and his family recovered a multi-million dollar judgment against the hospital on the basis, we are told, that it negligently failed to suspend Gannon's anesthesia privileges for incompetence before the tragic event.   The hospital voluntarily dismissed its appeal from that judgment.

In the wake of the incident and pursuant to the hospital's bylaws, Wayne Schroeder, the executive director, appointed three anesthesiologists, including defendants Francis Stocker and Jack S. Rounds, to investigate the incident.   Gannon was represented by an attorney, and he conferred with the hospital's legal counsel.   A cautious “wait and see” approach was initially adopted.   The committee suggested Gannon take a voluntary leave of absence to obtain further training.   But Gannon, who was in charge of scheduling surgeries for the hospital's anesthesiologists, only agreed not to schedule herself for the time being.

The committee apparently did not perceive an immediate need to act after her decision.   Gannon retained full staff privileges during this period;  but she did not perform anesthesia services because, as she testified at trial, “every time I suggested this possibility, either Dr. Rounds or Dr. Stocker would threaten that I would be suspended, and I didn't want to get suspended because that would—then I would have problems with my license in the State of California so I thought it was better to wait and allow them to have the meeting.” ³  During this time Gannon, who was permitted to vote on staff matters, was initially reappointed to the hospital's medical staff for the 1980 calendar year.⁴

Informal efforts to resolve the matter became strained over the next several months as the investigation seemed to stop and start and then broadened to include Gannon's treatment of other patients and the propriety of her retention of full staff privileges.   The stalemate ended when Gannon scheduled herself as the anesthesiologist for a surgery in February 1980.⁵  Rounds, chairman of the anesthesia department, summarily suspended her.

Gannon appealed the suspension, and several weeks of increasingly acrimonious exchanges followed.   Nonetheless, after advising the hospital she planned to move to Pennsylvania soon, she was reinstated with full privileges on April 25, 1980.⁶  Gannon did not leave the state for four months;  and although she resumed an unrestricted hospital anesthesiology practice during the interim, she complained she did not service as many patients as her colleagues, with a concomitant reduction in status and income.⁷

Gannon sued the hospital, Schroeder, Rounds, and Stocker for general and punitive damages on the theory they maliciously deprived her of the right to practice.   In a posture obviously irreconcilable with the one adopted after the surgery which prompted the investigation, she now complained the committee had no authority to prevent her from working without first suspending her from the staff.   The informal manner in which the investigation was handled, she contended, violated her fundamental constitutional right to engage in her profession.   She claimed to have lost over $200,000 in income between the time the investigation first started and her departure for Pennsylvania.   She also sought compensatory damages for the physical illness and emotional distress she allegedly suffered as a result her colleagues' actions.

The jury was presented with special verdict forms which asked only whether the defendants were negligent in their conduct toward Gannon and intentionally caused her emotional distress.   It found for Gannon on those issues, awarding $299,660 in general damages and a total of $2 million in punitive damages against the four defendants.   Defendants raise a number of appellate issues, but we will address many of them only marginally or not at all.   Assuming, as Gannon contends, that her decision not to schedule herself for surgery was involuntary, the fundamental jurisdictional flaw of failing to exhaust remedies at the administrative and judicial levels is fatal to a considerable portion of her case.⁸

II

 Gannon was required to exhaust her remedies after the alleged de facto suspension and when she was shunned post-reinstatement, but not for the period of her formal suspension.   Over a decade ago, in a concise but nonetheless sweeping opinion, the Supreme Court identified the procedural steps a physician who has been denied hospital privileges must complete before bringing suit in tort.   First, “before a doctor may initiate litigation challenging the propriety of a hospital's denial or withdrawal of privileges, he must exhaust the available internal remedies afforded by the hospital.”   (Westlake Community Hosp. v. Superior Court, supra, 17 Cal.3d at p. 469, 131 Cal.Rptr. 90, 551 P.2d 410.)   Second, “[after] the hospital's quasi-judicial decision has been found improper in a mandate action, an excluded doctor may proceed in tort against the hospital, its board or committee members or any others legally responsible for the denial of staff privileges.”  (Ibid.)  Stressing the “presumptive validity” of a “hospital's quasi-judicial decision” (id., at p. 485, fn. 9, 131 Cal.Rptr. 90, 551 P.2d 410), the court explained this two-step procedure “accords a proper respect to [the hospital's decision], precluding an aggrieved party from circumventing the established avenue of mandamus review ․ [and] simplify[ing] court procedures by providing a uniform practice of judicial, rather than jury, review of quasi-judicial administrative decisions.  [Citations.]”  (Id., at p. 494, 131 Cal.Rptr. 90, 551 P.2d 410.)

The Court of Appeal in Knickerbocker v. City of Stockton (1988) 199 Cal.App.3d 235, 240, 244 Cal.Rptr. 764 characterized the Westlake rule as a “variation on the theme of exhaustion” in that it requires physicians to exhaust not only administrative remedies but judicial ones as well before they may sue for tort damages.   This view of Westlake was new, as other post-Westlake appellate decisions merely reiterated long-standing case law and assumed that “[e]xhaustion of administrative remedy includes application for a writ of mandamus.  [Citing Westlake.]”  (Interior Systems, Inc. v. Del E. Webb Corp. (1981) 121 Cal.App.3d 312, 319, 175 Cal.Rptr. 301;  see also City of Fresno v. Superior Court (1987) 188 Cal.App.3d 1484, 1490, 234 Cal.Rptr. 136.)   But in those cases, the plaintiffs whose lawsuits were dismissed for failure to petition for mandate relief had been aggrieved by the final administrative decision.   In Knickerbocker, as here, the Court of Appeal was presented with a plaintiff who did not leave the administrative hearing empty-handed.   Should these prevailing plaintiffs be required to exhaust judicial remedies before suing in tort?   The Knickerbocker court said, “No,” and we agree.⁹

In Knickerbocker, a former Stockton police lieutenant challenged his termination through the established grievance procedure;  and the city's civil service commission determined termination was not appropriate for his particular peccadillo and ordered him reinstated with back pay, but at the reduced rank of sergeant.   The employee did not challenge this new administrative decision via a mandate petition.   Instead, he filed a civil complaint for tort damages.   The city demurred, arguing the employee failed to exhaust his administrative remedies.   The trial court agreed, and the action was dismissed.

A unanimous Court of Appeal reversed.   First, it determined plaintiff's failure to petition in the superior court collaterally estopped him from relitigating the propriety of his demotion:  “Unless the administrative decision is challenged, it binds the parties on the issues litigated and if those issues are fatal to a civil suit, the plaintiff cannot state a viable cause of action․”  (Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d at pp. 243–244, 244 Cal.Rptr. 764.)   But the court agreed he stated a cause of action for emotional distress suffered from the termination which the civil service commission found to be wrongful.   It was not necessary for Knickerbocker to petition in mandate before suing for these damages:  “[P]laintiff is not required to attack an administrative determination in which he acquiesces[, i.e., loss of rank].   He is no longer an aggrieved party and need not bring a superfluous writ proceeding just to lay a foundation for a later lawsuit.   If he is content to accept the results of the review process furnished by the city, nothing compels him to seek writ relief.   Exhaustion of judicial relief simply means that if he wishes to attack the administrative determination he must launch that assault in an administrative mandamus proceeding and not in a lawsuit for damages.”  (Id., at p. 244, 244 Cal.Rptr. 764.)

Gannon was formally suspended by the hospital on February 7, 1980.   After receiving the notice of suspension as required by the hospital's bylaws, she exercised her right under those rules for a hearing.   The medical staff executive committee recommended reinstatement on March 27, 1980, and she was ultimately permitted to return to work when the hospital's board of directors accepted that recommendation the following month.   Per Westlake, Gannon exhausted her administrative remedies insofar as the formal suspension was concerned.   She prevailed at the final administrative level and was, consequently, excused from complying with the second Westlake requirement of a favorable judicial determination in mandate.  (Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d 235, 244 Cal.Rptr. 764.)   But there is more.

Gannon did not work as an anesthesiologist at the hospital for approximately four months before her formal summary suspension.   The hospital threatened to immediately suspend her if she tried to schedule herself;  and, by her own account, she heeded the warning because she did not want a suspension on her record.   Those four months of limbo before the formal suspension can only be characterized in one of two ways:  as a de facto suspension or voluntary idleness.   If the period during which Gannon chose not to work in order to avoid a formal suspension is viewed as an elective leave of absence, then she sustained no damages attributable to the defendants' conduct.   In short, she would have no basis for a tort recovery for injuries suffered during that period.

But Gannon vigorously argues she was effectively suspended from the end of September 1979 to February 7, 1980.   While this interpretation is certainly reasonable, it dooms a considerable portion of her case:  If the investigatory period was the functional equivalent of a suspension, Gannon was obliged to exhaust her administrative and/or judicial remedies per Westlake before she could sue in tort.   Under the bylaws, Gannon had only thirty days to request a hearing to challenge the validity of the hospital's threat to formally suspend her.   She admittedly knew in September 1979 she would be suspended if she attempted to work at the hospital.   By failing to invoke the hearing procedures afforded her in the hospital's bylaws at that time, Gannon acquiesced in the hospital's conduct and waived the right to complain.¹⁰

The same analysis applies to the period after reinstatement.   Gannon was restored to the staff with full privileges, yet she complained she was unfairly discriminated against and not permitted to work as often as her colleagues.   The record does not reflect that she ever sought an administrative hearing to air her grievance, nor did she petition in mandate for an order to enforce the board of directors' reinstatement of her privileges and compel the hospital to adjust its anesthesiology schedule.   Accordingly, by failing to exhaust, Gannon waived the right to sue in tort for that period as well.

III

 Oddly, defendants did not pursue Gannon's failure to comply with the exhaustion requirements for the periods before her suspension and after reinstatement.   Although they specifically asserted Westlake as a bar to the lawsuit in their answer, defendants never sought to litigate the issue in the trial court or on appeal until we asked them to brief it.   Gannon understandably argues it is far too late in the day to rely on this particular defense, and we are more than sympathetic to her position.   Waiver would be easy to find on this record.   The issue turns, however, on whether the exhaustion of remedies requirements are jurisdictional, for subject matter jurisdiction cannot be “waived by a party or conferred on the court by consent.”  (Sampsell v. Superior Court (1948) 32 Cal.2d 763, 773, 197 P.2d 739, overruled on other grounds in Robinson v. Superior Court (1950) 35 Cal.2d 379, 385, 218 P.2d 10.)

Our review of the case law persuades us the first prong of the Westlake rule, exhaustion of administrative remedies, is probably a jurisdictional requirement, unless plaintiff can prove exhaustion would have been futile.   (Hittle v. Santa Barbara County Employees Retirement Assn. (1985) 39 Cal.3d 374, 384, 216 Cal.Rptr. 733, 703 P.2d 73;  Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d 235, 240, 244 Cal.Rptr. 764;  Jacobs v. Retail Clerks Union, Local 1222 (1975) 49 Cal.App.3d 959, 963, 123 Cal.Rptr. 309.)

We are aware that a divided panel of Division One of this court reached a seemingly contrary conclusion in Green v. City of Oceanside (1987) 194 Cal.App.3d 212, 222–223, 239 Cal.Rptr. 470.  (See also Doster v. Superior Court (1988) 203 Cal.App.3d 257, 251 Cal.Rptr. 507.)   The Green majority affirmed a $125,000 wrongful termination verdict in favor of a former city employee who failed to challenge his termination through established grievance procedures.   The fired worker sued for damages instead, and the employer did raise his failure to exhaust administrative remedies as an affirmative defense.   As in Gannon's case, the issue was not litigated:  “The apparent weakness of plaintiff's case may explain why the City decided to forego technical defenses in order to submit the matter on the merits to 12 persons representing the collective conscience of the community.”  (Id., at p. 217, 251 Cal.Rptr. 507 (maj. opn. of Wiener, J.).)

The city did complain of the failure to exhaust on appeal;  but the point was rejected by a majority of the appellate panel, who concluded the issue was not one of subject matter jurisdiction.   In so holding, the majority debunked decades of appellate interpretation of Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 109 P.2d 942, the opinion invariably cited for the proposition that exhaustion of administrative remedies is a jurisdictional requirement.¹¹

The majority first observed, “The association of the exhaustion doctrine with the ‘jurisdiction’ of the superior court has led to some confusion.   At least one court assumed that jurisdiction in this context refers to subject matter jurisdiction and, relying on the venerable rule [citation], concluded that the failure to exhaust administrative remedies ‘may be challenged at any stage of the proceeding.’  (People v. Coit Ranch, Inc. (1962) 204 Cal.App.2d 52, 57, 21 Cal.Rptr. 875;  [citation].)  Coit Ranch relied on the Supreme Court's decision in Abelleira ․ as the basis for its assumption that subject matter jurisdiction was involved.   Even a casual reading of Abelleira, however, demonstrates the fallacy of the assumption.”  (Green v. City of Oceanside, supra, 194 Cal.App.3d at p. 220, 239 Cal.Rptr. 470 (maj. opn. of Wiener, J.).)   The opinion then added, “Abelleira makes it abundantly clear that the exhaustion doctrine does not implicate subject matter jurisdiction but rather is a ‘procedural prerequisite’ ‘originally devised for convenience and efficiency’ and now ‘followed under the doctrine of stare decisis․’  [Citation.]   It is ‘jurisdictional’ only in the sense that a court's failure to apply the rule in a situation where the issue has been properly raised can be corrected by the issuance of a writ of prohibition.”   (Id., 194 Cal.App.3d at p. 222, 239 Cal.Rptr. 470.)

The analysis of the Green majority is intriguing, but we need not decide here whether it is correct or does violence to Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 20 Cal.Rptr. 321, 369 P.2d 937. (see, e.g., Green v. City of Oceanside, supra, 194 Cal.App.3d at pp. 230–235, 239 Cal.Rptr. 470 (dis. opn. of Todd, J.).)   For, unlike Green, Gannon was required to do more than exhaust administrative remedies:  She was obliged to exhaust judicial remedies as well.  (See, e.g., City of Fresno v. Superior Court, supra, 188 Cal.App.3d 1484, 1490, 234 Cal.Rptr. 136.)

Where the final administrative arbiter has determined to deny or revoke a physician's staff privileges, the doctor's only recourse is to challenge the administrative action in a mandamus proceeding.   That is the unequivocal rule of Westlake, and in our view the requirement is jurisdictional.   Unless the revocation “has been found improper in a mandate action” (Westlake Community Hosp. v. Superior Court, supra, 17 Cal.3d at p. 469, 131 Cal.Rptr. 90, 551 P.2d 410), the physician may not sue in tort.

Here, Gannon was admittedly aggrieved by the hospital's ultimatum that she would be suspended if she attempted to work;  she claims to have lost income and prestige and suffered physical injury and emotional distress as a result of the hospital's unyielding position.   Consequently, her only recourse was to seek administrative relief followed by a petition in mandate or a petition in mandate alleging a legal excuse for bypassing her administrative remedies.   She was similarly aggrieved by a perceived discrimination in surgery assignments after reinstatement, and her recourse was the same.

Even if the Green majority is correct and defendants waived the administrative issue by failing to litigate it, the court's analysis would not support Gannon's failure to obtain mandate relief.   The requirement to exhaust judicial remedies is not subject to the exceptions recognized for administrative remedies, e.g., irreparable harm, futility, unreasonable delay, or acts in excess of jurisdiction.  (Green v. City of Oceanside, supra, 194 Cal.App.3d at p. 222, 239 Cal.Rptr. 470.)   As far as the defendants' decisions which created the stalemate and resulted in a loss of work after reinstatement, we hold she was not excused from the second Westlake requirement to petition in mandate before suing in tort.  (See fn. 10 above.)   So long as Gannon was aggrieved, that Westlake prerequisite was jurisdictional in the sense that defendants' startling failure to pursue the defense below could not confer jurisdiction where none existed.  (Hittle v. Santa Barbara County Employees Retirement Assn., supra, 39 Cal.3d at p. 384, 216 Cal.Rptr. 733, 703 P.2d 73.)

In sum, assuming Gannon was correct and the investigatory period leading to a formal suspension constituted a de facto suspension, her failure to exhaust administrative and judicial remedies bars her from obtaining tort damages for those four months.   If, on the other hand, the investigatory period is viewed as a voluntary leave of absence, Gannon suffered no damage at the hands of these defendants as a matter of law during that time.   By failing to initiate any administrative or mandamus proceedings to challenge the alleged discriminatory scheduling after reinstatement, Gannon forfeited her right to seek tort damages for that conduct as well.   Those portions of her tort case must be reversed and dismissed.¹²

IV

 Gannon may sue for the period of her suspension, beginning on February 7, 1980.   But the right to pursue tort remedies does not mean she is entitled to a jury determination as to the reasonableness of the actions of the peer review committee and the chairman of the anesthesiology department in suspending her.

In Westlake, the Supreme Court stated a physician's cause of action for tort damages arising out of a revocation or denial of staff privileges is analogous to an action for malicious prosecution.   And in the same context, decades earlier, “[i]n Hardy v. Vial (1957) 48 Cal.2d 577, 311 P.2d 494, [the Supreme Court] explicitly held that the elements of a traditional malicious prosecution action apply to an action seeking damages resulting from a maliciously initiated administrative proceeding.”  (Westlake Community Hosp. v. Superior Court, supra, 17 Cal.3d at p. 483, 131 Cal.Rptr. 90, 551 P.2d 410.)   Gannon's reinstatement satisfied the “ ‘favorable termination’ ” requirement (ibid.), but that is only the beginning.   Before she may recover, she must also prove the suspension was without probable cause.¹³  Normally, this issue should be resolved in the mandate proceeding which precedes a physician's tort action.  (Id., at p. 484, 131 Cal.Rptr. 90, 551 P.2d 410 [“a uniform practice of judicial, rather than jury, review of quasi-judicial administrative decisions.”].)  But as we have already discussed, a mandate action was unnecessary here with respect to the summary suspension.   (Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d 235, 244 Cal.Rptr. 764.)   Consequently, it fell to the trial judge to make this determination before the other issues were submitted to the jury.  (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 874, 884, 254 Cal.Rptr. 336, 765 P.2d 498.) ¹⁴

Here, however, the court failed to find whether there was probable cause for Gannon's suspension.   Instead, the court concluded her reinstatement established as a matter of law that she was competent when suspended.   Not only was this determination patently erroneous,¹⁵ it was not the court's to make.

On retrial, the judge should make a probable cause determination before submitting the cause to a jury if the facts are not in dispute, and after deliberations if they are.   Should the court find there was probable cause to suspend Gannon, the lawsuit may proceed no further.   If the court determines probable cause for her suspension did not exist, the jury then has the opportunity to determine actual competency, whether facts exist which would support application of the conditional immunity provided by Civil Code section 43.7, and finally, damages.

The defendants may still prevail if the jury concludes Gannon was incompetent when she was formally suspended (Ascherman v. San Francisco Medical Society (1974) 39 Cal.App.3d 623, 664, 114 Cal.Rptr. 681) because actual malice by the individual defendants would then be irrelevant.   Also, competency may be litigated even after a judicial finding of no probable cause because it is always possible that a suspended physician may in fact be incompetent, although there was not probable cause to believe so at the time of the suspension.   In that case, even though the suspension would have been improper, the physician would not have suffered any legally cognizable damage.

V

 For the benefit of the court on remand, we discuss in detail one instructional error raised by the defendants on this appeal.   Most of the other claimed errors are not likely to recur, and only a cursory review is appropriate.¹⁶

Civil Code section 43.7, subdivision (b) potentially confers an immunity for the acts of the individual defendants.   At the time of trial it read, “There shall be no monetary liability on the part of, and no cause of action for damages shall arise against, any ․ duly appointed member of a committee of a professional staff of a licensed hospital (provided the professional staff operates pursuant to written bylaws that have been approved by the governing board of the hospital), for any act or proceeding undertaken or performed within the scope of the functions of the committee ․ or any member of the governing board of a hospital in reviewing the quality of medical services rendered by members of the staff if the [ ] committee, or board member acts without malice, has made a reasonable effort to obtain the facts of the matter as to which he, she, or it acts, and acts in reasonable belief that the action taken by him, her, or it is warranted by the facts known to him, her, or it after the reasonable effort to obtain facts․”  (Emphasis added.)   As the parties have correctly acknowledged, the conditional immunity cannot apply to the hospital.

During oral argument before this court, Gannon's counsel emphatically stated his client had the burden of proving the individual defendants acted with malice and argued the jury was “plainly and clearly” instructed as to that fact.   In several conferences outside the presence of the jury during trial, however, Gannon argued section 43.7 provided an affirmative defense only and must be pleaded and proved by the defendants;  i.e., they had the burden of proving they satisfied each of its elements, including the absence of malice.   The court agreed with Gannon on the question:  “[B]eing an affirmative defense, [section 43.7, subdivision (b) ] is [ ] like comparative negligence or contributory negligence or any other type of defense and, therefore, it is the burden of proof of the defendants.”

Consequently, at the court's direction, and over a defense objection that the burden of proof belonged solely to plaintiff to prove all the elements, including malice, which would entitle her to relief, the parties attempted to draft an instruction in line with the court's expressed views.   The result was that the court first gave an instruction which recited the provisions of section 43.7, subdivision (b) and then advised the jury, “The law just read to you is known as a qualified privilege.  [¶] If you find that the actions of any individual defendant in this case come within the immunity provided by section 43.7[, subdivision] (b), your verdict must be in favor of each such individual defendant or defendants.”

The court then read the two-part instruction which is hotly disputed in this appeal.   The first portion provided, “In this action, the plaintiff has a burden of establishing by a preponderance of the evidence all of the facts necessary to prove the following issues:  [¶] One, that the defendants were negligent, that their negligence was a legal cause of injuries and damages sustained by plaintiff, and the nature and extent of the injuries and damages sustained by plaintiff;  [¶] two, that the defendants were guilty of malice or oppression;  [¶] three, that the defendants intentionally and unreasonably inflicted emotional distress upon plaintiff which legally resulted in foreseeable physical harm, and the nature and extent of the injuries and damages sustained by plaintiff.”   So far, so good.   But the second part of the instruction took a different tack:  “The defendants have the burden of establishing by a preponderance of the evidence all of the facts necessary to prove the following issues:  [¶] One, that the plaintiff was negligent;  [¶] two, that plaintiff's negligence contributed as a legal cause of the injury and damage, if any, claimed to have been suffered;  [¶] three, that the acts or proceedings of the defendants are subject to the immunity established by California Civil Code section 43.7(b);  [¶] four, that the plaintiff failed to mitigate her damages.”  (Emphasis added.)

Although we have not found any appellate authority specifically discussing the burden of proof under Civil Code section 43.7, a review of case law interpreting a similar qualified privilege for defamation under section 47, subdivision 3 is instructive.   That provision is frequently referred to as the qualified privilege for fair comment and “recognizes a qualified or conditional privilege where the communicator and the recipient have a common interest and the communication is of a kind reasonably calculated to protect or further that interest.  [Citations.]”  (Williams v. Taylor (1982) 129 Cal.App.3d 745, 751, 181 Cal.Rptr. 423.)

In Williams, an automotive body shop manager suspected of embezzlement was fired.   The employer reported the matter to the police and to several insurance adjusters who referred work to the firm.   The discharged employee was criminally prosecuted, but acquitted in a jury trial.   He then sued his former employer for slander, malicious prosecution, and intentional and negligent infliction of emotional distress.   Applying the conditional privilege of Civil Code section 47, subdivision 3 to the statements to the insurance adjusters,¹⁷ the Court of Appeal affirmed summary judgment for the defendants:  “Since defendants' communications ․ were qualifiedly privileged, it was plaintiff's burden to show the statements were made with actual malice so as to defeat the privilege.  [Citation.]”   (Id., at p. 752, 181 Cal.Rptr. 423;  emphasis added.)

Division One of this court reached a similar result in Manguso v. Oceanside Unified School Dist. (1984) 153 Cal.App.3d 574, 200 Cal.Rptr. 535, another case involving Civil Code section 47, subdivision 3.   There, a teacher discovered an unfavorable letter from a school administrator in her file and sued for libel.   Because the letter was sent by one educator to another concerning the credentials of a teacher, it was subject to the qualified privilege.   Thus, the plaintiff had the burden to “show[ ] by a preponderance of the evidence [that the administrator] acted with malice, that is, that he acted with hatred or ill will toward [her], or he lacked reasonable grounds for believing the truth of the false statements or he made the statement for a reason other than to protect the interest of the one for whom the protection is given.”  (Id., at pp. 580–581, 200 Cal.Rptr. 535, fn. omitted.)

The same analysis applies here.   The individual defendants included Schroeder, indisputably “a member of the governing board of a hospital” and physicians Rounds and Stocker, who, without question, were “appointed member[s] of a committee of a professional staff of a licensed hospital ․ [which] operate[d] pursuant to written bylaws ․ approved by the governing board of the hospital․”  (Civ.Code, § 43.7, subd. (b).)  Accordingly, by virtue of their positions, they met the statutory profile for the immunity.

It was a question for the jury, however, as to whether other facts existed which would preclude application of the conditional immunity, e.g., did the individual defendants act with malice or without first making a reasonable effort to ascertain the facts?   Plaintiff had the burden on this score, but the challenged instruction left the jury inadequately equipped to resolve the issue.   First, it injected the concept of negligence into section 43.7, subdivision (b) analysis.   A plain reading of the statute demonstrates negligence simply has no place in determining the threshold question of the applicability of the qualified immunity.   Second, while the first portion of the instruction correctly advised the jury that Gannon was responsible for proving the defendants acted with malice, the second part confusingly told them the defendants were required to establish their conduct was not malicious.

There is more:  The instruction concluded by stating the defendants had to prove the existence of the remaining elements which would entitle them to the benefit of the immunity.   Based on the court's earlier (and proper) reading of section 43.7, subdivision (b), that meant the physician defendants had the burden to prove they were acting within the scope of the functions of their peer review committee and that all individual defendants had the burden to establish they “made a reasonable effort to obtain the facts of the matter as to which [they] act[ed] ․ [and they] act[ed] in reasonable belief that the action taken by [them was] warranted by the facts known.”   For the reasons discussed above on the malice question, the court erred in telling the jury the defense bore the burden of proving those elements.  (Manguso v. Oceanside Unified School Dist., supra, 153 Cal.App.3d 574, 200 Cal.Rptr. 535;  Williams v. Taylor, supra, 129 Cal.App.3d 745, 181 Cal.Rptr. 423.)

As noted above, the error was exacerbated by the closing argument of plaintiff's counsel.   He discussed section 43.7 at length, first telling the jurors, “I've had to read [section 43.7] no less than a dozen times during the first 30 days I had this case to even understand what it means, and I have broken it down.”   He continued, “And what you're going to need to find by a preponderance of the evidence, that the defendants need to prove before that immunity applies, is the following:

“․

“․ the fifth element, if these gentlemen acted with malice, [the] privilege doesn't apply.   So even if you should find all of the other elements are there, if you determine that they acted with malice, it doesn't matter.   The law is not going to allow these gentlemen to walk away after they have done something wrong, when their conduct has been deemed to be in the conscious disregard of Jeanne Gannon's rights, and they willfully and deliberately failed to avoid those bad consequences to her.”  (Emphasis added.)   In his rebuttal argument plaintiff's counsel added, “It is their burden of establishing that each and every one of the elements that I discussed before is present before a privilege or a qualified immunity applies, and let's not be confused about that. ”  (Emphasis added.)   Contrary to the assertions by plaintiff's counsel, we are convinced his argument created prejudicial confusion in the minds of the jurors.   The instruction erroneously injected the question of negligence into the equation and suggested the defendants had the burden to negate malice and the other factors which would preclude application of section 43.7, subdivision (b).   The closing argument of plaintiff's counsel only compounded the error.

The judgment is reversed, and the matter is remanded to the trial court for further proceedings, consistent with the views expressed in this opinion.   Because the defense substantially contributed to the errors we have identified, the parties shall bear their own costs.

FOOTNOTES

1.   She also failed to exhaust her judicial remedies concerning her due process complaints attributable to the period she worked after restoration of her staff privileges, when she allegedly was not scheduled as frequently as her peers.

2.   The hospital is now known as Western Medical Center.

3.   The meeting was postponed several times at Gannon's request.   It was finally held in December.   In January 31, 1980 correspondence, before litigation bloomed, Gannon wrote to Rounds, “I voluntarily withdrew my name from the assignment schedule on September 17, for September 18, and September 19, 1979 and traded with Dr. Tarr for September 20 and September 21, 1979.   Since then I have requested Dr. Francis Stocker and since January 1, 1980, you to allow me to work as other Anesthesiologists who are under investigation are doing.”

4.   The vote was 3–2, with Gannon herself breaking the tie.

5.   The physician requesting Gannon's anesthesiology services was her husband, plastic surgeon Ernest Alvin, M.D.

6.   The parties vigorously dispute the import of Gannon's announced intention to move to another state, with Gannon insisting the proposed move was of no significance and her reinstatement was unconditional.   The special executive committee minutes of March 27, 1980, indicate the members recommended “that Dr. Jeanne Gannon's suspension be immediately lifted, on the basis of the evidence presented.   This Committee notes that Dr. Gannon has taken and successfully passed the Advanced Cardiac Life Support course sponsored by the American Heart Association and that she has asserted she will appropriately monitor all patients and will sit for the next examination of the American Board of Anesthesia.”   The recommendation was adopted by the hospital's board of directors the following month.The exact basis for the committee's action might have been made clear by review of a transcript of the evidentiary portion of the committee meeting.   Gannon was given the opportunity to have a court reporter present for that purpose, at her own expense.   No transcript is included in the voluminous trial exhibits, however;  so we presume she did not exercise the right.In any event, as the following discussion will reveal, whether or not the committee voted to recommend reinstatement based on her decision to relocate or her rehabilitation during the suspension period will not be of great significance.   We do note there is little to suggest the finding had anything to do with the merits of the original suspension, as the trial judge believed.

7.   There was evidence that some physicians declined to have Gannon provide anesthesia for their patients “either on a routine or an elective basis or for any emergencies.”   Moreover, Gannon removed herself from several surgeries where the maternity patients requested epidurals, a form of anesthesia with which she was not proficient.

8.   After this matter was orally argued, we asked the parties to file supplemental briefs on several issues, including whether the manner in which the investigation, suspension, and reinstatement of Gannon was handled affected her “obligation to comply with the writ of mandate procedures in Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 131 Cal.Rptr. 90, 551 P.2d 410.  (See, e.g., McNair v. Pasadena Hospital Assn., Ltd. (1980) 111 Cal.App.3d 841, 845–846, 169 Cal.Rptr. 39 [physician who was not suspended but whose practice was to be monitored by hospital committee was nevertheless required to obtain a ‘favorable determination’ in a mandate proceeding before bringing suit].)”  The parties have now briefed the issues, and we have heard oral argument for a second time.  (Gov.Code, § 68081.)

9.   We do not read McNair v. Pasadena Hospital Assn., Ltd., supra, 111 Cal.App.3d 841, 169 Cal.Rptr. 39 to the contrary.   There, the physician did seek mandamus review after he essentially prevailed in the administrative proceeding, emerging with relatively modest restrictions on his practice.   When the superior court rejected his petition, he allowed that judgment to become final and then attempted to sue.   As Knickerbocker points out, res judicata principles barred the second action.  (Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d at p. 244, 244 Cal.Rptr. 764.)

10.   Westlake explains why a petition in mandate is necessary when a physician alleges a denial of due process:  “There are many circumstances in which it may be inappropriate for a court immediately to order a hospital to accord a doctor staff privileges;  if, for example, the hospital has failed to provide an applicant a proper hearing before rejection, a court may well decide that the appropriate remedy is simply to order a proper hearing rather than to mandate that the hospital grant staff privileges to a possibly unqualified applicant.  [Citations.]”   (Westlake Community Hosp. v. Superior Court, supra, 17 Cal.3d at pp. 484–485, fn. 9, 131 Cal.Rptr. 90, 551 P.2d 410;  see also Hackethal v. Loma Linda Community Hosp. Corp. (1979) 91 Cal.App.3d 59, 65–68, 153 Cal.Rptr. 783.)

11.   In Abelleira the Supreme Court determined the Court of Appeal lacked jurisdiction to issue a writ of mandate in a labor dispute because administrative proceedings involving the parties were still pending.   The court issued a writ of prohibition restraining the Court of Appeal from enforcing its ill-timed writ of mandate and reiterated the well-worn rule “that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act.”  (Id., 17 Cal.2d at p. 292, 109 P.2d 942.)

12.   The verdicts rendered by the jury did not differentiate between pre-suspension, suspension, and post-reinstatement damages.   For this reason, as well as other error (see parts IV & V below), the entire matter must be reversed and remanded for further proceedings.

13.   A summary or prehearing suspension is qualitatively different from a revocation or refusal to grant staff privileges.   It need only be based on probable cause.   Patient safety requires that a hospital be permitted to suspend when it has reasonable grounds to believe a physician is incompetent.   The hospital should not be automatically penalized when that does not turn out to be the case.   Since defendants have yet to appreciate this point and have never sought a trial court determination on it, we express no opinion as to whether this record will compel any particular finding.

14.   In Sheldon Appel, the Supreme Court acknowledged a “long-standing confusion in the case law” on this point:  “While ․ the probable cause determination has always been considered a question of law for the court, the cases have also made clear that if the facts upon which the defendant acted in bringing the prior action ‘are controverted, they must be passed upon by the jury before the court can determine the issue of probable cause․  “What facts and circumstances amount to probable cause is a pure question of law.   Whether they exist or not in any particular case is a pure question of fact.   The former is exclusively for the court, the latter for the jury.” ’  [Citations.]”  (Id., 47 Cal.3d at p. 877, 254 Cal.Rptr. 336, 765 P.2d 498.)

15.   Knickerbocker v. City of Stockton, supra, 199 Cal.App.3d 235, 244 Cal.Rptr. 764 is not in disagreement on the point.   There, the civil service commission reviewed the conduct leading to plaintiff's termination and concluded those facts did not justify termination, only demotion.   But here the decision to reinstate Gannon, endorsed by both the medical staff executive committee and the hospital board of directors, was not made by simply reviewing Gannon's past conduct, i.e., the facts leading to her suspension.   Instead, the decision appears to have been based in whole or substantial part on changed circumstances and new evidence, i.e., her completion of a cardiac resuscitation course and her promises to “appropriately monitor” all patients and sit for the next anesthesiology board examination.   It may also have been affected by her promise to leave town.

16.   For example, the court read BAJI No. 14.12, concerning the present cash value for loss of future earning capacity.   That issue has no place in this action where damages should be limited to a discrete period of time, the date of her summary suspension to the date of reinstatement.   Any effect of a short suspension on future earnings would be entirely speculative after plaintiff has prevailed administratively and would create an untoward disincentive to suspend physicians thought to be incompetent.Also, an instruction based on Ascherman v. San Francisco Medical Society, supra, 39 Cal.App.3d 623, 114 Cal.Rptr. 681, if requested, is warranted in this case.   Contrary to the trial court's determination, and as explained in the previous footnote, the hospital's voluntary reinstatement of Gannon did not establish as a matter of law that she was competent when suspended months earlier.As the judgment must be reversed in its entirety, we decline to address the punitive damages issues.   They are better left to another day on a record uncluttered with the legal debris we must sift through here.

17.   Statements to the police were considered absolutely privileged.  (Civ.Code, § 47, subd. 2.)

CROSBY, Associate Justice.

SCOVILLE, P.J., and SONENSHINE, J., concur.