NY High Court Opts Not To Expand Liability For Health Data Confidentiality Breach

The New York Court of Appeals ruling that came down last week in Doe v. Guthrie Clinic , 2014 NY Slip Op 00138 (Court of Appeals 1/9/14), should prove helpful in evaluating the liability of medical corporations in cases involving the disclosure of confidential patient information where the breach of confidentiality is unrelated to the patient's treatment. In Guthrie Clinic, a nurse at the clinic treating the plaintiff for sexually transmitted disease recognized the plaintiff as the boyfriend of her sister-in-law, prompting the nurse to send her sister-in-law a series of text messages concerning the boyfriend's medical condition (i.e. his STD).  The ruling came in response to the certification of a question to the New York Court of Appeals from the Second Circuit, which had earlier disposed of other of plaintiff's claims. 

The key holding in the Court of Appeals decision is that liability did not extend to the medical corporation because its "duty of safekeeping a patient's confidential medical information is limited to those risks that are reasonably foreseeable and to actions within the scope of employment".  The Court analogized the facts here to those in N.X. v. Cabrini Med. Ctr, 739 N.Y.S.2d 348, a 2002 case where the defendant hospital was not found strictly liable for a surgical resident's sexual assault on a sedated patient. 

The Court reaffirmed the rule that "under the doctrine of respondeat superior, an employer may be vicariously liable for the tortious acts of its employees only if those acts were committed in the furtherance of the employer's business and within the scope of employment".  Under both the facts of Cabrini and Guthrie, the tortious actions of the employee were not reasonably foeseeable.

In a decision handed down on March 25, 2013, the Second Circuit dismissed that part of plaintiff's claim seeking to hold the medical corporation liable under a theory of respondeat superior. The Second Circuit determined that the nurse's motive in disclosing confidential patient information was entirely personal. The Court certified to the New York Court of Appeals the question whether NY recognized a common law right of action for breach of the fiduciary duty of confidentiality against medical corporations under the facts presented. 

The dissent to the majority opinion of the Court of Appeals argued that a patient's disclosure of confidential information is necessary for treatment and that the patient has no control over what happens to this information.  The dissent argued further that, just as in the Cabrini case scenario, involving a sedated patient laying helplessly in her hospital bed, a medical corporation should be held to an independent duty to prevent an employee from acting outside the scope of his employment and  harming the patient. 

In response to the dissent, the majority rejoined that if the dissent fouind the majoritiy holding too "narrow", the "dissent's reasoning is flawed for the opposite reason; it is too broad."  The Court was clearly unwilling to impose a strict liability standard for the release of confidential medical information.

The Court of Appeals decision is well-reasoned and correct, but issues over alleged breach of patient confidentiality are sure to be raised again.  As the dissent noted, "technological advances have made it possible to collect and house patient data in ways accessible to a patient's doctor and other health care provider staff.  Computers and cellular devices have transformed medical record keeping and health care service provision, making access to such data fast and easy."  Confidential patient information is increasingly being transmitted via web and mobile devices--tablets and smartphones.  

Issues concerning what measures are reasonably required to keep these networks secure will no doubt be raised in the future.  

 

NYS Court Of Appeals: Injury Required For Medical Monitoring

In a landmark decision, the NYS Court of Appeals rejected medical monitoring claims in the absence of a physical injury in Caronia v. Philip Morris, No. 227, slip op. (N.Y. Dec. 17, 2013).

By way of background, on May 1, 2013, the Second Circuit certified to the Court of Appeals the question whether, under New York law, a current or former long-term smoker who has not been diagnosed with a smoking-related disease, and who is not under investigation by a physician for a such a suspected disease, may pursue an independent equitable cause of action for medical monitoring.

In a contentious 4-3 decision, the Court of Appeals held that New York law did not permit an independent claim for medical monitoring.  In an earlier article, we discussed the Second Circuit’s decision in Caronia v. Philip Morris in detail and surveyed prior New York law involving claims for medical monitoring.

Notably, the Court of Appeals held:

We conclude that the policy reasons set forth above militate against a judicially-created independent cause of action for medical monitoring.  Allowance of such a claim, absent any evidence of present physical injury or damage to property, would constitute a significant deviation from our tort jurisprudence.”  Slip op. at 14.

The majority of states have rejected medical monitoring claims in the absence of a physical injury.  To rule otherwise would disregard important medical, scientific and legal distinctions between concepts of “exposure” and “injury.” 

The Court of Appeals recognized that there was “significant policy reasons that favor recognizing an independent medical monitoring cause of action.”  However, citing the U.S. Supreme Court decision in Metro-North Commuter R.R. Co. v. Buckley, 521 US 424, 443-444 (1997) (refusing to recognize a tort claim for medical monitoring costs where the plaintiff was exposed to asbestos but had not manifested symptoms of a disease), the court agreed that the “potential systemic effects of creating a new, full-blown tort law cause of action cannot be ignored.” 

The court was correctly concerned that dispensing with the physical injury requirement could permit “tens of millions” of potential plaintiffs to recover medical monitoring costs, effectively flooding the courts while concomitantly depleting the alleged purported tortfeasor’s resources for those who have actually sustained damage.  Although not discussed by the court as part of its rationale, the danger of fraudulent claims and abuse by uninjured plaintiffs cannot be overlooked as well.

First Amendment Bars Pharmaceutical Company Prosecution

The Second Circuit yesterday rendered its much-anticipated decision in United States v. Caronia, the most important Food Drug and Cosmetics Act enforcement case pending in the country. Not only did  the court’s 2-1 holding determine that the First Amendment bars the criminal prosecution of pharmaceutical manufacturers or their sales representatives for truthful, non-misleading speech promoting the lawful, off-label use of an FDA-approved drug affect criminal FDA enforcement cases, it also has great potential impact on False Claims Act cases.

Stuart Gerson, an Epstein Becker & Geen partner in Washington, D.C., who has defended a number of significant  False Claims Act cases (and qui tam cases), opined  this morning that "the Caronia decision is revolutionary, dealing the government a very hard blow in its effort to quash all off-label promotion, and incidentally to try to limit off-label use, irrespective of the fact that such use is a lawful matter to be decided by doctors and patients. And that is the point, since such use is lawful, making truthful statements about such use would infringe allowable speech."

According to Gerson, the Second Circuit "read the FDCA in a hyperliteral way, holding that the misbranding provisions of the Food Drug and Cosmetics Act do not prohibit such truthful promotion of an off-label prescription drug that otherwise is approved, and thus avoided having to make what it also held would have been the constitutional determination that blocking such speech would have violated the First Amendment."  Caronia adopts a view that pharmaceutical companies and trade associations have attempted to advance for years. Gerson believes that the issue  might well reach the Supreme Court.

In any event, Caronia will stand as an important precedent, not only in criminal cases like this one, but in civil fraud cases as well where the government and qui tam relators have argued that off-label promotion is tantamount to false certification and hence a violation of the federal False Claims Act.

Given the importance of the case, it is likely that rehearing en banc will be sought and, perhaps, a petition filed by the government with the Supreme Court. However, it also may be the government’s strategy to follow a policy of non-acquiescence and litigate the point in other circuits, hoping to create a split. In any event, this is a case that pharmaceutical and medical device companies need to watch closely.
 

Conflicts Of Interest Involving Corporate Affiliates

In GSI Commerce Solutions, Inc. v. BabyCenter LLC, No. 09-2790, the Second Circuit affirmed the ruling of SDNY Judge Jed S. Rakoff, who disqualified the Blank Rome law firm from representing a company adverse to a subsidiary of Johnson & Johnson, which was a client of Blank Rome.

The Second Circuit’s ruling is noteworthy because it addressed for the first time whether a law firm infringed on its duty of loyalty by taking on a representation adverse to an existing client’s corporate affiliate. In disqualifying Blank Rome, Judge Rakoff found that the overlap between BabyCenter LLC and Johnson & Johnson in effect made them a single company for various purposes. Judge Rakoff observed that BabyCenter LLC did not have a separate in-house legal department, but instead relied exclusively upon the in-house lawyers at Johnson & Johnson for legal advice.  Drawing upon extensive discussion by other courts as well as the ABA, the Second Circuit held that a law firm cannot take on a matter adverse to an affiliate if it diminishes the parent client’s level of confidence in its lawyers.

The Court first examined the ABA's Model Rules of Professional Conduct, which provide that a “lawyer who represents a corporation or other organization does not, by virtue of that representation, necessarily represent any constituent or affiliated organization, such as parent or subsidiary.” ABA Model Rule of Prof’l Conduct 1.7 cmt. 34 (2006). This statement embodies what is often termed the “entity theory” of representation. However, the exception to this rule is that an attorney may not accept representation adverse to a client affiliate if “circumstances are such that the affiliate should also be considered a client of the lawyer.”

For its own part, Blank Rome argued that no conflict existed because: (1) the dispute between GSI and BabyCenter involved matters unrelated to Blank Rome’s Johnson & Johnson matters; and (2) Johnson & Johnson had waived any conflict by signing Blank Rome’s engagement letter. Both of these arguments proved unpersuasive to the unanimous appeals court. In particular, the Second Circuit observed that Blank Rome’s engagement letter contained provisions that might constitute a waiver by Johnson & Johnson of some, but not all, corporate affiliate conflicts. However, these conflict waivers were specifically limited to patent litigation and, even more specifically, to matters brought by generic drug manufacturers. Therefore, the Second Circuit held, Blank Rome failed to “contract around” the corporate affiliate conflict at issue. 

In a footnote, Judge Ralph K. Winter, Jr., writing for the Court, stated that the Circuit was not addressing issues that would arise if a blanket waiver had been executed and left open how it might rule in those circumstances.