Case Name: Egge v. County of Santa Clara, et al.
Case No.: 18CV329071

Defendants County of Santa Clara (erroneously sued herein as Santa Clara Valley Medical Center) (the “County”), Jeffrey Smith, M.D. (“Dr. Smith”) and Phuong Nguyen, M.D. (“Dr. Nguyen”), (collectively, “Defendants”) demur to the complaint (“Complaint”) filed by plaintiff Melissa Egge, M.D. (“Plaintiff”).

I. Factual and Procedural Background

This is an action for breach of contract and violation of whistleblower statute. According to the allegations of the operative Complaint, Plaintiff is a Suspected Child Abuse and Neglect (“SCAN”) physician who was hired by the County on July 1, 2011 as a Child Abuse Pediatrician at the Santa Clara Valley Medical Center (“SCVMC”). (Complaint, ¶ 13.) As a component of her contractual employment agreement with the County, Plaintiff was required to abide by the Medical Staff Bylaws and the internal policies and procedures of SCVMC. (Id., ¶ 14, Exhibit A.) The bylaws created binding rights and duties and are legally enforceable. (Id., ¶ 15.)

Plaintiff reported to Dr. Stirling, Director of the Center for Child Protection at SCVMC, and was subordinate to his role as a SCAN physician. (Complaint, ¶ 16.) Both Plaintiff and Dr. Stirling reported to Dr. Harris, the Chair of the Department of Pediatrics, and were required to abide by his decisions as they related to his patients and his SCVMC policy determinations. (Id.) Plaintiff and Dr. Stirling, the only two SCAN physicians at the facility, alternated on call for child abuse issues as they came up. (Id.)

On July 3, 2015, a two-year old child was transferred from O’Connor Hospital to SCVMC suffering from what were believed to be two fractures. (Complaint, ¶ 17.) Plaintiff was consulted on the phone by Dr. Zhang, a common practice at SCVMC used by mandated reporters who suspected abuse in lieu of making a report to child protective services (“CPS”). (Id.) After Dr. Zhang described the nature of the child’s injuries and his mother’s explanation for them, Plaintiff stated that if the doctors at the preceding hospital suspected non-accidental trauma they should make a report, and opined that the scenario Dr. Zhang described was not a pattern of injury typical for non-accidental trauma. (Id., ¶ 19.) By that time, no orthopedic surgeons had seen the child, and no x-rays were available. (Id.) Plaintiff was not asked to perform an inpatient consultation and had no further clinical involvement with the child. (Id.)

Over the next few days, physicians at SCVMC discovered the child had suffered additional fractures and he underwent surgery. (Complaint, ¶ 20.) Although there were several red flags, no reports were made and the child was eventually discharged to go home with his mother.

In November 2015, the Orthopedic Review Committee reviewed the child’s case and became concerned that a report was warranted. (Complaint, ¶ 21.) Dr. Harris was asked to weigh in and Plaintiff was asked to do a supplemental review of an ongoing Quality Improvement review of the child’s case. (Complaint, ¶ 21.) Plaintiff reviewed the child’s records, which included details not available during the prior telephone consultation, and concluded that a CPS report should have been filed. (Id., ¶ 22.) Plaintiff discussed the case with Dr. Stirling, the official SCAN physician listed on it, and he agreed to file the CPS report. (Id., ¶ 22.)

Prior to leaving on vacation, Plaintiff checked with Dr. Stirling to ensure that he had made the report. (Complaint, ¶ 23.) Dr. Stirling told her that he had forgotten but would do so that evening. (Id.) However, Dr. Stirling never made the report, and in January 2016, the child died as a result of alleged physical and sexual abuse. (Id.) During a Death Review Committee meeting in February 2016, Plaintiff learned that the child had died and subsequently checked his records where she found that on December 24, 2015, Dr. Stirling had placed a note in the chart stating that he had again reviewed the file, decided there was a low index of suspicion of child abuse, and therefore a CPS report was not warranted. (Id., ¶ 24.) Thus, Dr. Stirling never made the CPS report as he had promised Plaintiff he would. (Id.) Plaintiff believed that in the event Dr. Stirling decided not to submit a report to CPS on both of their behalves, he would have told her of his decision so as to provide her with an opportunity to make a report herself. (Id., ¶ 25.) Because he did not, Plaintiff did not believe she was required to submit a report. (Id.)

Concerned of what had transpired, Plaintiff contacted Dr. Harris to inform him of the child’s death and Dr. Stirling’s failure to report the case to CPS; he had not been aware of either fact prior to that point. (Complaint, ¶ 26.) Plaintiff also expressed multiple concerns that SCVMC policies and procedures were inadequate to comply with California’s mandated reporting laws. (Id., ¶¶ 26-28.) As a result of Plaintiff’s pressure to do so, SCVMC initiated an external peer review of the child’s case. (Id.) Plaintiff told Dr. Harris that many other employees, all mandatory reporters, had failed to comply with the law and that the practices encouraged by SCVMC leadership resulted in suspicions of child abuse not getting reported. (Id., ¶¶ 27-28.) She further advised him of many other systematic failings which she believed may have contributed to the child’s death. (Id., ¶ 28.)

On March 11, 2016, Plaintiff was put on administrative leave. On April 21, 2016, the Medical Executive Committee recommended a 6-month summary suspension of Plaintiff’s clinical privileges and medical staff memberships. (Complaint, ¶ 29.) The following day, Dr. Smith, as County Executive of the County, terminated Plaintiff’s employment. (Id.) Plaintiff was not afforded a hearing prior to the termination and her suspension and termination were completely unwarranted and arose in the context of activities that under SCVMC’s bylaws entitled her to immunity. (Id.)

In addition to the foregoing, Dr. Nguyen, on behalf of SCVMC, reported Plaintiff’s suspension to the Medical Board of California, despite not being obligated to do so. (Complaint, ¶ 31.) Dr. Nguyen was also aware that statements made to the Medical Board and contained in the report were false and misleading and did not provide Plaintiff with an opportunity to explain or comment. (Id.) The report will be a negative mark on Plaintiff’s career and she alleges that her suspension, termination and SCVMC’s report to the Medical Board were committed with malice and in bad faith, with Plaintiff made a scapegoat and punished for voicing her concerns. (Complaint, ¶ 32.) As a result of Defendants’ conduct, Plaintiff has been unable to obtain employment in the Bay Area and has to commute weekly to Southern California in order to work as a physician. (Id., ¶¶ 34-35.) Plaintiff’s appeal of her summary suspension was defective and amounted to a staged proceeding. (Id., ¶ 37.) Nevertheless, Plaintiff prevailed on her appeal, but has yet to regain her reputation. (Id., ¶ 38.)

Based on the foregoing allegations, Plaintiff filed the Complaint on May 30, 2018 asserting claims for (1) breach of written contract and (2) violation of Labor Code section 1102.5 (“Section 1102.5”). On June 13, 2018, Defendants filed the instant demurrer to each of the foregoing claims on the grounds of failure to state facts sufficient to constitute an action, that there is a defect or misjoinder of parties, and that it cannot be ascertained from the pleading whether the contract at issue is written, oral, or is implied by conduct. (Code, Civ. Proc., § 430.10, subds. (d), (e) and (g).) Defendants also demur to the first cause of action on the ground of uncertainty. (Code Civ. Proc., § 430.10, subd. (f).) Plaintiff opposes the motion.

II. Defendants’ Request for Judicial Notice

In support of their demurrer to the Complaint, Defendants request that the Court take judicial notice of the following items: (1) the May 7, 2018 Order Granting Motion to Dismiss First Amended Complaint in Egge v. County of Santa Clara (N.D.Cal. May 7, 2018), 2018 WL 2096275 (Exhibit 1) (hereafter, the “Federal Action”); (2) the original complaint in the Federal Action filed May 17, 2017 (Exhibit 2); (3) Plaintiff’s August 1, 2017 opposition to Defendants Motion to Dismiss the complaint in the Federal Action (Exhibit 3); (4) the November 17, 2017 Order Granting Motions to Dismiss with Leave to Amend in the Federal Action (Exhibit 4); (5) the First Amended Complaint in the Federal Action filed January 16, 2018 (Exhibit 5); (6) the November 16, 2017 Transcript of Proceedings in the Federal Action (Exhibit 6); (7) Plaintiff’s March 1, 2018 opposition to Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint in the Federal Action (Exhibit 7); (8) excerpts of the County of Santa Clara Charter (Exhibit 8); and (9) excerpts of the County of Santa Clara Ordinance Code (Exhibit 9).

All of the foregoing items are proper subjects of judicial notice as either a court record or the decisional, constitutional or statutory law of any state of the United States. (Evid. Code, § 452, subds. (a) and (d).) Accordingly, Defendants’ request for judicial notice is GRANTED.

III. Defendants’ Demurrer

In demurring to both of the claims asserted in Plaintiff’s Complaint, Defendants maintain that they are fatally deficient for the following reasons: (1) Plaintiff is collaterally estopped from re-litigating her breach of contract cause of action as it was already disposed of in Defendants’ favor in the Federal Action; (2) as a matter of law, medical staff bylaws are not an enforceable contract; (3) Plaintiff fails to sufficiently allege breach of the subject agreement; and (4) no claim for violation of Section 1102.5 can be stated against Drs. Smith and Nguyen because such a claim can only be maintained against Plaintiff’s employer. These arguments will be addressed in turn.

A. Breach of Contract (First Cause of Action)

As an initial matter, Defendants’ demurrer to the first cause of action on the grounds of uncertainty, that there is a defect or misjoinder of parties and that it cannot be ascertained whether the contract sued upon is written, oral or implied by conduct is OVERRULED. Plaintiff’s breach of contract cause of action cannot accurately be described as so unintelligible that Defendants cannot reasonably respond to it; consequently there is no basis to sustain the demurrer on the ground of uncertainty. (See Williams v. Beechnut Nutrition Corp. (1986) 1855 Cal.App.3d 135, 139, fn. 2.) Further, it is readily apparent that the contract upon which the first cause of action is predicated is written (see Complaint, ¶ 14) and Defendants otherwise fail to explain how there is a defect of misjoinder of parties in the Complaint relative to the first cause of action.

1. Collateral Estoppel

Turning to the substance of the instant demurrer on the ground of failure to state sufficient facts, Defendants’ first argument involves the issue preclusion component of the doctrine of res judicata. In its most succinct and narrow form, res judicata is described as a doctrine which “precludes parties or their privies from relitigating a cause of action [finally resolved in a prior proceeding].” (Vandenberg v. Superior Court (1999) 21 Cal.4th 81, 828 [internal citations and quotations omitted].) “Thus, res judicata does not merely bar relitigation of identical claims or causes of action. Instead, in its collateral estoppel aspect, the doctrine may also preclude a party to prior litigation from redisputing issues therein decided against him, even when those issues bear on different claims raised in a later case. Moreover, because the estoppel need not be mutual, it is not necessary that the earlier and later proceedings involve the identical parties or their privies. Only the party against whom the doctrine is invoked must be bound by the prior proceeding.” (Vandenberg v. Superior Court, 21 Cal.4th at 828 [internal citations and quotations omitted] [emphasis in original].)

Traditionally, the doctrine of collateral estoppel applies only if the following threshold requirements are met: (1) the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding; (2) the issue must have been actually litigated in the former proceeding; (3) it must have been necessarily decided in the former proceeding; (4) the decision in the former proceeding must be final and on the merits; and (5) the party against whom the preclusion is sought must be the same as, or in privity with, the party to the former proceeding. (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.) The party asserting collateral estoppel bears the burden of establishing these requirements. (See, e.g., Vella v. Hudgins (1977) 20 Cal.3d 251, 257.)

Defendants contend that the court in the Federal Action already considered and decided the issue upon which Plaintiff’s breach of contract cause of action is predicated- that the SCVMC Medical Staff Bylaws and the County Ordinance Code entitled her to due process before her position was terminated. However, as Plaintiff insists in her opposition, what the court actually determined was whether she had a viable property interest in her employment with SCVMC such that she could maintain a claim for federal constitutional violations under 42 U.S.C. § 1983. The court concluded that given the plain language of the County Ordinance and the bylaws, Plaintiff’s allegations were “insufficient to plausibly allege a property interest in employment under the standards set forth in Iqbal and Twombly.” (Egge v. County of Santa Clara (2018) 2018 WL 2096275, *4.) Accordingly, Plaintiff’s claims under 42 U.S.C. § 1983 were dismissed by the court, which then declined to exercise supplemental jurisdiction over Plaintiff’s state law claims given the absence of a viable federal claim.

Whether or not Plaintiff has a property interest under the due process clause of the Fourteenth Amendment is not an issue that need be reached in order to adjudicate her breach of contract claim in the instant action. For this claim, Plaintiff need only establish (1) the existence of an enforceable contract between herself and Defendants, (2) her performance or excuse for nonperformance thereunder, (3) Defendants’ breach of the agreement, and (4) damages to Plaintiff resulting from the breach. (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Thus, the “issues” underlying the breach of contract claim are not identical to the issues adjudicated by the federal court in connection with Plaintiff’s federal civil rights claims. The court otherwise did not actually and finally litigate the issue of whether the SCVMC Medical Staff Bylaws constituted an enforceable agreement between Plaintiff and Defendants. Although in its initial order granting Defendants motion to dismiss the claims asserted in Plaintiff’s original complaint the court found that the pleading failed to sufficiently allege the existence of a contract based on the SCVMC’s Medical Staff Bylaws, the court not only granted Plaintiff leave to amend, but never at any point thereafter found as a matter of law that the bylaws absolutely did not constitute an enforceable agreement. The court merely found that the allegations of the original complaint were insufficient to establish that the subject bylaws constituted a contract between Plaintiff and Defendants and then did not reach the sufficiency of the amended allegations of Plaintiff’s First Amended Complaint in that regard because it declined to exercise supplemental jurisdiction over her state law claims. Given the foregoing, Defendants’ assertion that Plaintiff’s first cause of action in the Complaint is barred by collateral estoppel is without merit.

2. Medical Staff Bylaws as Enforceable Contract

Turning to the issue of whether the SCVMC Medical Staff Bylaws (the “bylaws”) constitute an enforceable agreement between Plaintiff and Defendants, Defendants are correct that generally, medical staff bylaws on their own may not constitute employment contracts. (See O’Byrne v. Santa Monica-UCLA Med. Ctr. (2001) 94 Cal.App.4th 797, 808.) In O’Byrne, a physician brought an action against a hospital where he had applied for attending staff privileges alleging breach of a written contract based on the hospital bylaws after his request for some of the privileges was denied. The plaintiff physician had alleged, as Plaintiff does here, that the bylaws themselves constituted an enforceable agreement between himself and his employer, the defendant medical center.

In reaching its ultimate conclusion that, under California contract law, medical staff bylaws adopted pursuant to California Code of Regulations, title 22, section 70703 (“Section 70703”), subdivision (b), do not in and of themselves constitute a contract between a hospital and a physician on its medical staff, the O’Byrne court first cited to and discussed the case of Janda v. Madera Community Hospital (E.D. Cal. 1998) 16 F.Supp.2d 1181, where the court similarly considered whether a hospital’s bylaws create an enforceable contract. After noting that there was a split of authority, with the majority of state courts concluding that hospital bylaws, when approved and adopted by the governing board, are a binding and enforceable contract between the hospital and the physicians, the Janda court began its analysis by setting forth the essential elements of a contract as provided by Civil Code section 1550, namely: “(1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient cause or consideration.” (Janda, supra, 16 F.Supp.2d at 1186.) Because the hospital’s bylaws were more expansive and comprehensive than those required generally by California Code of Regulations, title 22, section 70701, to be adopted by a hospital’s governing body, the Janda court concluded that the physician’s agreement to abide by the bylaws in exchange for his services to the hospital constituted valid consideration, as he and the hospital were both required to “do that which neither [was] legally bound to do under the California law governing rules for hospital medical staff.” (Janda, supra, 16 F.Supp.2d at 1188.) The foregoing code section required the bylaws adopted to have provisions for the appointment and formal organization of medical staff.

Mindful of the Janda court’s analysis, the court in O’Byrne noted that the plaintiff before it did not explain how the bylaws at issue were more expansive or comprehensive than those provided by law or how he and the medical center had conferred on each other any more than what was required by law, as had been the case in Janda. It further highlighted a critical distinction between Janda and the circumstances before it in that Janda concerned the hospital’s governing body’s bylaws, while its case involved the medical staff bylaws. Section 70703 of title 22 of the California Code of Regulations requires physicians to comply with rules adopted by the hospital’s medical staff, not “bylaws adopted by the governing body of the hospital.” Thus, because the physician plaintiff in Janda agreed to do more than was legally required of him, the consideration necessary to find an enforceable agreement was found. Similar consideration was not clearly present in the situation presented in O’Byrne, with the court also noting that a provision contained in Assembly Bill No. 405 (1997-1998 Reg. Sess.), which was introduced in 1997 and provided that medical staffs of hospitals were to develop and adopt staff bylaws and that such bylaws would constitute a binding contract between the hospital and staff, was stricken by amendment. By deleting the foregoing provision, the O’Byrne court explained, the Legislature expressed its lack of belief that the medical staff bylaws would create a binding contract between a health facility and its staff. (O’Byrne v. Santa Monica-UCLA Med. Ctr., supra, 94 Cal.App.4th at 810.) Thus, the court explained, following California contract law in the situation before it (where the absence of consideration was fatal to finding an enforceable agreement), would “lead to a result consistent with the legislative intent and public policy considerations evident in the history of Assembly Bill 405. The physicians breach of contract claim therefore failed.

Here, Defendants principally rely on O’Byrne and Janda in arguing that the bylaws at issue do not constitute a contract between themselves and Plaintiff under California law. Plaintiff’s summary allegation, Defendants explains, that the bylaws are expansive does not support her contract claim, and the Complaint fails to sufficiently plead that the bylaws were part of her employment contract.

While Defendants are correct that O’Byrne exists as a possible roadblock to the ultimate success of Plaintiff’s breach of contract claim, the fact remains that on demurrer the Court must accept as true the material allegations of Plaintiff’s Complaint and she alleges that the bylaws were “more expansive and comprehensive than the minimum requirements of California law.” (Complaint, ¶ 14.) Whether the bylaws can accurately be summarized as Plaintiff alleges is a factual question not appropriately resolved on demurrer. It must be emphasized that O’Bryne involved a motion for summary judgment, and thus the Court was permitted to consider items beyond the pleadings, which this Court cannot do at this stage of the proceedings. Further, how expansive the bylaws truly are relates to the issue of whether there was sufficient consideration to render the bylaws an enforceable contract, and the Court notes that consideration need not be pleaded where the contract at issue is in writing, as the written instrument itself is presumptive evidence of such consideration. (Civ. Code, § 1614.) A complaint cannot be attacked on general demurrer for insufficiency of the consideration pleaded. (Brooks v. Fidelity Savings & Loan Assn. (1938) 26 Cal.App.2d 114, 116.)

The Court must therefore also accept as true at this juncture Plaintiff’s allegation that the bylaws were a component of her contractual employment agreement with the County. In O’Bryne, the court observed that whether medical bylaws become incorporated into a separate employment contract between a hospital and a physician is a separate question from whether the bylaws in and of themselves constitute an enforceable agreement, and concluded that it needed not to consider that question because the plaintiff physician only alleged that the bylaws constituted the contract between himself and his employer and presented evidence of no other contract. Here, Plaintiff has pleaded that the bylaws were a component of her employment contract, and that “the bylaws created privileges and obligations, both expressly and implied-in-fact by the conduct of the parties.” (Complaint, ¶ 14.)

Therefore, the Court cannot find at this time that the SCVMC Medical Staff Bylaws do not, as a matter of law, constitute an enforceable agreement between Plaintiff and Defendants. Consequently, Defendants’ arguments in this vein do not provide a basis upon which to sustain their demurrer to Plaintiff’s first cause of action for breach of contract, at least with respect to the County alone. This is because, as Defendants argue in their papers, there are no facts alleged which establish that Drs. Smith and Nguyen personally entered into any contract with Plaintiff. Plaintiff concedes this point by requesting that she be granted leave to amend her breach of contract claim relative to the individual physicians. Such leave is granted.
3. Sufficiency of Elements of Cause of Action

Defendants next argue that Plaintiff has not sufficiently pleaded the element of breach, with a failure to articulate which contractual provisions were breached, how Defendants breached those provisions, and the nature of the damages suffered as a result. Upon review of the allegations of the Complaint, the Court finds this argument persuasive. Although Plaintiff’s Complaint contains many specific factual allegations, she does not clearly set forth which specific contractual provisions were breached by Defendants and how. Given this failure, Defendants’ demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

B. Violation of Labor Code section 1102.5 (Second Cause of Action)

Turning to the second cause of action for violation of Section 1102.5, Defendants’ demurrer to this claim on the ground that there is a defect or misjoinder of parties is OVERRULED. Demurrers on this ground lie only where some third person must be joined before the action can proceed or there is no common question of law or fact as to the defendants. Neither of the foregoing circumstances are present here, at least based on what is pleaded in the Complaint. Thus, they do not provide a basis upon which to sustain the demurrer.

Defendants maintain that Plaintiff cannot state a claim for violation of Section 1102.5 against Drs. Smith and Nguyen because the statute only imposes liability against employers and not personal liability against individual employees. Section 1102.5 is a whistleblower statute which is intended to encourage employee whistle-blowers to report unlawful acts without fearing retaliation. (See Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 287.) As relevant here, this code section reads, in pertinent part that:

[a]n employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information, to a government or law enforcement agency ….

(Lab. Code, § 1102.3, subd. (b) [emphasis added].)

Plaintiff focuses on the foregoing italicized language in arguing that individual liability under Section 1102.5 is permissible. In 2014, the California legislature revised Section 1102.5 to include this language; prior to that point, courts “reliably found that [Section] 1102.5 precluded individual liability.” (United States ex rel. Lupo v. Quality Assurance Services, Inc. (S.D. Cal. 2017) 242 F.Supp.3d 1020, 1030.) Plaintiff notes that no published California state decision has settled the issue of individual liability under Section 1102.5, and urges the Court to refrain from resolving an issue of statutory interpretation on demurrer.

Because the meaning of a statute is strictly a legal issue, however, there is no reason for the Court to delay making a determination as to whether or not Plaintiff can maintain a claim under Section 1102.5 against Drs. Smith and Nguyen individually. (See Jones v. Pierce (1988) 199 Cal.App.3d 736, 741.) While Plaintiff is correct that no published decision by the California courts has settled this issue, numerous federal courts have considered it and concluded that the amendment does not create a basis for liability against individual employees under Section 1102.5. (See, e.g., United States ex rel. Lupo v. Quality Assurance Services, Inc., supra, 242 F.Supp.3d at 1030; Tillery v. Lollis (E.D. Cal. 2015) 2015 WL 4873111, *9; Vera v. Con-way Freight, Inc. (C.D. Cal. 2015) 2015 WL 1546178, *1.) Moreover, the California Supreme Court has come to the same conclusion when evaluating similarly worded statutes. (See, e.g., Reno v. Baird (1998) 18 Cal.4th 640, 645 [affirming that no individual liability exists under the FEHA based on the statute’s definition of “employer” to include “any person acting as an agent of an employer ….”]; see also Jones v. Lodge at Torrey Pines P’Ship (2008) 42 Cal.4th 1158, 1162 [finding that use of “person” in portion of the FEHA prohibiting retaliation does not compel finding of individual liability and noting that the Legislature can signal individual liability when it means it such as the portion of the FEHA prohibiting harassment].) The Court sees no reason to deviate from these well-reasoned findings and therefore finds that no individual liability exists under Section 1102.5. Consequently, Defendants’ demurrer to the second cause of action as to Drs. Smith and Nguyen on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.