Novotny v. Sacred Heart Health Services
2016 S.D. 75
| S.D. | 2016Background
- Plaintiffs (Novotny and Arens) sued Dr. Alan Sossan and affiliated hospitals and individuals alleging negligence, negligent credentialing, fraud, bad-faith peer review, racketeering, and related claims after treatment by Sossan.
- Plaintiffs sought peer review committee materials; defendants asserted those materials are privileged under SDCL 36-4-26.1 (peer review privilege).
- The circuit court held the statute constitutional only if a "crime-fraud" exception applies, concluded Plaintiffs made a prima facie showing of fraud, and ordered production of certain "objective" materials without in camera review and submission of other materials for in camera review.
- Defendants appealed intermediate under SDCL procedure, challenging (1) compelled production of third-party materials possessed by peer review committees and (2) creation/application of a judicial crime-fraud exception to SDCL 36-4-26.1.
- The Supreme Court analyzed the statutory scope of SDCL 36-4-26.1/36-4-42/36-4-43, concluded the privilege covers "proceedings, records, reports... or any other data whatsoever" relating to peer review activity (including objective facts generated for or by the committee), and held documents originating from independent sources may be obtained from those original sources but are not discoverable from the peer review committee itself.
- The Court reversed the circuit court: peer review materials in committee possession are protected; the judiciary will not create a crime-fraud exception to SDCL 36-4-26.1 (such changes belong to the Legislature). Plaintiffs remain able to pursue discovery from non-committee sources.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of SDCL 36-4-26.1: are materials in a peer review committee's possession discoverable? | Statute should not shield objective, independently sourced materials; court may order production. | SDCL 36-4-26.1 protects all proceedings/records/any data in committee possession relating to peer review. | The statute protects materials in the committee's possession; items originating elsewhere may be discovered from original sources but not from the committee. |
| Discoverability of third-party items that committees obtained (e.g., privilege applications, external reports, NPDB info) | These items are not privileged merely because a committee possesses them; Plaintiffs need access to objective info (applications, background checks, complaints). | Information created by or at the behest of a committee is privileged; independent-source items remain discoverable from their original sources but not from the committee. | Adopted rule: information created by/for committee is protected; independent-source items do not become privileged merely because a committee received them, but they must be obtained from original external sources, not from the committee. |
| Constitutionality of SDCL 36-4-26.1 vis-à-vis open courts / state due process or remedy clauses | Privilege, without exception, infringes plaintiffs' right to open courts and access to evidence needed to prove fraud; thus a crime-fraud exception is necessary. | Privilege does not abolish causes of action or deny access to alternative sources; judicially creating a crime-fraud exception is inappropriate. | Privilege does not violate the open-courts provision or procedural due process as applied here; the Court will not judicially create a crime-fraud exception—such changes are for the Legislature. |
| Need for in camera review before compelling production | Plaintiffs argued some objective materials could be produced without in camera review. | Defendants argued protections cover materials in committee possession and production should be limited. | Court reversed the order compelling production without in camera review and instructed vacatur of the production order; materials remain protected unless obtained from original sources. |
Key Cases Cited
- Shamburger v. Behrens, 380 N.W.2d 659 (S.D. 1986) (recognizing peer review confidentiality for staff competency evaluations)
- Krusac v. Covenant Med. Ctr., Inc., 865 N.W.2d 908 (S.D. 2015) (statutory terms "record" and "data" include objective facts)
- Pawlovich v. Linke, 688 N.W.2d 218 (S.D. 2004) (importance of peer review in professional regulation)
- Larson v. Wasemiller, 738 N.W.2d 300 (Minn. 2007) (negligent credentialing may be shown by what was known or should have been known; confidentiality provisions do not bar claim)
- Adams v. St. Francis Reg'l Med. Ctr., 955 P.2d 1169 (Kan. 1998) (open-courts/due process concerns where confidentiality blocked access to critical evidence)
- Falco v. Institute of Living, 757 A.2d 571 (Conn. 2000) (constitutional right to redress does not automatically override psychotherapist privilege)
- State ex rel. Wheeling Hosp., Inc. v. Wilson, 782 S.E.2d 622 (W. Va. Ct. App. 2016) (statute-provided rule that materials available from original sources remain discoverable)
- Green v. Siegel, Barnett & Schutz, 557 N.W.2d 396 (S.D. 1996) (open-courts clause interpreted as guaranteeing remedy but permitting reasonable conditions on causes of action)