## Facts

- Dr. Robert L. Berry practiced anesthesiology with Lakeview Anesthesia Associates (LAA) at Lakeview Regional Medical Center (Lakeview Medical) in Louisiana and was an LAA shareholder from November 2000 to March 13, 2001.
- Lakeview Medical investigated Berry after complaints of suspicious, undocumented Demerol withdrawals; management found excessive withdrawals and inadequate documentation.
- LAA partners concluded Berry’s narcotics use required control and monitoring; Berry did not comply. He was later found on call “asleep, groggy, and unfit to work” and removed from duty.
- LAA terminated Berry “for cause” on March 13, 2001. Despite recognizing impairment and patient-safety risk, no report was made to hospital governance, the state medical board, or the National Practitioner Data Bank.
- Berry sought privileges at Kadlec Medical Center (Kadlec), a Washington hospital. Kadlec’s credentialing process included requesting references from LAA physicians and information from Lakeview Medical.
- Two months after Berry’s termination, LAA physicians Dr. Mark Dennis and Dr. William J. Preau, III sent reference letters strongly recommending Berry without disclosing his on-duty drug impairment or termination for cause.
- Lakeview Medical sent a brief verification letter stating Berry’s medical staff dates and that there were no “pending disciplinary actions or restrictions,” without offering an affirmative recommendation.
- Kadlec granted privileges. While at Kadlec, Berry allegedly practiced under the influence of Demerol and negligently administered anesthesia, causing a patient’s catastrophic brain injury.
- Kadlec and its insurer (Western Professional Insurance Co.) settled the malpractice claim for more than $8 million and sued LAA, its physicians, and Lakeview Medical for damages based on allegedly misleading credentialing communications.

## Issues

1. Under Louisiana law, whether physicians and hospitals responding to credentialing inquiries owe a duty to avoid affirmative misrepresentations in reference or verification communications.
2. Whether Louisiana law imposes an affirmative duty to disclose adverse information about a physician’s impairment or termination absent a special relationship or direct pecuniary interest in the hiring transaction.
3. Whether the alleged misrepresentations were a legal cause of Kadlec’s losses, considering Kadlec’s credentialing practices and other available information.

## Decision

- The Fifth Circuit held that when LAA physicians chose to provide reference letters, they assumed a duty to use reasonable care to avoid misleading affirmative statements; a jury could find the unqualified endorsements actionable as negligent misrepresentation.
- The court rejected a general, affirmative duty under Louisiana law to volunteer adverse information in response to credentialing inquiries absent a special relationship or direct pecuniary interest.
- The court reversed the judgment against Lakeview Medical, concluding its verification letter was not an affirmative misrepresentation and Lakeview Medical had no broader duty to disclose Berry’s impairment or termination circumstances.
- The court vacated the remainder of the judgment and remanded for further proceedings concerning LAA and its physicians, including a more focused analysis of legal causation and damages.

## Legal Principles

- Under Louisiana negligent misrepresentation doctrine, a speaker who has a duty to supply correct information may be liable for providing false or affirmatively misleading information that is justifiably relied on and causes damage.
- Voluntarily providing a professional reference can create a duty of reasonable care to ensure the communication is not affirmatively misleading, even if it does not disclose every negative fact.
- Absent a special relationship or direct pecuniary interest in the relevant transaction, Louisiana law generally does not impose an affirmative duty to disclose damaging information in credentialing responses.
- A neutral verification limited to dates and the absence of pending restrictions, without false assertions or endorsements, is not necessarily an actionable misrepresentation.
- Liability requires legal causation; courts may examine the recipient’s credentialing practices, what would have occurred with accurate information, and whether intervening events break the causal chain.

## Conclusion

The Fifth Circuit drew a line between actionable affirmative misrepresentation in physician reference letters and nonactionable silence: unqualified endorsements that omit known, disqualifying facts may support negligent misrepresentation liability, but Louisiana law does not generally require hospitals or physicians to volunteer adverse information in credentialing responses absent a qualifying relationship, and causation must be specifically proven.


Kadlec Med. Ctr. v. Lakeview Anesthesia Assocs., 527 F.3d 412 (5th Cir. 2008)