Major Ruling: Court Limits Attorney–Client Privilege For Healthcare Provider Corporations

In a major decision that affects healthcare-provider corporations, the Washington Supreme Court significantly limited attorneys’ ability to engage in privileged conversations with the provider corporation’s employed physicians and other medical staff.

The Court held that, except in narrowly tailored circumstances, the State’s common-law prohibition of defense attorneys’ ex parte communications with a plaintiff-patient’s non-party physicians supersedes the corporation’s attorney–client privilege with its employed physicians. Youngs v. Peacehealth, 316 P.3d 1035 (Wash. 2014). You may access the opinion here.

Battle of the Privileges

Washington’s physician–patient privilege statute precludes a physician from revealing her patient’s communications. But the patient automatically waives this privilege “as to all physicians or conditions” 90 days after filing a personal injury or wrongful death case. RCW § 5.60.060(4)(b). In Loudon v. Mhyre, 756 P.2d 138 (Wash. 1988), the Washington Supreme Court prohibited defense attorneys from holding ex parte communications with a plaintiff-patient’s non-party treating physicians.

But Washington also follows the corporate attorney–client privilege adopted by the U.S. Supreme Court in Upjohn Co. v. United States, 449 U.S. 383 (1981). This standard provides that a corporation’s attorneys may have privileged communications with a corporate employee regardless of the employee’s position in the corporate hierarchy. And when healthcare-provider corporations employ physicians, the Upjohn rule allows the provider-corporation’s attorneys to have privileged communications with its physicians.

The Loudon no-contact rule (derived from the physician–patient privilege) and the corporate attorney–client privilege conflict in medical practice actions against the provider-corporations. When a patient sues a provider-corporation, the attorney–client privilege protects the corporate attorney’s communications with employed treating physicians. But Loudon simultaneously prohibits the corporate attorney from having ex parte interviews with these same treating physicians.

The Victor

The Court resolved this privilege battle largely in favor of patient confidentiality. Wanting to avoid forcing the injured plaintiff-patient “to suffer the additional injury of privacy invasion,” the Court rejected the argument that the corporate attorney–client privilege completely trumps the physician–patient privilege.

The Court instead adopted a so-called “modified version of the Upjohn test.” It ruled that, in medical malpractice actions, a provider-corporation’s attorneys may have ex parte communications with its non-party treating physicians so long as:

1. The communications meet the general prerequisites for establishing the privilege (confidential and for purposes of rendering legal advice);
2. The communication is with a physician who has direct knowledge of the event triggering the malpractice action; and
3. The communications concern the facts of the alleged negligent incident.

To the Victor Go the Spoils

The Court’s decision greatly affects the provider-corporation attorney’s ability to communicate with (non-party) employed physicians who treated the plaintiff-patient either before or after the negligent event. The Court prohibited ex parte communications with employed physicians concerning the plaintiff-patient’s pre-event medical condition or post-event recovery. Under this ruling, a hospital sued for malpractice cannot have its attorney interview its own employees without plaintiff’s counsel’s presence.

POP Post-Battle Analysis

The Court’s decision provides an unsatisfying analysis of the interaction between these two evidentiary privileges in medical malpractice actions. The Upjohn Court held that the corporate attorney–client privilege covers the company lawyer’s communications with company employees regardless of their employment position.

The Youngs Court identified silent topics to parse the Upjohn decision, stating that Upjohn “did not articulate a fixed set of criteria by which to determine what specific conversations with lower-level employees must remain privileged.” And seizing upon Upjohn’s purported failure to detail “specific conversations,” the Youngs Court limited the corporate attorney–client privilege to specific conversations about the negligent event at issue.

The Court’s handling of the common-law at-issue waiver doctrine, reinforced by the physician–patient privilege statute that automatically waives the privilege “as to all physicians or conditions,” is not reassuring. A plaintiff-patient’s medical condition, including pre- and post-event conditions, becomes relevant when she files suit, but the Court essentially said that the Loudon no-contact rule applies despite this waiver.

The Youngs decision significantly limits the corporate attorney–client privilege for provider corporations that employ physicians. The privilege effectively does not exist unless the employed physician has direct knowledge of the medical event giving rise to the malpractice action. It will be interesting to see how the new Youngs rule applies in practice and how this decision affects other state courts that have yet to address this battle-of-the-privileges issue.