The Letter of Recommendation: A Two Way Legal Instrument

The Letter of Recommendation: A Two Way Legal Instrument

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Letters of recommendation (LORs) are a common part of the job application. Employers rely on them to help choose new hires. Many physicians have written reference letters for their peers and trainees. It is important to appreciate that LOR is a legal instrument that holds not only the applicant accountable but also the writer. It is a signed document that is retained in the employee’s files and its origin can be traced.

I will describe the case of a physician group which was successfully sued for writing an inaccurate reference letter for a former colleague. Litigation involving inaccurate and misleading references in the broader employment arena will be discussed to highlight the nature of liability in LORs.

Background

An anesthesiology group was successfully sued for providing misleading information about a former colleague in a reference letter. Two separate cases reached the Fifth Circuit Court of Appeals involving the group. In neither case was the verdict of the Appellate court in favor of the group.

Kaldec Medical Center v. Lakeview Anesthesia Associates

The case revolved around an anesthesiologist with a drug problem. He worked at Lakeview Anesthesia Associates (LAA). LAA served Lakeview Medical Hospital (LM). LM conducted an internal investigation after staff became suspicious of the anesthesiologist’s drug abuse.

LM discussed the findings with LAA. The anesthesiologist failed to improve, despite a warning.  On one occasion, the anesthesiologist did not answer his pager on call and was in an impaired state in the call room. LAA dismissed the anesthesiologist for cause stating “you have reported to work in an impaired physical, mental, and emotional state. Your impaired condition has prevented you from properly performing your duties and puts our patients at significant risk . . . .”

LM and LAA did not report the anesthesiologist to any disciplinary agency such as the state board of medical examiners or the National Practitioner’s Data Bank. LM locked away the files concerning his investigation. The LAA partners recorded only that the anesthesiologist was “no longer employed by [the group].”

The anesthesiologist applied for a locum tenens in another state. The new hospital, Kaldec Medical Center (KMC), requested references for credentialing. LAA submitted letters with effusive praise such as “excellent” clinician and “asset to any anesthesia service”. LM furnished a letter, indifferent in tone, stating only the dates he was on active medical staff. Neither LAA nor the LM disclosed his drug abuse.

The anesthesiologist was credentialed at KMC. Soon suspicion about substance abuse emerged. On one occasion a patient had to be revived with Narcan after he gave excess morphine during a surgery.

In the relevant suit, he was anesthetizing a 31-year-old mother for a tubal ligation. She had agreed to tubal ligation following an uneventful delivery of her third child. During the procedure, the patient had a cardiopulmonary arrest. The anesthesiologist failed to note the arrest. The patient suffered anoxic brain injury leading to a permanent vegetative state. The anesthesiologist confessed to abusing Demerol and entered a drug rehabilitation program. The patient’s family sued the anesthesiologist and KMC. They settled out of court.

KMC and its insurer filed against LAA and LM. KMC sought damages for failing to disclose the anesthesiologist’s drug use in the reference letters. Since the lawsuit crossed state boundaries it was taken up by the Federal District Court in Louisiana.

KMC claimed that it was misled by the LAA/LM into hiring the anesthesiologist, the defendants had a duty to inform truthfully and they breached that duty through omission and misrepresentation, and reasonably relying on inaccurate information led to KMC’s damages. 

The court agreed and found the defendants proportionately liable for the damages, and divided the damages ($8.5 million) as such: LAA 25%; LM 25%; KMC 17%; anesthesiologist 33%.

The case was appealed in the Federal Fifth Circuit Court. The circuit court reaffirmed most of the district court’s decision. The court reasoned that there may have been an ethical obligation but no fiduciary or contractual duty to disclose information about the physician’s past negligent behavior. The court admitted that no court in or outside of the state had ever imposed this duty on an employer.

However, and this is a crucial point, the court stated that in an absence of duty when an employer volunteers to disclose information about an employee, it assumes a duty to disclose accurately. In other words, writing the letter was a choice that LAA and LM made, and by doing so had assumed a duty not to misrepresent.

The court found affirmative and negligent misrepresentations in the letters from LAA. The court remarked that their letters were “false on their face and misleading”. Regarding the issue of legal cause, the court found that any negligence by a new employer does not absolve the former negligent parties, namely the LAA and LM, from liability.

The court noted that since the anesthesiologist had used narcotics while on duty, it was foreseeable to LM and partners that he could do so again. By omitting his drug abuse in their communication with KMC the defendants should have foreseen that the employer may “miss the warning signs” of the anesthesiologist’s behavior which was dangerous to patients. The federal circuit court upheld the federal district court’s ruling on KMC, LAA and the anesthesiologist.

The Federal Fifth Circuit Court absolved LM from liability. The court concluded that LM’s letter was a contrast to the letters from LAA, which commented on his performance. LM had revealed nothing about the anesthesiologist’s performance or character, good or bad, and was not misleading. The court cleared LM and readjusted the liability between KMC, partners at LAA and the anesthesiologist.

Preau v. St. Paul Fire & Marine Insurance Company.

In a related case, the Federal Fifth Circuit Court ruled that a physician’s professional insurance was not responsible for liability arising from letters of recommendation.  One of the LAA partners filed a suit against his insurer in the federal district court for refusing to cover the damages. The partner argued that the insurance should cover him against bodily injuries incurred by the patient who had died in KMC. The insurer refused, citing that commercial general liability policies protecting a physician from direct bodily injury do not cover third party claims resulting from misrepresentations from reference letters.

The district court sided with the partner. The Federal Fifth Circuit Court disagreed and overturned the district court’s verdict. The circuit court stated that the financial claim against the partner was not for the deceased patient’s bodily injuries but for the breach of duty to be truthful in references that it owed to KMC. The LAA partner had to pay the damages out of his pocket.

Duty to disclose accurately versus duty to disclose

Liability from inaccurate reference letters is not new and several state and federal court cases have examined it before.

In Cohen v. Wales, Moore v. St. Joseph Nursing Home, Inc., Richland School District v. Mabton School District, and Johnson v. United Parcel Service, courts have maintained that there is no duty to disclose someone’s character or performance in the absence of a special relationship between the parties. However, there is a duty to not to misrepresent if one elects to write, as seen in Randi v. Muroc Joint Unified School District, Gutzan v. Altair Airlines, Davis v. Board of County Commissioners of Dona Ana County, Govea v. City of Norcross, and Singer v. Beach Trading Co. Additionally, as seen in Nationwide Mut. Ins. Co. v. Lake Caroline, Inc., commercial general liability policies may not cover damages as the result of intentional falsification.

In Cohen, a teacher’s former employer was not liable for failing to disclose past charges of sexual misconducts, leading to hiring at a new school where the teacher abused another student. In absolving the former employer from liability, the court remarked that “[the] mere recommendation of a person for potential employment is not a proper basis for asserting a claim of negligence where another party is responsible for the actual hiring.”

Similarly, in Moore, the representative of a murdered security guard who was killed by a co-worker sued the assailant’s previous employer for not disclosing his drug and alcohol abuse and history of violence. The former employer was open that it provided no information other than the dates of employment. The Michigan Court of Appeals agreed and ruled that the employer had no duty to disclose or warn the new employer of an employee’s dangerous tendencies.

In Richland, a school district fired its employee, a custodian, after learning that the employee was forced to resign from his previous job in return for dismissal of three counts of child abuse. The school district then sued the previous employer for not disclosing the charges in the recommendation letter.  The school district argued that the employer violated a duty to disclose, especially for a job where children were involved. The case went into appeals. The Washington Court of Appeals sided with the former employer and ruled that there was no duty to disclose so long as the letter did not comment about the employee’s character.

In Johnson, the Kentucky Court of Appeals ruled that a duty to disclose a person’s performance or character does not exist. In Johnson, the estate of a deceased employee who was killed by a co-worker brought suit against the assailant’s former employer for failure to disclose his aggressive behavior.

Misrepresentations can hold an employer to liability, as ruled by the California Supreme Court in 1997 in Randi. In Randi, an employer failed to disclose the vice principal’s alleged sexual misconduct, mentioning only the positive aspects of the vice principal’s tenure. He was hired at a new school where he allegedly molested a female student. The previous employer was found negligent.

In Gutzan, the Federal Third Circuit Court of Appeals held that false statements could hold the writer liable. In Gutzan, an employment agency falsely mitigated a candidate’s criminal record.

Specifically it said that the candidate’s assertion that an accusation of sexual misconduct was a false accusation was verified, when there was no verification. Because of the reassurance, Altair Airlines hired him, where he sexually assaulted a colleague. The agency was found liable for misrepresentation.

In Davis, a jail wrote positively about a guard even though he had sexually assaulted female prisoners. The guard was hired at a hospital where he sexually abused a patient. The New Mexico Court of Appeals ruled that in choosing to write, the writer had a duty to not misrepresent.

In Govea, a police officer voluntarily resigned after an internal investigation found negligent behavior on duty. The officer had left a loaded firearm in an unattended motor vehicle. In return for voluntary resignation, the employer agreed to not disclose his negligence. In a new job, the officer gave a minor his gun to play with and the minor shot and killed himself. When the officer’s past events came to light, the new employer sued his previous employer for failure to disclose his carelessness. The case was decided by Georgia Circuit Court of Appeals, which ruled that by failing to disclose accurately the employer was liable.

In Singer, the employer submitted incorrect information about an employee’s job title. Specifically, the employer said that she had worked as a customer service representative, instead of her actual role of a manager, as she had written on her resume. Because of the discrepancy the new employer dismissed her. The employee sued the former employer for defamation and the New Jersey Supreme Court held that providing false information to an employer in a reference letter held the former employer liable for damages that resulted from reasonably relying on the information.

In Nationwide, the Fifth Circuit upheld that an organization covered for bodily injury and property damage was not covered for “injury arising out of oral or written publication of material, if done by or at the discretion of the insured with knowledge of its falsity.”  The case involved an organization that was covered by Nationwide’s Commercial General Liability Coverage. The organization had a contract dispute. When sued, the organization sought protection under the insurance. Nationwide refused on the grounds that liability from making intentionally false statements, the basis of the contract dispute, is not protected by insurance, an argument that the circuit court upheld upon appeal.

The cases underscore four points: (1) one is not required to write about someone’s character or performance, (2) if one elects to write, they have a duty not to misrepresent competence or character that could affect performance, (3) failing in that duty could hold one personally responsible for damages, and (4) damages due to misrepresentation may not be covered by general liability policies.

Implication for Physicians

How should physicians write a letter of recommendation in lieu of its legal significance? The answer will vary between individuals and organizations; and many have developed their own rules and guidelines. There are three questions to ask: what is a legal instrument? When is there a duty to disclose in the legal instrument? And what constitutes as breach of that duty?

A legal instrument is a formally- executed written document that can be attributed to its author, which records and expresses a legally enforceable act, process, or contractual duty, obligation, or right and therefore evidences that act, process or agreement. Courts have maintained that LORs are legal instruments, opening its authors to liability for misrepresentation.

The duty to disclose is complicated. A mandated duty to disclose exists only in “special circumstances such as a fiduciary or confidential relationship between the parties, which, under the circumstances, justifies the imposition of the duty.” The courts have not imposed a duty on individuals to write LOR.  By ruling that LORs are legal instruments, the courts have imposed a duty that the letter’s content be truthful.

What constitutes a breach of duty? Under Louisiana law, the elements for intentional misrepresentation are:  (1) misrepresentation of a material fact, (2) made with intention to deceive, and (3) causing justifiable reliance with resultant injury.  The elements for negligent misrepresentation are: (1) existence of a duty to supply correct information, (2) breach of that duty by omission or affirmative misrepresentation, and (3) breach causing damages to plaintiff based on reasonable reliance on the misrepresentation. Additionally, where there is silence, misrepresentation arises when there is a mandated duty to disclose the information.

In summary, while writing the LOR is not a duty, if a person chooses to write, he or she must not misrepresent.

Conclusion

The case is extreme. The reference letter was opposite the character of the anesthesiologist. The partners of LAA praised a colleague they had fired for abusing anesthetic medication. The disconnection between the LOR and reality was wilful. The lessons are taut and reinforce the adage “if you do not have something positive to write about a person do not agree to write the LOR”.

Reference letters may become bland and contain non-exculpatory statements which offer no information about a physician’s competence, work ethic or citizenry. This is fine if physicians also wrote letters which were full of praise, and if there was a correlation between the blandness of a letter and incompetence of the physician. New hiring departments could read between the lines and the value of a letter of reference to discern would be retained. Silence may serve as a red flag. The author who is reluctant to disclose in writing could discuss a physician’s competence over the phone.

The most salient part of this case is that the liability was covered by neither the physician’s professional nor umbrella insurance policy. The extrapolation to minor transgressions of competence and professionalism should be resisted, though. There is a distinction between crime and gross professional misconduct in a physician (essential facts) and sub-optimal work ethic, undesirable temperament or citizenry (unpleasant facts). The key is not to misrepresent. Writers of letters of recommendations should follow the Golden Rule: write in the letter what they expect to read were they the employer.

Varon Sethi, MD is a radiologist at Penn.

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