Most Kaiser Defenses Axed in Scorching Suit

OAKLAND, Calif. (CN) - A judge rejected most of Kaiser Foundation Health Plan's objections to a wrongful termination and libel suit brought by one of its chief administrative officers who complained that Kaiser was funneling money to for-profit entities.

Carrie Harris-Muller sued Kaiser in Alameda County Superior Court in October 2011. Harris-Muller claimed she had been fired for protesting that the nonprofit foundation was funneling money to related for-profit Kaiser entities, rather than focusing on care and services to the community, as required by its tax-exempt status.

Harris-Muller said in her complaint that Kaiser's Mid-Atlantic subsidiary used only 2.5 percent of its revenue to provide community benefits in 2010, that the regional branch provided no care to indigent or uninsured people, and was not a Medicaid-participating health plan.

"Kaiser's intentional deficiency in charitable expenditures resulted in surplus profits exceeding $5 billion," Harris-Muller said in her complaint. "Although Kaiser failed to come anywhere near the threshold level of community benefits provided by other hospitals, Kaiser still compensated its executives, who were responsible for overseeing the provision of community benefits, at approximately 110 percent of their target bonuses," she said.

Harris-Muller claimed that the issue came to a head in February 2011, when several employees sent a lengthy "bullying letter" to Kaiser Foundation's top management. According to Harris-Muller, the content of the letter "focused on the 'hostile, harassing environment' employees were subjected to on a daily basis."

Harris-Muller's supervisor accused her of writing the letter, which she denied, according to her complaint. She said she was "mentally and physically destroyed by the humiliating allegations and fell deeper into isolation from her colleagues, which made coming into work each day painful and agonizing."

Harris-Muller claimed that her objections to Kaiser's profit-motivated decisions led to her termination. Since then, she has been informed that her supervisor told her staff that the decision to terminate her "was made by the highest levels of the organization," according to her complaint.

Kaiser Foundation filed a demurrer in November 2011. In it, Kaiser said that Maryland law, not California law, must apply to Harris-Muller's claims, and that she has no standing in a California court.

Harris-Muller lives in Maryland, according to her complaint.

Judge Robert Freedman disagreed.

"The argument that Maryland law should apply to all causes of action, even if successful, does not establish that plaintiff Carrie Harris-Muller has failed to state facts sufficient to constitute a cause of action," Freedman wrote.

"The first, fourth, and fifth causes of action [wrongful termination, negligent supervision, and intentional infliction of emotional distress] are not premised solely on violations of California statutes but instead are in the nature of torts that are recognized in both Maryland and California, as Kaiser acknowledges," Freedman found.

"Although the labels of the second and third causes of action include citations to California statutes, those labels also include the theories 'slander' and 'libel' which Kaiser acknowledges are recognized torts under Maryland law. ...

"Standing turns on whether the plaintiff has alleged harm from the defendants' conduct, not on the court in which the action is brought. California courts may adjudicate causes of action involving Maryland law, just as Maryland courts may adjudicate causes of action involving California law," Freedman wrote in rejecting the first element of Kaiser's objection.

"Second, plaintiff has alleged sufficient facts, for pleading purposes, regarding the alleged nexus between her termination and conduct that could be considered 'protected activity,' Freedman wrote. "Whether a sufficient 'nexus' exists is a factual matter that is not properly resolved at the pleading stage. Kaiser has not cited sufficient authority to the effect that California or Maryland law precludes a cause of action for wrongful termination in violation of public policy where the employee's duties include monitoring the employer's compliance with the law. Although Kaiser may be correct that the allegations regarding the 'bullying letter' cannot, in themselves, support this cause of action in light of plaintiff's allegations that she did not author the letter, there are allegations regarding other conduct." (Citations omitted.)

Freedman also rejected Kaiser's objections to the slander and libel counts, stating that "for pleading purposes, plaintiff has sufficiently alleged that there were false and defamatory communications published to persons other than plaintiff that were made with malice and thus outside the qualified 'common interest' privilege" in California civil code.

Freedman sustained Kaiser's demurrer in the negligent supervision action, with leave for Harris-Muller to file an amended complaint within 14 days. But he rejected Kaiser's final objection, to the intentional infliction of emotional distress charge.

"Although plaintiff will bear the evidentiary burden of establishing that the conduct at issue falls within such exceptions and was sufficiently outrageous to support the cause of action, the court will not resolve such factual matters on demurrer," the judge wrote.

The next hearing is set for April 5.

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