Stega v. N.Y. Downtown Hosp.

• Decision Date: 10 January 2017
• Citation: Stega v. N.Y. Downtown Hosp., 44 N.Y.S.3d 417, 148 A.D.3d 21 (N.Y. App. Div. 2017)
• Parties: Jeanetta STEGA, etc., Plaintiff–Respondent, Wesley Tzall, M.D., Plaintiff, v. NEW YORK DOWNTOWN HOSPITAL, et al., Defendants–Appellants, Jeffrey Menkes, etc., et al., Defendants.
• Court: New York Supreme Court — Appellate Division

148 A.D.3d 21

44 N.Y.S.3d 417

Jeanetta STEGA, etc., Plaintiff–Respondent,

Wesley Tzall, M.D., Plaintiff,

v.NEW YORK DOWNTOWN HOSPITAL, et al., Defendants–Appellants,Jeffrey Menkes, etc., et al., Defendants.

Supreme Court, Appellate Division, First Department, New York.

Jan. 10, 2017.

Nixon Peabody LLP, Jericho (Christopher J. Porzio and Christopher G. Gegwich of counsel), for appellants.

Beranbaum Menken LLP, New York (John A. Beranbaum and Jason J. Rozger of counsel), for respondent.

PETER TOM, J.P., RICHARD T. ANDRIAS, DAVID B. SAXE, BARBARA R. KAPNICK, JJ.

SAXE, J.

The statements that form the basis of the defamation claim at issue here were made to a U.S. Food and Drug Administration (FDA) investigator in the course of an investigation.In fact, that investigation was prompted by a complaint made by plaintiffs after defendant hospital terminated their employment, in which they expressed concern that the patients in research protocols being overseen by the hospital's Institutional Review Board(IRB) might be treated improperly.The particular research protocol at the heart of the underlying events, which led directly to the termination of plaintiffs' employment and the premature termination of the research protocol itself, was testing a compound developed by Luminant Bio–Sciences, LLC, for the treatment of metastatic cancer.Given both the nature of an FDA investigation into the propriety of the hospital's research protocols and the importance of the unimpeded flow of thoughts and information in this investigative context, as a matter of law and public policy, statements to such an investigator must be protected by an absolute privilege, not merely a qualified privilege.Therefore, plaintiff Stega's defamation cause of action must be dismissed.¹

For purposes of this motion, we accept as true the events leading to this action as alleged in the complaint: PlaintiffDr. Jeanetta Stega was employed by defendant New York Downtown Hospital (NYDH) as a research scientist and, during the relevant period, as the chair of its Institutional Review Board(IRB), a board comprised of a number of individuals designated by the hospital to review, approve and oversee its biomedical research involving human subjects.The work of IRBs is governed by regulations promulgated by the FDA (see generally21 C.F.R. part 56).

According to the complaint, in October 2011, Luminant Bio–Sciences, LLC, the manufacturer of a newly developed drug to be used to treat metastatic (stage four) cancer, retained defendantLeonard A. Farber, M.D., an oncologist in private practice, to create a research protocol and patent application for a clinical trial for the drug.According to Stega, Farber was unable to develop the protocol, even with templates provided by Stega, and requested that Stega develop the protocol.

In October 2011, Stega alleges, she spoke about the Luminant project and her plan to write the study's protocol with several NYDH officers, including Anthony Alfano, the hospital's chief operating officer; Chad Harris, its chief compliance officer, and defendantJeffrey Menkes, its chief executive officer.She alleges that no objection was raised to her preparing the protocol for Luminant, and that Alfano, Harris and Menkes did not ask her whether she was to be compensated for this work.Stega then agreed to write the protocol and patent application, allegedly performing this work on weekends and at night, so as not to interfere with her duties at the IRB.In about November 2011, before the proposed study was presented to the IRB, Luminant paid Stega $50,000 for this work.

Farber remained the study's principal investigator, and in November 2011, he applied to the hospital's IRB for approval of the Luminant study.Stega alleges that she recused herself from the IRB's deliberations and voting on the project, since she had written the protocol and patent application, but she remained at the IRB meeting to answer questions about the Luminant study, allegedly in compliance with FDA regulations.

The IRB approved the application for the Luminant study.

Farber then commenced the clinical trial with stage four cancer patients, at his private office.Plaintiff alleges that Farber ran into financial problems or other difficulties, and complained to Luminant that he was not receiving enough money to run the study and needed more people.In December 2011, Farber requested that Stega take over the study, but she declined; then Luminant itself asked Stega to take over the study, and she declined.

On December 16, 2011, after Stega rejected demands from Farber that she turn over to him money she had received from Luminant, Farber advised Stega that he was leaving the study.He texted her the following:

"The money you arranged for yourself was what I had negotiated to keep my practice going.I cannot do it for nothing.You are going to need to find a new PI and change the IRB.I am done with it."

According to the complaint, Farber failed to make alternative treatment plans for the patients in the Luminant study, so Stega requested that NYDH treat those patients at its facility, and it agreed to do so over the Christmas holiday.Stega oversaw the patients in the study during that period without compensation.

Luminant then requested that NYDH take over the study.However, in the process of giving consideration to Luminant's proposal, in January 2012, Alfano asked Stega if she had been paid by Luminant; she replied that she had, after she had complied with the hospital's conflict of interest policy by informing him, Menkes, and Harris of the work, and by working on her own time.On or about January 25, 2012, Stega was called to Menkes's office, and, in the presence of Alfano and defendantStephen G. Friedman, M.D., NYDH's acting chief medical officer, Menkes accused Stega of stealing money paid by sponsors that rightly belonged to the hospital.²Stega was placed on administrative leave pending an investigation of her conduct.

After performing the investigation, NYDH's counsel concluded that Stega had a conflict of interest arising from her role as chairperson of the IRB when the IRB considered the Luminant study.Stega's employment was terminated, along with that of plaintiffWesley Tzall, M.D., NYDH's director of nuclear cardiology, who had been serving as vice chair of the IRB.

On March 6, 2012, Stega and Tzall filed a formal complaint with the FDA, expressing concerns that the patients in research protocols overseen by the IRB would not be properly supervised.In response to Stega and Tzall's complaint, the FDA commenced an investigation, during which an FDA investigator performed an onsite inspection of NYDH and met with Friedman.Friedman explained the reasons for Stega's removal from her positions at NYDH and the IRB and responded to Stega's and Tzall's complaint.He is alleged to have asserted that Stega had "channeled" funds from a research study sponsor to her own research group and that she had indicated to Farber that she could use her position on the IRB to get a patient into a study.Friedman allegedly said that all IRB approvals made while Stega was chairperson were "tainted."

Stega and Tzall brought this action.While the motion court granted defendants' CPLR 3211motion to the extent of dismissing plaintiffs' other claims—which ruling is not challenged on appealed—it denied the branch of the motion seeking to dismiss the defamation claim as asserted by Stega.It reasoned that the alleged statements at issue here qualified only for a "common interest" qualified privilege, rather than for the protection of an absolute privilege, because the FDA investigation here had none of the indicia of a quasi-judicial proceeding.

My dissenting colleague agrees with the motion court, reasoning that the FDA investigation lacked the indicia of a quasi-judicial proceeding and safeguards such as an adversarial process or a determination reached based upon the application of law to the facts and subject to review.

I disagree, because under current case law, the complained-of statements were made in a quasi-judicial context in which an absolute privilege protects them.

Whether allegedly defamatory statements are protected by an absolute or a qualified privilege "depend[s] on the occasion and the position or status of the speaker"( Park Knoll Assoc. v. Schmidt,59 N.Y.2d 205, 208–209, 464 N.Y.S.2d 424, 451 N.E.2d 182[1983] ).

"The absolute privilege generally is reserved for communications made by individuals participating in a public function, such as executive, legislative, judicial or quasi-judicial proceedings ... to ensure that such persons' ‘own personal interests—especially fear of a civil action, whether successful or otherwise—do not have an adverse impact upon the discharge of their public function’ "( Rosenberg v. MetLife, Inc.,8 N.Y.3d 359, 365[, 834 N.Y.S.2d 494, 866 N.E.2d 439][2007] ).

The Second Department explained the evolution of the applicable case law, which has developed so as to apply an absolute privilege in the quasi-judicial, administrative context: "[T]he complexities of our modern society have substantially broadened the role of administrative law both in its rulemaking and adjudicative aspects.With that expansion has come a concomitant recognition by many courts that certain attributes of the judicial process have equal relevance to those administrative bodies that utilize a quasi-judicial process in the determination of individual rights, privileges or obligations"( Allan & Allan Arts v. Rosenblum,201 A.D.2d 136, 139, 615 N.Y.S.2d 410[2d Dept.1994], lv. denied85 N.Y.2d 921, 627 N.Y.S.2d 319, 650 N.E.2d 1321[1995], cert. denied516 U.S. 914, 116 S.Ct. 301, 133 L.Ed.2d 207[1995], quotingJulien J. Studley, Inc. v. Lefrak,50 A.D.2d 162, 165, 376 N.Y.S.2d 200[1975], affd.41 N.Y.2d 881, 393 N.Y.S.2d 980, 362 N.E.2d 611[1977] )."Accordingly, during the past several decades, the courts have extended the absolute privilege to a wide...