Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 1 of 25
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`Tara Natarajan
`State Bar No. 263333
`10382 Westacres Drive
`Cupertino, CA 95014
`(408) 250-7269
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`UNITED STATES DISTRICT COURT FOR
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`THE EASTERN DISTRICT OF CALIFORNIA
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`SACRAMENTO DIVISION
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`Dr. Sundar Natarajan,
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`Plaintiff,
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`vs.
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`Dignity Health,
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`Defendant(s)
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`Case No.: No. _________________
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`COMPLAINT FOR DECLARATORY AND
`INJUNCTIVE RELIEF
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`I. THE RELIEF SOUGHT BY DR. NATARAJAN
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`In California, physicians have a fundamental vested property right to practice their profession.
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`This right is amplified for physicians who practice medicine exclusively as hospitalists, like Dr.
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`Natarajan. However, California law now permits private corporations to take away or limit physicians’
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`right to practice medicine without due process of law. This lawsuit is intended to redress the ongoing
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`unconstitutional deprivation of the rights of Dr. Sundar Natarajan and other California physicians,
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`specifically hospitalists.
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`The State of California has the legal responsibility to protect the public health by monitoring
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`and disciplining California physicians and, to prevent California residents from receiving unsafe or
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`incompetent medical care. Pursuant to statute and case law, California has expressly delegated to
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`private health corporations the primary responsibility for monitoring, investigating, disciplining and
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`Complaint for Declaratory and Injunctive Relief - 1
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 2 of 25
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`reporting California physicians. Those private health corporations are now permitted under state law
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`to restrict or remove a physician’s ability to practice medicine without due process of law.
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`Plaintiff Dr. Natarajan is a highly qualified and competent physician who made complaints to
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`hospital administrators to protect the safety of patients at their hospitals. He also was a direct economic
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`competitor of the hospital. The Defendant, a private health corporation who operated the hospital where
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`he worked, subsequently retaliated against him and removed his privileges under color of state law
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`through actions which violated federal due process protections.
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`This lawsuit seeks a declaration that California’s law governing medical disciplinary actions
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`by private corporations violates the Fourteenth Amendment’s guarantee of due process of law and 42
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`U.S.C. section 1983. Dr. Natarajan also seeks an injunction requiring the reinstatement of his hospital
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`privileges at St. Josephs which was terminated by Defendant Dignity on November 2015.
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`II. IDENTIFICATION OF THE PARTIES
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`Dr. Sundar Natarajan is a physician trained in internal medicine and pediatrics licensed to
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`practice medicine in California. Defendant Dignity Health is a private California corporation in the
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`business of providing healthcare. Dignity owns and operates St. Joseph’s Medical Center, the hospital
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`in which Dr. Natarajan’s privileges were terminated.
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`III. JURISDICTION OF THIS COURT
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`This court has jurisdiction over this case pursuant to 28 U.S.C. section 1331, because it is a
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`civil action arising under the Constitution and law of the United States. This court also has jurisdiction
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`over this case pursuant to 28 U.S.C. section 1343 because it is brought to redress the deprivation, under
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`color of State law, statute, ordinance, regulation, custom or usage, of a right, privilege or immunity
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`secured by the Fourteenth Amendment of the Constitution of the United States and by 42 U.S.C. section
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`1983.
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`IV. VENUE
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 3 of 25
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`Venue is proper in the Eastern District of California, pursuant to 28 U.S.C. section 1391, subd.
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`(b), because Defendant’s Hospital, St. Joseph’s Medical Center is located in Stockton, California.
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`Venue is also proper in the Eastern District of California because a substantial part of the events giving
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`rise to the claim occurred in the Eastern District of California, including but not limited to the medical
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`disciplinary hearing of Plaintiff Dr. Sundar Natarajan. Venue is also proper in the Eastern District of
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`California as to the Defendant in this action pursuant to 28 U.S.C. section 1391, sub. (c), because the
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`defendant has sufficient contacts with the Eastern District of California to subject it to personal
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`jurisdiction if that district were a separate State.
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`V. INTRADISTRICT VENUE
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`Intradistrict venue is proper in the Sacramento Division because a substantial part of the events
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`giving rise to the claim occurred in Stockton, San Joaquin County, including but not limited to the
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`medical disciplinary hearing of Plaintiff Dr. Sundar Natarajan, as well as other Dignity meetings
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`concerning Dr. Natarajan’s disciplinary proceedings.
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`VI. CALIFORNIA’S PEER REVIEW PROCEDURES VIOLATE DUE PROCESS.
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`California’s “Fair Hearing” Requirement Was Created to Protect Physicians’
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`Right to Practice Their Profession.
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`Starting in 1959, with the case of Wyatt v. Tahoe Forest Hospital (1959) 174 Cal.App.2d 709,
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`715, the California courts developed a common law doctrine that physicians could not have their
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`hospital privileges restricted or revoked without first receiving a “fair hearing.”. The California courts
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`initially adopted the fair hearing requirement to protect the rights of physicians in public hospitals. The
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`requirement was then extended to private hospitals, private medical groups, and private medical
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`societies. The California Supreme Court held in Anton v. San Antonio Community Hospital (1977) 19
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`Cal.3d 802, 823-825, that physicians have a fundamental and vested protected property right to practice
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`their profession and cannot fully exercise that right without access to hospitals.
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 4 of 25
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`The California Legislature codified the requirements of fair hearing procedures in 1989,
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`following the passage of a federal law, the Health Care Quality Improvement Act of 1986, which
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`regulated peer review proceedings. The stated purposes of the1989 law, California Business and
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`Professions Code section 805 et seq., were to protect both patient safety and the right of physicians to
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`practice their profession.
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`Medical Disciplinary Hearings Are State Action.
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`It is a duty and function of the State of California to protect the health and welfare of the
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`people of California. In the 1989 act, the legislature delegated to private health care entities primary
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`responsibility for monitoring and disciplining physicians in the interest of public safety.
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`Under California Business and Professions Code section 809, subd. (a)(3) it is the express
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`policy of the State of California that “peer review, fairly conducted, is essential to preserving the
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`highest standards of medical practice.” Under California Business and Professions Code section 809,
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`subd. (a)(4) it is the express policy of the State of California that “peer review that is not conducted
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`fairly results in harm to both patients and healing arts practitioners by limiting access to care.”
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`Under California Business and Professions Code section 809, subd. a(6), it is the express policy
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`of the State of California to use peer review conducted by private entities to exclude physicians who
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`provide substandard care or who engage in professional misconduct, in order to protect the health and
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`welfare of the people of California. Pursuant to Section 809, subd. (a)(9)(A), an express propose of the
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`1989 Act was to integrate public and private peer review in California. Pursuant to Section 809, subd.
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`A(8), the State required hospital medical staffs and their governing bodies to adopt bylaws
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`implementing the provisions of the 1989 Act.
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`Under California Business and Professions Code section 805 et seq., private hospital entities
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`are required by statute to give physicians a hearing before taking any action restricting or revoking
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`privileges or employment for a “medical disciplinary cause or reason.” A medical disciplinary cause
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`or reason is defined in Business and Professions Code section 805, subd. a(6) as “that aspect of a
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`licentiate's competence or professional conduct that is reasonably likely to be detrimental to patient
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`safety or to the delivery of patient care.” Business and Professions Code section 809.5 permits a
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`healthcare corporation to summarily suspend a physician without a hearing, but only if patients or
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`someone else might be in “imminent danger” if the physician is allowed to continue to practice. In
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`addition, Section 809.5 requires a physician to receive the opportunity for a “fair hearing” after the
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`summary suspension. Business and Professions Code Section 805, subds (c) and (e) require that
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`disciplinary actions taken by private corporations be reported to the State in “805 Reports.” A failure
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`to make a required 805 report is punishable by fines up to $100,000. These 805 reports are then used
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`by both State and other private healthcare corporations to determine whether the physician’s practice
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`of medicine should be further restricted or terminated. Hospitals and other healthcare corporations are
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`required to request and review any 805 reports on file with the Medical Board of California before
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`granting or renewing a physician’s medical staff privileges pursuant to Business and Professions Code
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`section 805.5. A failure to comply with section 805.5 is a criminal offense. The State’s system of
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`monitoring and disciplining physicians to ensure the public health and safety is intertwined with the
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`performance by private healthcare corporations of medical disciplinary hearings and medical
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`disciplinary actions.
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`This delegation of the State’s responsibility for maintaining the public health and safety was
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`expressly confirmed by the California Court of Appeal in the case of Unnamed Physician v. Board of
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`Trustees (2001) 93 Cal. App. 4th 607, 617. The California Supreme Court subsequently held in Kibler
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`v. Northern Inyo County Local Hospital District (2006) 39 Cal.4th 192, 196, that “the Business and
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`Professions Code sets out a comprehensive scheme that incorporates the peer review process into the
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`overall process for the licensure of California physicians.” It further held that a medical disciplinary
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`hearing is an “official proceeding authorized by law . . . .” (Id., at p. 199.) It held that the Legislature
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`has accorded to these hearings “a status comparable to that of quasi-judicial public agencies whose
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`decisions likewise are reviewable by administrative mandate.” (Id., at p. 200.) It also held that the
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 6 of 25
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`Legislature has delegated to private hospitals “the primary responsibility for monitoring the
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`professional conduct of physicians licensed in California.” (Id., at p. 201.) Thus, the California
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`Supreme Court has held that the State has delegated a greater responsibility for monitoring physicians
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`to private hospitals than to the Medical Board of California. Because of the State’s delegation to private
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`healthcare corporations of the official responsibility for safeguarding the public health and safety
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`through monitoring and disciplining physicians, the actions of those private entities constitute state
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`action.
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`California Healthcare Corporations Now Use Medical Disciplinary Hearings To Deny
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`Due Process of Law to Physicians.
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`Since the passage of the 1989 Act, private health care corporations, including Defendant
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`Dignity has used the law to deny physicians due process of law. There are three different ways in which
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`the California disciplinary system violates due process.
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`California Healthcare Corporations Are Permitted to Unilaterally Choose the Judge and
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`Jury in an Adversarial Proceeding Which Will Determine a Physician’s Right to Practice
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`His Profession.
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`The first due process violation occurs because California law permits private health
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`corporations who are adversaries of a physician to choose the hearing officer and hearing panel that
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`will render a decision as to whether the private health corporations’ actions against the physician are
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`reasonable and warranted. Disciplinary proceedings against a physician are inherently adversarial.
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`Healthcare corporations seeking to impose discipline on a physician may do so for a variety of reasons
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`besides a genuine concern about the quality of a physician’s care or his or her behavior. A healthcare
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`corporation may want to eliminate or punish whistleblowers, to prevent further whistleblowing by that
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`physician and to deter whistleblowing by other physicians. Personal antagonisms or fear of bad
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`publicity also lead to disciplinary actions by a healthcare corporation. A healthcare corporation may
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`want to eliminate its direct economic competitor.
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`Whatever the motive of a healthcare corporation for wanting to discipline a physician, the
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`stakes are usually high for both the corporation and the physician. For a physician, an adverse
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`disciplinary decision always results in an “805" report to the California Medical Board and a report to
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`the National Practitioner Data Bank, each of which significantly damages the physician’s reputation
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`and may, as a practical matter, limit or eliminate the physician’s ability to practice medicine. A
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`disciplinary action usually results in a loss of income and significant emotional distress. Challenging
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`a proposed or final disciplinary action usually takes large financial expenditures for attorneys and
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`expert witnesses, often exceeding $100,000 or much more. For the healthcare corporations, the stakes
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`are likewise high. They have a strong economic stake in the outcome. If they attempt to discipline a
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`physician and fail, they may be liable to the physician for bad faith peer review, interference with the
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`physicians’ ability to practice his profession, anti-trust violations and/or other legal claims. Physicians’
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`monetary claims and potential recoveries are often worth millions, because of the damage to their
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`careers and the value of those careers. In addition, the healthcare corporations may suffer significant
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`bad publicity if they are found to have punished a physician unfairly or in retaliation for whistleblowing
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`activity, which would affect both their marketing and their revenue. The healthcare corporations
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`therefore have a great financial incentive to ensure that they win when they attempt to discipline a
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`physician.
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`The California law governing the selection of the hearing officer and hearing panel members,
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`Business and Professions Code section 809.2, subd. a, gives the healthcare corporations the authority
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`to decide whether physicians charged with conduct detrimental to patient care or safety will have their
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`hearings decided by (1) neutral arbitrators chosen by a process mutually agreeable to the physician and
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`the healthcare corporations, or (2) by a panel of physicians with a hearing officer who serves as the
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`presiding judge. The statute is silent on the question of who should pick the hearing officer and panel
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`members if neutral arbitrators are not used. Healthcare corporations have taken advantage of this
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`silence to assert their authority to unilaterally appoint a hearing officer and hearing panel members.
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`When they choose to do so, they can select a hearing officer and panel members that they believe that
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`they can count on to affirm the wishes of the health care corporation. Although the statute also permits
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`a decision by neutral arbitrators, health care systems, including defendants, never or virtually never
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`use neutral arbitrators. This is the only system of law in American jurisprudence in which a private
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`entity in an adversarial confrontation with another private party is permitted to choose the judge and
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`jury who will decide the conflict. This is a fundamental violation of due process.
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`California Healthcare Corporations Are Not Required to Use a Known Objective
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`Standard to Determine Quality Issues in Medical Disciplinary Hearings.
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`The second violation of due process occurs because California law permits healthcare
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`corporations to discipline a physician for alleged quality problems without the requirement of any
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`known objective standard.
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`Due process requires that a person be judged by a known standard so that actions against
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`individuals are not arbitrary or capricious. Without a known standard under which a person is judged,
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`one person may be severely punished for a minor mistake or error, while others may be permitted to
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`avoid any punishment for much more serious problems. In addition, the lack of a standard makes
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`effective judicial review nearly impossible on substantive clinical issues, because the reviewing court
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`has no ability to measure the physician’s conduct against any objective standard.
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`To support a proposed medical disciplinary action, a healthcare corporation may charge a
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`physician with either clinical medical care problems, behavioral problems, or both. In regard to alleged
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`behavioral problems, in Miller v. Eisenhower Medical Center (1980) 27 Cal.3d 614, 628- 629, the
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`California Supreme Court adopted an objective standard for behavioral issues: any alleged behavioral
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`problems must have been sufficient “to present a real and substantial danger that patients treated by
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`him might receive other than a ‘high quality of medical care’ at the facility.” In regard to clinical
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`medical issues, neither the California legislature nor the California courts have ever adopted a standard
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`for clinical issues.
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 9 of 25
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`In other California medical-legal proceedings, the “standard of care” is used as the applicable
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`standard. Under California law, the standard of care is defined as the reasonable degree of skill,
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`knowledge and care ordinarily possessed and exercised by members of the medical profession under
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`similar circumstances. This standard is used by the Medical Board of California in its disciplinary
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`actions and it is also the standard used in medical malpractice cases. However, in healthcare
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`corporations’ disciplinary proceedings, there is no legal requirement that the standard of care be used
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`as the applicable standard in a hearing. As a consequence, a healthcare corporation’s hearing panel
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`may determine that discipline is warranted even though it does not find that the physician violated the
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`standard of care.
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`There Is No Effective, Timely and Independent Judicial Review of Medical Disciplinary
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`Hearings in California.
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`The third reason that California’s disciplinary system violates due process is the fact there is
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`not effective, timely and independent judicial review of healthcare corporations’ disciplinary hearings
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`before, during or after disciplinary actions are taken.
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`Physicians are not permitted to challenge in state court the hearing officer and hearing panel
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`appointed by a healthcare corporation in state court, no matter how biased or unfair their selection,
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`until after the hearing is concluded. Business and Professions Code section 809.2 permits a physician
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`to voir dire the appointed hearing officer and panel members. However, that section also states that it
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`is the hearing officer who shall rule on whether the hearing officer or any hearing panel member is
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`biased. The hearing officers are generally very well paid for their services as hearing officer by the
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`healthcare corporations. They are often attorneys that represent healthcare corporations as the mainstay
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`of their legal practices. Hospital attorneys often arrange for the appointment of other hospital attorneys
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`they know well as the hearing officers for the disciplinary hearings.
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`The hospital attorneys appointed as hearing officers have several powerful financial reasons to
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`reject a challenge to their service. First, a hearing officer that accepts the challenge to his or her service
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`will lose the income from being the hearing officer in that case. A hearing officer’s income from a
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`single hearing can exceed $100,000 in a lengthy and complex case. Second, if the hearing officer
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`accepts the challenge, he or she is unlikely to be appointed again by the healthcare corporation and
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`hospital attorney who were involved in the appointment. Third, a hospital attorney appointed as a
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`hearing officer who hears a challenge to his or her service is likely to fear damaging the attorney’s
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`ongoing relationships with his corporate healthcare clients if he or she fails to go along with the system
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`in which hospital attorneys appoint each other to serve as hearing officers.
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`In the case of Kaiser v. Superior Court (2005) 128 Cal.App.4th 85, 109, the Court of Appeal
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`ruled that a physician is not permitted to challenge the appointment of a hearing officer or any of the
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`hearing panel members until the hearing has been completely finished. A healthcare corporation can
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`appoint a biased hearing officer, even one of its own attorneys, as the hearing officer, without fear that
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`a court can will intervene to disqualify the hearing officer before the hearing decision. A healthcare
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`corporation likewise can appoint one of its top managers to a hearing panel, without fear of court
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`intervention during the hearing process. A physician cannot escape the expense, stress and time
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`expenditure involved in litigating a fundamentally flawed hearing, no matter how obvious it is that the
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`hearing officer and/or a hearing panel member is unqualified to serve as a result of his bias or conflict
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`of interest.
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`Under California law, there is also no independent review of the evidence used to support a
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`healthcare corporation’s disciplinary action against a physician. In 1977, the California Supreme Court
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`held in Anton v. San Antonio Community Hospital, supra, 19 Cal.3d 802, 822- 825, that the evidence
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`supporting a medical disciplinary action was subject to independent review by the fundamental vested
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`right to practice his profession. An independent review of the evidence presented at administrative
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`hearings was and is the standard used for judicial review of other administrative hearings in which a
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`fundamental vested right is at stake in the hearing.
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`In 1978, however, the California Legislature intervened and passed an amendment to Section
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`1094.5 so that in physician disciplinary hearings, the decision of the healthcare corporation only needs
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`to be supported by any substantial evidence. The ability of courts to independently weigh the evidence
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`supporting a medical disciplinary action was eliminated. As a result, there is no effective judicial
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`review of medical disciplinary hearings on the issue of whether the evidence presented supports a
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`healthcare corporation’s decision on clinical competence issues. In order to prevail on the substantial
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`evidence issue, a healthcare corporation need find only a single expert who is willing to opine (often
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`after having been paid tens of thousands of dollars) that the physician facing charges did something
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`wrong. Thus, an exceedingly weak case against a physician may be decided against him by a jury
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`handpicked by the hospital, but neither a California superior court nor a California court of appeal has
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`the legal authority to reverse the decision on substantive grounds, if any substantial evidence supports
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`the decision.
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`On the other hand, if a physician wins his disciplinary hearing, the healthcare corporation is
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`not required to accept the decision under California law. Even if the hearing panel’s decision against
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`discipline is supported by substantial evidence, the governing body may choose to disregard the
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`decision and discipline the physician anyway.
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`There is also no effective judicial review of healthcare corporations’ disciplinary decisions
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`because under California law, judicial review often takes six years or more, depriving a physician of
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`his right to practice medicine in a hospital during a substantial part of his or her career without due
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`process.
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`The initial disciplinary hearing typically takes at least six months to complete and may take as
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`long as two years or more. If the governing body makes a decision against a physician, then the
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`physician must ordinarily obtain a writ of mandate overturning the decision before filing an action for
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 12 of 25
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`damages or reinstatement. California superior court proceedings on a writ of mandate often take a year
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`or longer to conclude.
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`If the physician wins a writ in the superior court, then the healthcare corporation can appeal
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`the decision. The decision of the superior court has virtually no significance, because the Court of
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`Appeal undertakes the same review of the record as the superior court and gives no deference to the
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`superior court’s decision. The appeal ordinarily takes another 19 to 26 months. If the physician wins
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`the appeal, then the physician should be able to file a civil action for reinstatement and damages.
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`However, when the California Supreme Court determined in the Kibler case that healthcare
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`corporations’ disciplinary proceedings are official proceedings, it held that participants in those
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`proceedings may therefore enjoy the protection of the state’s Anti-SLAPP (Anti-Strategic Lawsuit
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`Against Public Participation) law. California Code of Civil Procedure, section 425.16. As a result,
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`when a physician files a civil suit seeking reinstatement and damages, the healthcare corporation may
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`bring an anti-SLAPP motion, which stays discovery until the motion is resolved. If the physician
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`defeats the anti-SLAPP motion in superior court, Section 425.16 gives the losing defendant an
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`automatic right to appeal, no matter how lacking in merit its anti-SLAPP motion. The defendant can
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`therefore postpone consideration of the merits of a physician’s reinstatement claim for another 19 to
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`26 months while the anti-SLAPP appeal is pending. If the defendants lose their appeal of the anti-
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`SLAPP motion, then the physician may finally pursue his action for reinstatement and damages in
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`superior court. Such actions ordinarily take a year or more for discovery and trial. If the physician wins
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`an order for reinstatement, the defendant can appeal, again postponing final resolution of the case for
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`19 to 26 months.
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`Thus, under California law, a healthcare corporation can usually prevent a physician from
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`obtaining a final judicial decision on a summary suspension or a denial of hospital privileges for six
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`years or more. During that time, a physician’s fundamental right to practice medicine is limited or
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`foreclosed entirely in violation of due process.
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`Complaint for Declaratory and Injunctive Relief - 12
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 13 of 25
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`The denial of due process to California physicians subjected to medical disciplinary hearings
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`proximately causes severe and irreparable injuries to those physicians. Physicians in California subject
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`to medical disciplinary hearings without due process suffer irreparable harm due to the infringement
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`on their fundamental vested property right to practice their profession, their inability to treat and care
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`for their patients, and the irreparable damage to their reputations arising from legally required reports
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`of the State and Federal government, and self-reporting requirements of private healthcare corporations
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`when a physician applies for employment or privileges to practice.
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`Defendant Dignity Acted Under Color of State Law to Deprive Plaintiff of Due Process
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`of the Law in the Medical Disciplinary Proceedings that Defendant Designed and
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`Controlled.
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`California Business and Professions Code section 809.2 establishes in very general terms the
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`procedures under which hospitals must conduct the “fair hearings” delegated to them by the state of
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`California. Defendant Dignity Health has taken advantage of the lack of specificity in the law to design
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`and implement “fair hearing” procedures enshrined in bylaws that violate the due process rights of
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`physicians in the manner described in this complaint. The individuals who conducted the “fair
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`hearings” did so in accordance with the procedures and policies created and mandated by defendant
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`Dignity.
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`Dr. Natarajan raised objections to the due process violations described in this complaint.
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`Corporations are persons within the meaning of section 1983. Defendant Dignity Health were persons
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`acting under color of law in violation of section 1983 and the Fourteenth Amendment when it deprived
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`Dr. Natarajan of his right to practice medicine without affording him due process and “fair hearings”
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`and claimed that its conduct was authorized by section 809, et seq.
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`Dr. Natarajan has exhausted all state remedies available to him. On May 18, 2016, Dr.
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`Natarajan filed a Petition for Administrative Mandamus in the Superior Court of San Joaquin County
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`pursuant to Code of Civil Procedure § 1094.5, alleging that he had not received a fair administrative
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`Complaint for Declaratory and Injunctive Relief - 13
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`Case 2:21-at-01092 Document 1 Filed 11/12/21 Page 14 of 25
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`hearing from Respondent Dignity Health before it terminated his hospital privileges. The Court denied
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`the Petition on the grounds that the hearing officer’s opportunity to obtain future work at Dignity
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`hospitals other than St. Joseph’s was not a “direct financial benefit” under Section 809.2, subd. (b) and
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`that St. Joseph’s had used objective standards in the hearing. The Judgment denying the Petition was
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`filed on September 27, 2017. Dr. Natarajan appealed. On October 22, 2019, the Court of Appeal
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`issued an unpublished opinion denying Dr. Natarajan’s Petition. The Court of Appeal issued a
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`published opinion on November 20, 2019, following requests to publish by Dignity, the CHA, two
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`hospital systems and two hearing officers. The California Supreme Court granted review of Dr.
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`Natarajan’s Petition was granted on February 26, 2020. On May 8, 2020, Dr. Natarajan filed an
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`Opening Brief and Dignity filed its response on August 10, 2020. Oral arguments were held May 18,
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`2021.
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`The issue presented before the California Supreme Co