San Diego Medical Corporations: What is the Doctrine of Fair Procedure?

In San Diego and in California generally, there is a judge-created common law legal principle called the “doctrine of fair procedure.” In general, the doctrine protects an individual, like a physician, from being fired, excluded, or expelled in an arbitrary fashion from membership in a “private entity affecting the public interest” like a hospital, if such firing, exclusion, or expulsion has “substantial economic ramifications.” The doctrine has several interesting aspects. A good San Diego corporate lawyer can help. Here is a quick primer.

San Diego Corporate Law: The Doctrine of Fair Procedure

As noted, for the doctrine of fair procedure to apply, there must be several conditions present, including:

• Existence of a private organization — thus, the doctrine does not apply to the government, for example
• The private organization “affects the public interest” – like a hospital
• Membership or attempted membership in that organization by an individual
• Membership affords or would afford economic advantage
• Actions to arbitrarily expel or exclude said individual without any sort of procedural fairness

See Potvin v. Metropolitan Life Ins. Co., 997 P. 2d 1153 (Cal. Supreme Court 2000). According to the California Supreme Court, the decisions made by private organizations must be both substantially rational and procedurally fair. The Potvin case dealt with an insurance company’s preferred provider list. In that case, the insurance company removed the physician from the preferred list without any sort of hearing or procedural fairness. The Supreme Court held that the doctrine of fair procedure applies to the relationship between the insurer and its preferred provider physicians. However, the court sent the case back to the trial court for further proceedings.

San Diego Corporate Law: To Whom Does the Doctrine Apply?

In general, California courts have applied the doctrine of procedural fairness to any private organization or company if there is a significant impairment of the affected person’s ability to work in a particular field or profession. Here are a few examples:

• Revocation of a physician’s staff membership and clinical privileges at a hospital — Rosenblit v. Superior Court, 231 Cal.App.3d 1434 (1991)
• Expulsion from a trade union — Otto v. Tailors’ P. & B. Union, 75 Cal. 308, 17 P. 217 (Cal. Supreme Court 1888)
• Expulsion from a social and mutual aid society of Swiss immigrants — Von Arx v. San Francisco G. Verein, 113 Cal. 377, 45 P. 685 (Cal. Supreme Court 1896)
• Exclusion of dentists and orthodontists from membership in local, regional, and national associations of orthodontists — Pinsker v. Pacific Coast Soc. of Orthodontists, 460 P. 2d 495 (Cal. Supreme Court 1969) (excluded members had rights “fundamental of due process, including the showing of cause for rejection.”)
• Termination from neurosurgeon’s emergency room on-call medical service contract — Kessey v. Los Robles Regional Medical Center, 2d Civil No. B279550 (Cal. App., 2nd Dist. January 18, 2018)

San Diego Corporation Law: Legal Lessons

The doctrine of fair procedure requires that a person being fired, expelled, or excluded be given some sort of procedural and substantive fairness. This means some opportunity for the person to give his or her side of the story and some explanation of the decision being made. This is one reason that employers should always engage in an investigation, if only minimal, before terminating an employee.

Contact San Diego Corporate Law

For further information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard has the experience to help you form a San Diego medical corporation or other professional corporation, can draft your bylaws and ownership agreements and can provide advice and guidance with respect to any business-related matter. Contact Mr. Leonard by email or by calling (858) 483-9200.

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