In re Rockhill Pain Specialists, P.A., Daniel R. Kloster, M.D., Appellee,
Dan L. Hancock, M.D., Appellant.
BY THE COURT
restrictions regarding dissemination of reports and records
of public health care licensing agencies contained in K.S.A.
65-4925 are a statutory exception to the general rule
contained in K.S.A. 60-407 that all relevant evidence is
strict or narrow interpretation is applied to statutory
exceptions to the rule contained in K.S.A. 60-407 that all
relevant evidence is admissible.
plain language of K.S.A. 65-4925 does not prohibit the
admission into evidence of the ultimate result of
investigations by public health care licensing agencies.
good-faith immunity provided under K.S.A. 65-2898 for persons
that report information regarding incidents of malpractice,
or the qualifications, fitness or character of, or
disciplinary action taken against, a person licensed,
registered or certified by the board of healing arts
adequately protects the public interest in encouraging
reporting of unfitness.
Unless otherwise limited by court order, parties may obtain
discovery regarding any nonprivileged matter that is relevant
to a party's claim or defense and proportional to the
needs of the case.
privilege is a rule of evidence that allows a person to
shield confidential communications or information from
compelled disclosure during litigation.
Because they are exceptions to the general rule that parties
may obtain discovery regarding any matter that is relevant to
a party's claim or defense, evidentiary privileges are to
be strictly construed.
fact that a statute identifies information as confidential
does not necessarily mean that the statute has created an
trial court is vested with broad discretion in supervising
the course and scope of discovery.
discovery proceedings when a claim of privilege,
confidentiality, or irrelevance is raised by a litigant, the
court has a duty to conduct an in camera inspection to permit
discovery of only relevant documents to protect against
unnecessary and damaging disclosure of irrelevant
confidential material. The court must balance the interests
of the litigants as well as the public interest in
maintaining the confidentiality of the material.
Findings and other records submitted to or generated by
hospital peer review committees or officers are privileged
and are not subject to discovery. But by statute, the holder
of the privilege is the hospital peer review officer or
committee creating or initially receiving the record, not the
individual doctors or medical professionals submitting the
doctor's responses to a Kansas Board of Healing Arts
investigation are confidential but not privileged under
Damages recoverable for defamation cannot be presumed but
must be proven.
Defamation is not a personal injury action as contemplated by
K.S.A. 2016 Supp. 60-19a02(a).
Failure to request an itemization of noneconomic damages
prior to the discharge of the jury waives any claim to apply
the caps on noneconomic damages in K.S.A. 2016 Supp.
verdict for actual damages will not be disturbed merely
because the court cannot definitely ascertain the precise
method by which the jury arrived at the exact amount of its
verdict when such an amount is reasonably within the range of
from Johnson District Court; James Charles Droege, judge.
G. Kraft, of Eric Kraft Law, LLC, of Olathe, for appellant.
Timothy R. West and Nick J. Kurt, of Berkowitz Oliver LLP, of
Kansas City, Missouri, for appellee.
Arnold-Burger, C.J., Pierron and Green, JJ.
case represents a tragic story of two highly gifted and
respected physicians, Dr. Dan Hancock and Dr. Daniel Kloster,
who specialize in pain management care. They maintained a
highly successful practice and each made over a half million
dollars a year. They were like brothers to each other, until
a dispute over money sent their friendship and their practice
into a death spiral.
a dispute over the proposed distribution of income, Hancock
began broadcasting complaints regarding Kloster's patient
care to several state agencies, hospitals, and
ultimately-when he believed the other entities were not
responding quickly enough or in the manner he hoped-to the
Kansas City Star. He alleged that Kloster was either killing
or hastening the death of his patients. None of the
complaints bore fruit. After hundreds of hours defending his
reputation Kloster successfully sued Hancock for defamation,
breach of fiduciary duty, fraud, and conversion. Hancock
appeals that verdict.
appeal, Hancock argues that the district court misapplied the
statutory privilege in K.S.A. 65-4925, which provides that
reports and records of state licensing agencies are
confidential, by admitting evidence that two state agencies
had cleared Kloster of any wrongdoing. Although we find that
the district court did not err in admitting evidence that the
state licensing agencies cleared Kloster of wrongdoing, it
did err in holding that Kloster's submissions to the
state licensing agencies were privileged. However, the error
was harmless because Hancock had other ways of discovering
the information. Hancock also argues that there was
insufficient evidence to support the jury's damages
awards for Kloster's defamation and nondefamation claims.
But, the jury had a sufficient evidentiary basis to support
its award of damages on all claims. Finally, Hancock argues
that the damages for Kloster's defamation claim should
have been capped under K.S.A. 2016 Supp. 60-19a02(b), which
provides a statutory cap of $250, 000 for noneconomic damages
in personal injury cases. However, defamation is not a
personal injury action. Additionally, he did not object to
the jury's failure to itemize damages, a failure that is
fatal to his claim. Accordingly, we affirm.
and Procedural History
Daniel Kloster and Dr. Dan Hancock are anesthesiologists
specializing in pain management. They formed Rockhill Pain
Specialists, P.A. (Rockhill) in 2001. Their practice
included, among other pain management procedures, the
implantation of pain pumps in terminally ill cancer patients
for end-of-life pain management. At that time, they were
"good friends, like brothers." Rockhill was an
S-corporation, and as Kloster and Hancock were the only two
shareholders of Rockhill they split all profits evenly.
Kloster brought in about two-thirds of the patients while
Hancock brought in the other third. Hancock handled
Rockhill's business, and served as Rockhill's
president, director, and compliance officer.
doctors' relationship began deteriorating in 2011. The
doctors had different ideas about why this occurred. Hancock
maintained that he was concerned about Kloster's patient
care. Kloster argued that the doctors had a monetary dispute
sparked by a job offer he received from a company called
2011, Assured Pharmacy approached Kloster about a potential
position as its national medical director. Kloster described
the position as a business advisory role. The position
entailed about 35 to 40 hours of work per month. Kloster
thought he would not be expected to split profits from this
position with Hancock because their agreement was only to
split money earned in the practice of medicine. Hancock,
however, thought that the position entailed the practice of
medicine because the employment contract specified that the
employee had to be a licensed physician and anesthesiologist
who specialized in pain management. Kloster asked
Rockhill's corporate counsel, Randy Schultz, whether he
would have to share profits from the Assured Pharmacy
position with Hancock. Schultz told him that he would not
have to share because the position was unrelated to the
practice of medicine.
and Hancock went out to dinner in December 2011. They
continued to disagree over whether Kloster's earnings
from Assured Pharmacy should go to Kloster or to Rockhill.
Kloster said he would look at Rockhill's books and
discuss the issue again with Hancock at a later point in
time. Kloster had not looked at Rockhill's books before
because that aspect of the business was managed by Hancock.
When Kloster looked at Rockhill's books, he realized that
he had brought in twice as much business as Hancock had for
the previous five years.
doctors met for another dinner in January 2012. Kloster
alleges that Hancock "just went off" and started
screaming at him. Kloster said that Hancock accused him of
working with Schultz to deprive Rockhill of the Assured
Pharmacy money and that Hancock screamed, "Oh,
you're going down. Randy [Schultz] is going down."
Hancock denied threatening Kloster or Schultz at this
meeting, and said that Kloster actually threatened him by
saying he would kill Hancock if he did anything to injure
Kloster's wife or children.
parties met again briefly in March or April of 2012. Kloster
asked Hancock if he would be open to a different compensation
system where, instead of splitting profits evenly, they would
split profits based on production. Hancock refused.
the parties' disagreement on compensation, Kloster
recommended that they cease receiving any distributions from
Rockhill beyond their base pay. Direct deposits of $15, 000
per month were given to Kloster during this time period, just
like Hancock, but Kloster returned them to the corporation.
Hancock continued to take distributions from Rockhill.
Schultz instructed Rockhill's bookkeeper to cease making
distributions until the doctors could agree on a compensation
model. But Hancock emailed the bookkeeper and said that
"as president of Rockhill Pain Specialists, I am
instructing you to make the monthly distributions for May as
you have every month for the past 4-5 years."
14, 2012, Kloster called a special meeting of Rockhill's
board of directors. Kloster, Hancock, and Schultz attended.
Kloster and Hancock each brought a private attorney as well.
Kloster raised the issue of distributions again, but Hancock
continued to receive them. The parties also discussed a
production-based compensation arrangement, and Kloster's
attorney agreed to "prepare a proposed compensation
arrangement that was partially based upon a production
formula while taking into consideration any special
administrative duties being provided by the parties."
discussing compensation, Hancock raised the issue of
Rockhill's billing and coding practices. The special
meeting minutes state that Hancock requested a third-party
review of Rockhill's billing and coding activities. The
minutes also state that Hancock agreed to provide Schultz
with the names of two to three physicians who could conduct
an independent review of Rockhill's practice. During the
trial, Hancock denied that he agreed to do this. At the time
of the special shareholder's meeting, neither Kloster nor
Schultz knew why Hancock raised an issue with Rockhill's
he did not disclose it at the special shareholder's
meeting, Hancock had been investigating Rockhill's
billing practices for several months. Hancock testified that
he began having concerns with Kloster's patient care in
2011. Hancock's primary concern was with Kloster's
implantation of intrathecal pain pumps in patients. These
pumps are about the size of a hockey puck and are inserted
under a patient's skin. Pumps provide a powerful way to
deliver medicine into patients with severe pain. Hancock
thought that patients receiving pumps were dying at a faster
rate than usual. He thought Kloster was "either choosing
patients that [were] inappropriate to receive pumps or that
the concoction that he was using was hastening their
was also concerned with the pain pump issue from a compliance
standpoint. Medicare asks doctors to certify that they have a
reasonable certainty that a patient will survive for 90 days
after implantation of a pump. Hancock thought that if Kloster
was selecting inappropriate patients for pump procedures that
Rockhill might be subject to a Medicare audit or sanction.
January 2012, shortly after the doctors' monetary dispute
began, Hancock met Vicki Myckowiak at a conference in
Scottsdale, Arizona. Myckowiak is an expert in fraud and
abuse in medical billing. Hancock told Myckowiak that he had
concerns over Rockhill's billing practices and
Kloster's use of pain pumps. Hancock hired Myckowiak on
behalf of Rockhill to conduct a review of some of
Rockhill's files. Hancock sent Myckowiak records from 12
patients of Kloster's who had died within 90 days of
their pump placements. These were records that Rockhill
maintained for billing purposes, and did not include
operating room notes or nursing notes.
6, 2012, Hancock provided Kloster with a peer review
reference. Hancock certified that he would recommend Kloster
without reservations. Hancock strongly agreed that Kloster
provided appropriate patient assessments, evaluations, and
after the June 2012 special shareholder meeting, Myckowiak
hired Dr. Andrea Trescot as an expert to conduct additional
review of the records. After reviewing the records, Trescot
prepared an expert report. She stated that "[a]lthough
these were cancer patients, presumably with a limited life
span, I am seriously concerned that the medicines that Dr.
Kloster chose for the pump hastened if not caused these
patients' deaths." She also said that "[r]eview
of these cases force[s] me to conclude that an emergency
suspension of pump implantations is necessary to protect
did not contact Schultz throughout his consultations with
Myckowiak or Trescot. He also did not discuss Trescot's
findings with Kloster. Hancock testified that he raised
concerns regarding the pain pumps with Kloster as early as
August 2011. He said that Kloster told him "that he
could justify all of the pumps that he put in, that [Hancock]
needed to be more aggressive in patient treatment and that
[Hancock] should not be lecturing him about how to treat pump
patients." Hancock testified that he discussed the issue
with Kloster again in December 2011 or January 2012 to
reinforce his previous concern that Kloster was choosing the
wrong patients or being too aggressive in his treatment.
Hancock alleged that Kloster said, "I'm telling you
that these patients are going to die anyway and I'm going
to make as much money off of them before they die as I
can." At trial, Kloster denied that Hancock ever
expressed any concerns over his patient care.
August 8, 2012, Myckowiak filed complaints against Kloster
with the Kansas State Board of Healing Arts and Missouri
Board of Registration for the Healing Arts. These complaints
stated that she was writing "on Dr. Hancock's
request to provide you with information showing that his
partner, Daniel L. Kloster, M.D. is providing services to
patients . . . that are below the standard of care and which,
it appears, caused the death of at least one patient."
The primary concern in the complaints regarded the
implantation of intrathecal pain pumps.
that month, Hancock sent letters to several people at Menorah
Medical Center and Research Medical Center, including the
CEOs, credentials committees, and peer review committees
regarding his concerns over Kloster's patient care.
Hancock asked Myckowiak to send complaints to the attorneys
general and governors of Missouri and Kansas, the federal
Drug Enforcement Administration, the Missouri Bureau of
Narcotics and Dangerous Drugs, and the Kansas Bureau of
Investigation. Hancock also made an anonymous call to the
Overland Park Police Department.
began thinking about dissolving Rockhill when Hancock lodged
complaints against him. The doctors' business dispute
continued, with Hancock accepting distributions and Kloster
continuing to reject them. This led to Hancock accruing
approximately $100, 000 more than Kloster by September 2012.
At that time, Kloster's attorney wrote a letter informing
Hancock that his acceptance of the distributions breached his
fiduciary duty to Rockhill and put Rockhill's
S-corporation status at risk. Kloster also discovered that
Hancock had used Rockhill funds to pay his personal attorney,
Myckowiak, and Trescot. Kloster asked Hancock to reimburse
those funds, and Hancock refused. In early 2013, Kloster
withdrew $38, 515.15 to equalize the doctors'
distributions. Hancock responded by taking an equal amount
out of Rockhill's account. Kloster responded to this by
withdrawing about $42, 830.13 from Rockhill-some to equalize
distributions and the rest for routine expenses like gasoline
and continuing medical education credits.
the business dispute, Hancock continued investigating
Kloster's patient care. Hancock provided Trescot with 33
more of Kloster's patient billing records to review.
Trescot issued a second opinion in January 2013. She
concluded: "This review identifies multiple cases of
treatment below the standard of care, probable Medicare
fraud, and, I am afraid, possibly manslaughter. In my many
years of reviewing medical cases, I have rarely seen a
magnitude of cases this egregious." Hancock sent
Trescot's second report to the state licensing agencies
to supplement his complaints against Kloster.
March 2013, Kloster filed suit against Hancock. Kloster sued
for breach of fiduciary duty, fraud, fraud through silence,
conversion, defamation, and invasion of privacy by false
light. Kloster also asked for judicial dissolution of
Rockhill as well as an accounting and appointment of a
receiver. Hancock counterclaimed for breach of fiduciary
duty. Later that month the district court appointed Craig
Chance as receiver for Rockhill for the pendency of the
dissolution. Chance's duty was to preserve Rockhill's
assets during the winding down of the company. Chance was
also tasked with determining whether Kloster or Hancock made
inappropriate disbursements of Rockhill funds.
end of March 2013, Hancock began talking to a reporter from
the Kansas City Star. Hancock was frustrated when he talked
to the reporter because none of the state licensing agencies,
hospitals, or other parties to whom Hancock had transmitted
complaints about Kloster had taken action. Hancock deemed
this a "government failure" and thought that he
needed to "alert the general public" to the dangers
posed by Kloster's patient care. The Kansas City Star
published an article titled, "When doctors divorce, the
breakup can be as messy as a marital split" in June
2013. The article begins, "It sounds like the lead-in to
any of 101 divorces. One partner is accused of outrageous
misconduct, the other of not doing his share. There are
threats, maybe shouting. The silent treatment. And underneath
it all, a simmering dispute over money." The article
goes on to discuss Hancock's allegations that Kloster was
"practicing so far below the standard of care that two
of his patients died through massive overdoses of pain
medications." It also contained Hancock's
allegations that patients were dying too quickly after
implantation of pain pumps.
both the Missouri and Kansas licensing agencies concluded
their investigations of Kloster and found that he did not
violate the standard of care. In May 2014, Hancock made a
motion to compel discovery responses from Kloster. Hancock
sought "Kloster's written responses to the different
medical boards and regulatory boards of the various hospitals
and the boards of health for [the] states of Kansas and
Missouri." Kloster objected, arguing that the records
were confidential. The district court agreed with Kloster and
held that Kloster's responses to the licensing agencies
couple of weeks before trial, Hancock filed a motion in
limine asking the court to exclude "[e]vidence,
testimony, exhibits, and/or statements regarding the
conclusions, results, or any other determinations of Dr.
Kloster's conduct or practice methods from any peer
review process of any hospital, the Kansas Board of Healing
Arts, or the Missouri State Board of Registration for the
Healing Arts." Hancock argued that the conclusions of
the investigations were confidential and inadmissible in
court. Kloster replied, arguing that Hancock waived any right
to the privilege of confidentiality in the content of the
administrative proceedings when Hancock publicized the
proceedings in ...