Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions


Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.

 

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Courtney Guy v. Providence Health & Services Washington d/b/a Providence Alaska Medical Center (1/14/2022) sp-7578

Courtney Guy v. Providence Health & Services Washington d/b/a Providence Alaska Medical Center (1/14/2022) sp-7578

           Notice:   This opinion is subject to correction before publication in the P                      ACIFIC  REPORTER.  

           Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

                                                                                                                           

           303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                                                             

           corrections@akcourts.gov.  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                         



COURTNEY  GUY,                                                     )  

                                                                   )    Supreme Court No. S-17520  

                                                                                                          

                                 Appellant,                        )  

                                                                   )    Superior  Court  No.  3AN-16-05145  CI  

           v.                                                      )  

                                                                                             

                                                                   )    O P I N I O N  

                                              

PROVIDENCE HEALTH &                                                )  

                                                                                                                 

                                                   

SERVICES WASHINGTON d/b/a                                          )    No. 7578 - January 14, 2022  

                                                

Providence Alaska Medical Center,                                  )  

                                                                   )  

                                 Appellee.                         )  

                                                                   )  



                                                                                                                 

                                    

                      Appeal from the Superior Court of the State of Alaska, Third  

                                                                                                          

                      Judicial District, Anchorage, Jennifer Henderson, Judge.  



                                                                                                              

                      Appearances:              Jason  Gazewood  and  Ember  Skye  Tilton,  

                                                                                                              

                      Anchorage, for Appellant.  Mara E. Michaletz, Birch Horton  

                                                                               

                      Bittner & Cherot, Anchorage, for Appellee.  



                                                                                                                           

                      Before: Winfree, Maassen, Carney, and Borghesan, Justices.  

                                                                   

                      [Bolger, Chief Justice, not participating.]  



                                                  

                      BORGHESAN, Justice.  



I.         INTRODUCTION  



                                                                                                                              

                      A  patient  sued  a  hospital  after  learning  that  a  hospital  employee  



                                                                                                                                    

intentionally  disclosed  the  patient's  health  information  in  violation  of  the  Health  


----------------------- Page 2-----------------------

                                                                                                                                                                                                                                                               1  

Insurance Portability and Accountability Act (HIPAA).                                                                                                                                                                                                               The patient alleged that the                                                                                       



disclosure breached the hospital's contractual obligations to him.                                                                                                                                                                                                                                          The superior court                                               



instructed the jury to return a verdict for the hospital if the jury found that the employee                                                                                                                                                                                                                                                              



was not acting in the course and scope of employment when she disclosed the patient's                                                                                                                                                                                                                                                                          



information.   The jury so found, leading to judgment in the hospital's favor.                                                                                                                                                                                                                                                                           



                                                            We vacate the judgment because the jury instruction erroneously applied                                                                                                                                                                         



the rule of vicarious liability to excuse liability for breach of contract.                                                                                                                                                                                                                                                             A party that                               



breaches its contractual obligations is liable for breach regardless of whether the breach                                                                                                                                                                                                                                                                              



is caused by an employee acting outside the scope of employment, unless the terms of  



the contract excuse liability for that reason.  We therefore remand this case for further                                                                                                                                                                                                                                                             



proceedings, in particular to determine whether a contract existed between the patient                                                                                                                                                                                                                                                                                



and hospital and, if so, the contract's terms governing patient health information.                                                                                                                                                                                                                                                                                              



II.                           FACTS AND PROCEEDINGS                                              



                              A.                            Facts  



                                                            In March 2013 Courtney Guy was assaulted and tortured by a group of men                                                                                                                                                                                                                                                



in Anchorage.                                                      Guy was treated for his injuries at Providence Alaska Medical Center                                                                                                                                                                                                                                



 (Providence).   While Guy was hospitalized, one of his assailants communicated by text                                                                                                                                                                                                                                                                                              



message with Providence employee Stacy Laulu.                                                                                                                                                                                             At the assailant's request, Laulu                                                                                              



accessed Guy's medical records and illegally texted the information to the assailant.                                                                                                                                                                                                                                                                                                        



                                                            Months   later,   federal   agents   searched   the   assailant's   cell  phone   while  



investigating himfor                                                                          federal crimes. The                                                                     agents found Laulu's text messages, which had  

                                                                                                                                           2  Upon learning of the violation, Providence fired Laulu,  

constituted a HIPAA violation.                                                                                                                                                                                                                                                                                                                                           



                               1                            Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified in scattered sections                                                                                                                                                                                                                           



of 42 U.S.C.).            



                              2                             See, e.g., Murphy v. Dulay, 768 F.3d 1360,  1368-69 (11th Cir. 2014)  

                                                                                                                                                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                                                                                                                          (continued...)  



                                                                                                                                                                                             -2-                                                                                                                                                                                7578
  


----------------------- Page 3-----------------------

notified the Secretary of the United States Department of Health and Human Services of                                                                                                                                                                                                                                       



the violation, and informed Guy of the disclosure by letter.                                                                                                                                                                        Laulu was subsequently                        



convicted of violating HIPAA.                                                                                          



                         B.                       Proceedings  



                                                   1.                      Initial proceedings   



                                                  Roughly   two-and-a-half   years   after   Guy   was   informed   of   the   HIPAA  



violation, he filed a complaint against Providence.                                                                                                                                             Guy alleged that he had "suffered                                                               



severe and prolonged serious physical injury" when "Laulu, as an employee and agent                                                                                                                                                                                                                             



of Providence," disclosed his health information.                                                                                                                                         Guy claimed that Providence "had a                                                                                                    



contractual obligation to ensure that such information was not released to third parties"                                                                                                                                                                                                              



and had breached that duty, causing him injury.                                                                                                                                      



                                                  Providenceanswered thecomplaint,                                                                                                      admitting thatLaulu                                                         wasaProvidence     



employee when she disclosed Guy's information.                                                                                                                                                However, Providence claimed that                                                                                        



"[t]he disclosure of this information was not authorized by Providence" and that "Laulu                                                                                                                                                                                                                   



was   not   an   agent   of,   or   acting   in   the   course   and  scope   of   her   employment   with,  



Providence when confidential patient information was disclosed."                                                                                                                                                                                                    Providence also   



denied that it had caused Guy's injury.                                                                                                            



                                                  2.                       Motion for summary judgment                                                           



                                                  Providence moved for summary judgment. After pointing out that HIPAA                                                                                                                                                                                  



violations do                                       not give rise to                                                  private causes of action,                                                                         Providence argued                                                          that any   



common-law tort claim based on disclosure of patient health information would be                                                                                                                                                                                                                                          



                         2                        (...continued)  



                                                                                                 

(explaining that "HIPAA regulations generally prohibit covered entities from using or  

                                                                                                                                                                                                                                                                                                       

disclosing 'protected health information' "with exceptions for disclosures made through  

                                                                                                                                                                                                                                                                                                         

the  judicial  process  or  when  expressly  authorized  by  a  patient  (citing  45  C.F.R.  

       

  164.508(a)(1))).  



                                                                                                                                                             -3-                                                                                                                                                  7578
  


----------------------- Page 4-----------------------

barred by the applicable two-year tort limitations period.                                                                                As for Guy's contract claim,                            



Providence contended that because it had no contract with Guy "concerning HIPAA or                                                                                                                          



the disclosure of information about him," it did not breach any contractual obligations                                      



to Guy.             



                                The court held oral argument on Providence's summary judgment motion.                                                                                                              



Guy's counsel raised an argument not made in briefing.                                                                                         He likened Guy's case to                                    



Luedtke   v.   Nabors   Alaska   Drilling,   Inc.,   where   this   court   recognized   that   at-will  



employment contracts contain an implied covenant of good faith and fair dealing and that                                                                                                                



requiring employees to undergo drug testing could in some instances amount to a breach                                                                                                         



of the implied                        covenant   in  light  of   the public policy                                                     in   Alaska favoring                             employee  

                    3   Invoking this public policy, Guy argued that the court should follow Luedtke  

privacy.                                                                                                                                                                                     



and find that the implied covenant of good faith and fair dealing protects patients' health  

                                                                                                                                                                                                  



information when receiving medical treatment.  At the close of argument the superior  

                                                                                                                                                                                            



court stated that if it considered this newly raised argument it would give both parties an  

                                                                                                                                                                                                           



opportunity to present supplemental briefing on the issue.  

                                                                                                                                             



                                The court denied Providence's motion for summary judgment in a written  

                                                                                                                                                                                               



order. "After consideration of new arguments brought forth at oral argument," the court  

                                                                                                                                                                                                    



found genuine issues of material fact "as to the existence and terms of the contract for  

                                                                                                                                                                           



 services entered between Mr. Guy and Providence and, further, whether the duty of good  

                                                                                                                                                                                                     



faith and fair dealing would be violated by the conceded unauthorized disclosure of  

                                                                                                                                                                                                           



private medical information."  

                                                                         



                                Providence moved for reconsideration, pointing to the court's promise to  

                                                                                                                                                                                                            



provide an opportunity for supplemental briefing in the event it considered arguments  

                                                                                                                                                            



beyond those already briefed. The court granted Providence's motion to reconsider and  

                                                                                                                                                                                                        



                3               768  P.2d   1123,   1130,   1136-37  (Alaska   1989).   



                                                                                                     -4-                                                                                                     7578  


----------------------- Page 5-----------------------

invitedProvidenceto filesupplemental briefing. Providencethenrequestedand received  

                                                                                                                              



a one-month extension, but it does not appear to have filed any supplemental briefing on  

                                                                                                                                        



this issue.  

                  



                     3.         Trial  

                                           



                     Trial began in October 2018, but the judge declared a mistrial.  A second  

                                                                                                                                



trial was scheduled for June 2019.  

                                                         



                     Before the first trial, Providence had filed a memorandum regarding jury  



instructions.   One of its proposed jury instructions stated that "[i]n order to determine                                 



whether [Providence] is legally responsible for the acts of Stacy Laulu, you must decide  

                                                                                                                                 



that it is more likely true than not true that Stacy Laulu was acting within the course and  

                                                                                                                                      



scope of her employment when the disclosure occurred." Before the second trial, which  

                                                                                                                                  



was held before a new judge, the court notified the parties that it intended to give this  

                                                                                                                                      



proposed instruction (among others) to the jury.  

                                                                               



                     Guy objected to this instruction.  Guy argued that his action was based on  

                                                                                                                                        



contract and that the concept of vicarious liability did not apply because "[v]icarious  

                                                                                                                        



liability is a concept that a principal is liable in tort for harms caused by its agent."  He  

                                                                                                                                       



proposed his own instructions seemingly based on a mix of contract and tort principles.  

                                                                                                                           



The superior court accepted some but not all of Guy's instructions.  

                                                                                                             



                     On the first day of the second trial the judge invited the parties to address  

                                                                                                                                



the dispute over jury instructions. Guy's counsel stated that Providence was "attempting  

                                                                                                                         



to use vicarious liability as a defense to a contract claim, which doesn't seem to be  

                                                                                                                                       



available."  He argued that the jury instructions failed to address contract law and asked  

                                                                                                                                   



the court to use "our earlier contract instructions that we submitted."  Guy's counsel  

                                                                                                                               



argued that he was not able to find a single case where vicarious liability "was approved  

                                                                                                                             



as a defense to a contract claim."  

                                                       



                                                                   -5-                                                             7578
  


----------------------- Page 6-----------------------

                                                                                                                              

                    Later that day Guy submitted a supplemental brief on the issue.  The brief  



                                                                                                                     

explained  that  "[t]here  is  no  reference  in  the  Restatement  (Second)  of  Contracts  



                                                                                                                               

regarding vicarious liability." Rather, "[v]icarious liability rests in tort." Guy asked that  



                                                                                                                        

"[i]nstead, the Court instruct on the relevant contractual breach instructions."  



                                                                                                                              

                    Providence responded that its proposed instruction did not use the term  



                                                                                                                   

"vicarious liability" and was "based on previous pattern jury instructions referencing  



                                                                                                                                      

agency relationships," namely Alaska Pattern Jury Instructions - Civ. 23.01 and 23.02.  



                                                                                                                               

 Providence argued that "vicarious liability is to tort law as agency is to contract," and  



                                                                                                                                 

claimed that "Alaska has a long history of applying principles of agency liability to  



                                                                                                                                 

contract claims."  It cited the Restatement (First) of Agency, arguing that the factors set  



                                                                                                                                 

forth "for the consideration of an agent's authority (and a principal's liability) . . . . are  



                                                                             

not unlike Alaska Civil Pattern Jury Instruction."  



                                                                                                                            

                    Thedisputedinstruction, reflectingProvidence'sposition, instructed jurors  



                                                                                                                                      

that the parties did not dispute that Laulu illegally disclosed Guy's information, but that  



                                                                                                     

                     [i]n  order  to  determine  whether  [Providence]  is  legally  

                                                                                                           

                    responsible for the acts of Stacy Laulu, you must decide that  

                                                                                                       

                    it is more likely true than not true that Stacy Laulu was acting  

                                                                                                          

                    within the scope of her  employment with,  or  agency  for,  

                                           

                     [Providence].  



                                                                            

To make this decision, the jury was instructed to consider:  



                                                                                                     

                    (1) whether [Providence] expressly authorized Stacy Laulu's  

                                                                                                           

                    conduct, or Stacy Laulu's conduct was similar to conduct that  

                    the defendant authorized, or Stacy Laulu's conduct was not  

                                                                                                        

                    a  remote  or  improbable  occurrence  in  connection  with  

                                      

                    authorized conduct;  



                                                                                             

                    (2)  whether  Stacy  Laulu's  conduct  occurred  substantially  

                                                                                                                

                    within the time and place authorized by the defendant; and  



                                                                                                              

                    (3) whether Stacy Laulu's conduct was motivated, at least in  

                                                                                    

                    part, by an intent to serve the defendant.  



                                                                -6-                                                         7578
  


----------------------- Page 7-----------------------

                                                                                                  

In evaluating these factors, the instruction permitted the jury to consider:  



                                                                                                                 

                     *	       the time, place and purpose of Stacy Laulu's conduct;  



                                                                                              

                     *	        any previous situations that involve the defendant's  

                                                                             

                               authorization to Stacy Laulu;  



                                                                                                          

                     *	       whether  Stacy  Laulu's  conduct  was  outside  the  

                                                                                         

                               defendant's area of business activity;  



                                                                                                        

                     *	       whether the defendant had reason to expect that Stacy  

                                                                                       

                               Laulu would engage in the conduct;  



                                                                                                     

                     *	       the similarity of Stacy Laulu's conduct to any conduct  

                                                                                             

                              that the defendant expressly authorized;  



                                                                                                         

                     *	       whether thedefendantsuppliedany equipment or tools  

                                                                                                                  

                              that Stacy Laulu used when engaging in the conduct;  



                                                                                                     

                     *	       whether Stacy Laulu departedfromthe normal method  

                                                                                                 

                               of accomplishing an authorized result; and  



                                                                                                     

                     *	       whether  Stacy  Laulu's  conduct  involved  a  serious  

                                          

                               crime.  



                                                                                                      

If the jury ruled that Providence was not legally responsible, the disputed instruction  



                                                                  

ordered the jury to return a verdict for the hospital.  



                                                                                                                               

                    The court later asked the parties for additional arguments regarding this  



proposed jury instruction.  Providence's counsel suggested that it would be "ironic" if  



                                                                                                                             

parties that "don't file within the statute of limitations . . . have more theories" than those  



                                                                                                                               

that do:  "[I]f you don't bring a tort claim for something that's obviously a tort, and you  



                                                                                                                               

bring a contract claim, all of a sudden you're in a stronger position because defenses that  



                                                                                                                       

could be raised before are no longer viable." Guy's counsel responded that the proposed  



                                                                                                                              

instruction was inconsistent with the contract claims being pled.  Guy's counsel then  



                                                                                                                                

argued that the breach at issue was not Laulu's revealing Guy's health information, but  



                                                                                     

her  obtaining  it in  the first place.                 The fact that the information  was  subsequently  



                                                                -7-	                                                        7578
  


----------------------- Page 8-----------------------

revealed to the men who had assaulted Guy "is more along the lines of what the harm                                                                                                                                                                                                                                                                                                                      



was, what the damage was."                                                                                                                  



                                                                 The court observed that Guy's theory had "shifted over the course of time                                                                                                                                                                                                                                                                    



in this case."                                                  The court stated that the case was "unusual" because in a contract action,                                                                                                                                                                                                                                                        



the relevant breach is not usually "based on a tort or crime committed by one of the                                                                                                                                                                                                                                                                                                                               



employees."   And it described the case as "a tort case at heart trying very, very hard to                                                                                                                                                                                                                                                                                                                               



be a contract case."                                                                              The court concluded that Civil Pattern Jury Instruction 23.10 "is                                                                                                                                                                                                                                                  



applicable in this case where . . . the jury is being asked to decide . . . whether Providence                                                                                                                                                                                                                                                                               



 should be held responsible for the conduct of Ms. Laulu."                                                                                                                                                                                                                              Therefore the court gave the                                                                                                



disputed   instruction   (Instruction   22),   which   was   modeled   on   Civil  Pattern   Jury  



Instruction 23.10, to the jury.                                                                                                                 



                                                                 After trial the jury returned a verdict for Providence. The first question on                                                                                                                                                                                                                                                                         



the special verdict form asked: "Was Stacy Laulu acting within the course and scope of                                                                                                                                                                                                                                                                                                                                   



her employment or agency when the disclosure occurred so that defendant Providence                                                                                                                                                                                                                                                                                          



Alaska Medical Center is legally responsible for any damages caused by the disclosure?"                                                                                                                                                                                                                                                                                                                                               



The jury answered:                                                                               "No."   It did not reach any of the other questions on the verdict                                                                                                                                                                                                                             



 form.    After the jury left, Guy's counsel moved for a judgment notwithstanding the                                                                                                                                                                                                                                                                                                                              



verdict, arguing that the jury instructions had improperly stated the law.                                                                                                                                                                                                                                                                                                   The court   



denied the motion.                                                                           The court later issued a final judgment reflecting the jury verdict.                                                                                                                                                                                                                                                                     



Guy appeals.                                                      



III.                             STANDARD OF REVIEW                                                                       



                                                                                                                                                                                                                                                                                                                                                                                                                                4  

                                                                 "We review jury instructions de novo when a timely objection is made."                                                                                                                                                                                                                                                                                               



"A jury instruction containing an erroneous statement of law constitutes reversible error  

                                                                                                                                                                                                                                                                                                                                                                                                            



if it prejudiced one of the parties; prejudice exists 'if it can be said that the verdict may  

                                                                                                                                                                                                                                                                                                                                                                                                              



                                 4  

                                                                                                                                                                                                                                                                                                                                  

                                                                  Cummins, Inc. v. Nelson, 115 P.3d 536, 541 (Alaska 2005).  



                                                                                                                                                                                                            -8-                                                                                                                                                                                             7578  


----------------------- Page 9-----------------------

                                                                                                                  5  

have been different had the erroneous instruction not been given.' "                                                 "As a type of jury          



instruction, a special verdict form is subject to the same standard of review as other jury                                                   

instructions."6  



IV.         DISCUSSION  



                                                                            

           A.          The Jury Instructions Were Erroneous.  



                                                                                                                                                 

                       There is much truth to the superior court's observation that this case is "a  



                                                                                                                                      

tort case at heart trying very, very hard to be a contract case."  Stacy Laulu wrongly  



                                                                                                                                             

disclosed confidential information about Guy to his assailants, allegedly causing Guy  



                                                                                                                                              

injury.  Guy argues that Providence, Laulu's employer, should be held liable for this  



                                                                                                                                                 

injury.  Courts in other jurisdictions have recognized that unauthorized disclosure of  



                                                                                                                     7  

                                                                                                                         

confidential health information gives rise to a cause of action in tort. 



                       But  perhaps  because  this  lawsuit  was  not  filed  within  the  two-year  

                                                                                                                                    

limitations period applicable to tort claims,8 it was pled as a breach of contract claim.9  

                                                                                                                                                      



            5          Barrett  v.  Era  Aviation,  Inc.,  996  P.2d   101,   103  (Alaska  2000)  (quoting  



Beck  v.  State,  Dep't  of  Transp.  &  Pub.  Facilities,  837  P.2d   105,   114  (Alaska   1992)).   



            6          Manes  v.  Coats,  941  P.2d   120,   125  n.5  (Alaska   1997).   



            7          See, e.g., R.K. v. St. Mary's Med. Ctr., Inc., 735 S.E.2d 715, 724 (W.Va.  

                                                                                                                                        

2012)  (holding  HIPAA  does  not  preempt  state  law  causes  of  action  for  wrongful  

                                                                                                                                    

disclosure of health care information); Sheldon v. Kettering Health Network, 40 N.E.3d  

                                                                                                                                        

661, 672 (Ohio App. 2015) (holding HIPAA does not preempt an independent tort claim  

                                                                                                                                           

for disclosure of private medical information by a physician or hospital); Walgreen Co.  

                                                                                                                                              

v. Hinchy,  21  N.E.3d  99,  104 (Ind.  App.  2014)  (affirming  a jury  verdict  against  a  

                                                                                                                                                  

pharmacy for disclosing private information in a patient's prescription records), aff'd on  

                                                                                                                                                

reh'g Walgreen Co. v. Hinchy, 25 N.E.3d 748 (Ind. App. 2015).  

                                                                                                   



            8          AS 09.10.070.  

                              



            9          AS  09.10.053  (providing  three-year  statute  of  limitations  on  contract  

                                                                                                                                      

claims).  



                                                                        -9-                                                                7578
  


----------------------- Page 10-----------------------

It must therefore be tried as a breach of contract claim.                                                                                                     Jurors were instructed to decide                                          



Providence's liability by applying a principle of agency law commonly used in tort                                                                                                                                                              



claims to determine vicarious liability: whether Laulu was acting in the course and scope                                                                                                                                                  

                                                                                                                                                                                                                                      10        But  

of   her   employment   when   she   disclosed   Guy's   information   to   his   assailant.                                                                                                                                                  



principles of agency law and vicarious liability do not apply to the question of whether  

                                                                                                                                                                                                                                   



a party to a contract may be liable for breaching its contractual obligations.  A party to  

                                                                                                                                                                                                                                                     



a contract is liable for breaching its contractual obligations even when the breach is  

                                                                                                                                                                                                                                                     

caused by the party's employee acting outside the scope of employment.11  

                                                                                                                                                                                                                          



                                       Providence  fails  to  cite  a  case  holding  that  agency  law  applies  to  

                                                                                                                                                                                                                                                   



determining whether a contract was breached.  It claims that "[f]or almost a century,  

                                                                                                                                                                                                                                



Alaska courtshavefollowed commonlawrequiring principal liabilityfor contract claims  

                                                                                                                                                                                                                                         



to be predicated on a principal's authorization or ratification of an agent's actions."  But  

                                                                                                                                                                                                                                                



the  cases  Providence  cites  do  not  apply  agency  principles  to  determine  whether  a  

                                                                                                                                                                                                                                                      



                    10                 See, e.g.               ,  Lane v. City &Borough of Juneau                                                                 , 421 P.3d 83, 94 (Alaska 2018)                                         



("We have . . . followed the traditional rule that an employer is liable for the torts of an                                                                                                                                                        

employee only 'while the [employee] is acting in the scope of [their] employment.' "                                                                                                                                                                   

(alteration in original) (quoting                                                            Williams v. Alyeska Pipeline Serv. Co.                                                                           , 650 P.2d 343,     

349 (Alaska 1982)));                                         Taranto v. North Slope Borough                                                               , 909 P.2d 354, 358 (Alaska 1996)                                               

("This court adopted the Restatement (Second) of Agency . . . rule that an employer will                                                                                                                                                        

be held liable for both negligent and intentional torts of its employee, if the employee 'is                                                                                                                                                        

acting in the scope of [their] employment.' " (quoting                                                                                                        Williams, 650 P.2d at 349)).                                    



                    11                 See RESTATEMENT   (SECOND)   OF  CONTRACTS    235(2) (A                                                                                                                  M. L         AW. I   NST .  

                                                   

                                                                                                                                                                                                                                                        

 1981) ("When performance of a duty under a contract is due any non-performance is a  

                                                                                                                                                                                                                                              

breach." (emphasis added)); cf. Webster v. S. Cal. First Nat'l Bank, 137 Cal. Rptr. 293,  

                                                                                                                                                                                                                                           

297-98 (Cal. App. 1977) (promisor's inability to perform contract due to court order  

                                                                                                                                                                                                                                                             

                                                                                                                                                                                                                                                      

obtained  by  third-party  litigant  against  promisor  does  not  excuse  performance);  3  

      ARTIN D.CARR  & A                                       NN  TAYLOR  SCHWING, C                                               ALIFORNIA  AFFIRMATIVE  DEFENSES   59:4   

M                                

(2d ed.) ("Prevention by a stranger to the contract is not" a contract defense.).                                                                                                                    



                                                                                                                        -10-                                                                                                                 7578
  


----------------------- Page 11-----------------------

contracting party                  breached  the terms of its contract.                                  Instead, these cases apply agency                     



principles only to determine whether an entity is                                                bound  by a contract.      



                           In  Bendix Corp. v. Adams                           , the plaintiff sought to hold Bendix liable for                                        



breach of the plaintiff's contract with Marine Advisors, a wholly-owned subsidiary of                            

                12   The plaintiff argued that Marine was Bendix's agent during negotiation and  

Bendix.                                                                                                                                                              

breach of the contract at issue.13                                    We disagreed, finding insufficient evidence of an  

                                                                                                                                                                       

agency relationship.14  Although we noted that Marine breached the contract at Bendix's  

                                                                                                                                                           



direction, this fact was "not . . . sufficient to establish that Marine was acting on behalf  

                                                                                                                                                                



of Bendix at the time when the contract was formed" and therefore "would not make  

                                                                                                                                                                  



Bendix a party to the . . . contract on an agency theory so as to be liable for a breach of  

                                                                                                                                                                         

that contract."15  In a footnote, we noted the possibility that Bendix subsequently ratified  

                                                                                                                                                               



Marine's contract but stated such a finding would depend on showing "that Marine  

                                                                                                                                                              



initially entered into the contract for the benefit of Bendix even if at the time Marine did  

                                                                                                                                                                       

                                                                                          16  Our decision that Bendix was not liable  

not have the requisite authority from Bendix."                                                                                                                    

                                                                         



therefore turned on the conclusion that Bendix was not a party to the contract; our focus  

                                                                                                                                                                  



on whether Marine was "acting on behalf of" or "for the benefit of" Bendix pertained to  

                                                                                                                                                                         



whether Marine's actions bound Bendix to the contract.  The decision does not suggest  

                                                                                                                                                              



that when a party is bound, agency principles are relevant to determine whether it has  

                                                                                                                                                                      



breached its contractual obligations.  

                                                 



             12            610 P.2d 24, 25-26, 32-33 (Alaska 1980).
                                            



             13           Id .
  



             14
          Id.  at 33.         



             15           Id .  



             16           Id . at 33 n.19.              



                                                                                  -11-                                                                            7578
  


----------------------- Page 12-----------------------

                                                                                                                                                                           17  

                             Sea Lion Corp. v. Air Logistics of Alaska, Inc.                                                    is equally off-point                     .    In that   



case, we held that Sea Lion was liable as a direct signatory to a contract because Sea                                                                                                



Lion's board knew that Sea Lion's president had signed the document, knew that the                                                                                                     



signature exposed Sea Lion to the risk of liability, and "said nothing tending to disavow                                                                                   

                                                                                        18   Like Bendix, Sea Lion shows that a principal  

the effect of [the president's] signature."                                                                                                                                



must authorize or ratify a contract made by an agent in order to be bound to a contract  

                                                                                                                                                                         



and therefore liable for breaching it. But it does not show that when a principal is indeed  

                                                                                                                                                                                



bound by a contract, the principal's failure to perform contractual obligations is excused  

                                                                                                                                                                             



if the failure results from the actions of an agent acting outside the scope of authority.  

                                                                                                                                                                        



                             When deciding whether a party has  breached  the contract (rather than  

                                                                                                                                                                                    



whether a party is bound by the contract), it is necessary to focus on the terms of the  

                                                                                                                                                                                       



contract rather than on who or what caused the breach.  In other words, we focus on the  

                                                                                                                                                                                        



duties of the principal (which are spelled out in the contract) rather than the duties of the  

                                                                                                                                                                                        



                                                                                                                                                                                           19  

agent.  This distinction reflects a major difference between contract and tort liability.                                                                                                       

                                                                                                                                                                



                             In the tort context, vicarious liability entails holding the principal liable for  

                                                                                                                                                                                        



a breach of someone else's duty of care towards the injured party, such as when a  

                                                                                                                                                                                           



business is vicariously liable for a delivery driver's breach of the driver's own duty to  

                                                                                                                                   



use care when driving.  The test for vicarious liability, based on whether the agent was  

                                                                                                                                                                                      



               17            787  P.2d   109  (Alaska   1990).   



               18            Id .  at   116-19.   



               19            Of  course,  the  terms  of  the  contract  themselves  may  specify  that  the  identity  



of   the   person   or   thing   that   caused   the   failure   to   perform   is   material   to   determining  

whether  the  party  has  breached  the  contract.    



                                                                                           -12-                                                                                    7578
  


----------------------- Page 13-----------------------

 acting in the course and scope of employment, serves to determine whether it is fair to                                                                                              



                                                                                                                                                                  20  

 hold the employer liable for the employee's breach of the employee's duty.                                                                                             



                             A contract claim, on the other hand, is based on the asserted breach of the  

                                                                                                                                                                                    



principal's  duty to satisfy obligations the principal has agreed to.  The rationale for the  

                                                                                                                                                                                    



 agency principles underlying Providence's proposed jury instruction - to determine  

                                                                                                                                                                     

 whether it is fair to hold the defendant liable for the breach of another person's duty21 -  

                                                                                                                                                                                     



 has less force when the plaintiff seeks to hold the defendant liable for breach of its own  

                                                                                                                                                                                 



 duty.  That is especially true because parties to a contract have the opportunity (at least  

                                                                                                                                                                                 



 in theory) to determine the precise scope of their obligations and liabilities - unlike the  

                                                                                                                                                                                    



 parties in a tort case, who often do not have a preexisting contractual relationship. These  

                                                                                                                                                                              



 differences explain why there are countless decisions applying agency principles to  

                                                                                                                                                                                      



 determine vicarious liability in tort, yet Providence has not cited any decisions in which  

                                                                                                                                                                             



               20            The general rule is that it is fair to hold an employer vicariously liable when                                                                   



 the employee was acting for the benefit of the employer.                                                                  See  RESTATEMENT  (SECOND)  

 OF AGENCY  219(1) (A                             M. L     AW. I  NST . 1958) ("A master is subject to liability for the torts                                                  

                           

 of his servants committed while acting in the scope of their employment.");                                                                                         id.  cmt. a      

 ("[W]ith the growth of large enterprises, it became increasingly apparent that it would  

                                                                                                                                                                          

 be unjust to permit an employer to gain fromthe intelligent cooperation of others without  

                                                                                                                                                                              

 being responsible for the mistakes, the errors of judgment and the frailties of those  

                                                                                      

 working under his direction and for his benefit.").  



               21            See Lane v. City & Borough of Juneau, 421 P.3d 83, 94 (Alaska 2018)  

                                                                                                                                                                             

 ("Before holding an employer legally responsible for an employee's conduct, a court  

                                                                                                                                                                              

 must determine whether the employee's conduct was 'so connected to his employment  

                                                                                                                                                                

 as to justify requiring . . . the employer [to] bear [the plaintiff's] loss.' " (alterations and  

                                                                                                                                                                                   

 omissions in original) (quoting Williams v. Alyeska Serv. Co., 650 P.2d 343, 349 (Alaska  

                                                                                                                                                                          

 1982))).  



                                                                                         -13-                                                                                  7578
  


----------------------- Page 14-----------------------

a court has applied agency principles to excuse a party to a contract from liability for                                                                                             

breaching its terms.                      22  



                             This case does not concern whether someone was acting as another's agent  

                                                                                                                                                                                



when entering into a contract, as in Bendix  and Sea Lion, nor whether Providence is  

                                                                                                                                                                                       



vicariously liable for torts committed by Laulu.  Rather, the key issues are whether a  

                                                                                                                                                                                         



contract between Guy and Providence existed and, ifso, what terms, if any, such contract  

                                                                                                                                                                          



contained governing protection of patient health information.  

                                                                                                          



                             The superior court denied Providence's motion for summary judgment,  

                                                                                                                                                                     



concluding there were "genuine issues of material fact as to the existence and terms of  

                                                                                                                                                                                       



the contract for services entered between Mr. Guy and Providence and  .  . . [as to]  

                                                                                                                                                                                     



whether the duty of good faith and fair dealing would be violated by the conceded  

                                                                                                                                                                      



unauthorized disclosure of private medical information."  Therefore the threshold issue  

                                                                                                                                                                                 



in this case is the existence and terms of a contract between the parties. It is conceivable  

                                                                                                                                                                  



that such a contract did exist and contained terms obliging Providence to take steps to  

                                                                                                                                                                           



prevent disclosure of patient health information fromdisclosure by rogue employees like  

                                                                                                                                                                                    



Laulu.  If so, and if Providence breached those obligations, then the jury's finding that  

                                                                                                                                                                                   



Laulu was acting outside the scope of her employment would not necessarily excuse  

                                                                                                                                                                            



Providence from liability.   Because Jury Instruction 22 permitted the jury to excuse  

                                                                                                                                                                            



Providence from liability without first deciding whether there was a contract between  

                                                                                                                                                                         



Providence and Guy and what such contract may have required of Providence, this  

                                                                                                                                                                                   



instruction was error.  

                                   



              22             Providence suggested before the superior court that it is unfair to preclude                                                                



a tort defense for what is seemingly a tort claim at heart, albeit presented as a contract                                                                            

claim.    Whether fair or not, each claim for relief comes with its own advantages and                                                                                             

disadvantages. For example, there is a longer limitations period for contract claims than                                                                                         

for tort claims, but a party pursuing a contract claim has to prove elements that a party                                                     

pursuing a tort claim does not:                                     namely, the existence of a contract and its terms.                                           



                                                                                         -14-                                                                                   7578
  


----------------------- Page 15-----------------------

                 B.	             TheErroneousJuryInstructionPrejudicedGuy                                                                                    BecauseHePresented              

                                 Sufficient Evidence For A Jury To Find That The Disclosure Of His                                                                                                           

                                 Health Information Caused Him Injury.                                                   



                                 Providenceclaims                             that Jury Instruction22 did                                       not constitutereversibleerror                              



because the verdict would have been the same even if the instruction had not been                                                                                                                        



                23  

given.                                                                                                                                                                                                        

                       It argues that Guy presented too little evidence of injury resulting from the  



                                                                                                                                                                                                            

disclosure  of  his  information  for  the  jury  to  find  any  damages.                                                                                                 We  disagree  and  



                                                                                                                                                                                                 

conclude that the erroneous jury instruction warrants reversing the judgment.  



                                                                                                                                                                                                             

                                 Guy presented evidence in the form of his own testimony, explaining that  



                                                                                                                                                                                                                        

he had "paranoia" about health care providers as a result of his experience at Providence.  



                                                                                                                                                                                                      

Had  the  unauthorized  disclosure  not  occurred,  Guy  testified  that  his  mental  health  



                                                                                                                                                                                                  

"would probably be a little bit more . . . well-balanced or not so sketchy."  Guy testified  



                                                                                                                                                                                                              

that he had not applied for Medicaid since the incident, which "stemmed from [Guy] not  



                                                                                                                                                                                                                        

trusting" that his medical information would not be "given out" as it was at Providence.  



                                                                                                                                                                                                

From this testimony, a reasonable jury could have found that Guy experienced damages  



                                                                                                                                                                                                

caused by Laulu's disclosure.  Providence argues that Guy did not offer any evidence  



                                                                                  

that the hospital was aware of or authorized Laulu's conduct.  But as discussed above,  



                                                                                                                                                                                                  

there was no need for Guy to present any evidence that Providence ratified Laulu's  



                                                                                                                                                                                                          

disclosure; Jury Instruction 22 was improper precisely because this is not a relevant issue  



                                                                       

in a breach of contract case.  



                                                                                                                                                                                  

                                 Nor is it the case, as Providence argues, that the evidence Guy presented  



                                                                                                                                                                                              

was "wholly contrary" to a finding of damages. Providence points to evidence presented  



                 23              See Barrett v. Era Aviation, Inc.                                            , 996 P.2d 101, 103 (Alaska 2000) ("A jury                                                    



instruction containing an erroneous statement of law constitutes reversible error if it                                                                                                                           

prejudiced one of the parties; prejudice exists 'if it can be said that the verdict may have                                                                                                              

been different had the erroneous instruction not been given.' " (quoting                                                                                                           Beck v. State,       

Dep't of Transp. & Pub. Facilities                                                    , 837 P.2d 105, 114 (Alaska 1992))).                                                        



                                                                                                      -15-	                                                                                              7578
  


----------------------- Page 16-----------------------

                                                                                                                               

at trial that Providence took immediate remedial actions once it found out about the  



                                                                                                                       

HIPAA violation, including contacting Guy to inform him of the breach and offering  



                                                                                                                                

further assistance.   But Guy did not claim that Providence injured him by failing to  



                                                                                                                     

follow  its  remedial  HIPAA  protocol.                       Rather  he  claimed,  and  presented  evidence  



                                                                                                                       

intended  to  show,  that  Providence  injured  him  when  Laulu  revealed  his  medical  



                                                 

information to Guy's assailant.  



                                                                                                                               

                    Guy's recovery is not precluded by his testimony that he had not seen the  



                                                                                                                              

text messages between Laulu and the assailant. Providence claims that because Guy was  



                                                                                                                        

not aware of what the text messages relayed, he could not have shown that Laulu's  



                                                                                                                             

disclosure  caused  damage  to  him.                     Providence  suggested  at  trial  that  Laulu's  text  



                                                                                                                       

messages might have relayed only that Guy was in the hospital - a fact the assailant  



                                                                                                                           

already knew. But Guy was in the hospital after being assaulted and tortured, and Laulu  



                                                                                                                           

furnished information about Guy to his assailant.  A jury could reasonably have found  



                                                                                                                          

that Guy experienced fear, distress, and anxiety knowing that his information was shared  



                                                                                                   

with his attackers, even if that information was limited in scope.  



                                                                                                                                     

                    Similarly unpersuasive is Providence's claim that Guy failed to identify  



                                                                                                                                

reasonably certain damages caused by Laulu's disclosure because Guy "admitted that he  



                                                                                                                              

could  not  differentiate  between  the  trauma  arising  from  the  disclosure  versus  the  



                                                                                                                   

significant torture that caused him to seek medical treatment to begin with." Providence  



                                                                                                                            

cites to a portion of the trial at which Guy's counsel asked him if there was "some way"  



                                                                                                                         

he could "explain the difference" between the trauma he experienced from the assault  



                                                                                               

and the trauma he experienced from Laulu's disclosure.  Guy replied:  



                                       

                    Not really.  They're both like the same because, like, it was  

                                                                                        

                    just - I was helpless.  There was nothing I could do when  

                                                                                                

                    the assault was going on.   I could - there was absolutely  

                                                                                                            

                    nothing I could do.   I was helpless.   And  when I was at  



                                                              -16-                                                         7578
  


----------------------- Page 17-----------------------

                                                                                                              

                    Providence laid up in the bed, you know, after surgery and at  

                                                                            

                    their disposal, there's nothing I can do.  



                                                                                                                                

Fairly read, Guy's testimony indicates that both experiences made him feel helpless, not  



                                                                                                                      

that the two experiences were indistinguishable.  And at other points in his testimony  



                                                                                                                              

Guy  clearly  attributed  specific  harm  to  the  disclosure,  including  "paranoia"  and  



                                                                                                                               

"conspiracy issues"; a mental condition that was less balanced and caused him to be less  



                                                                                                                                

"at ease" than before the disclosure; and a decision to not apply for Medicaid since his  



                                                                                           

information was revealed because of the resulting distrust.  



                                                                                                                    

                    Finally it is not the case, as Providence argues, that Guy's attempt  to  



                                                                            

recover damages for future therapy was doomed by his failure to obtain mental health  



                                                                                  

treatment since the assault.  Guy testified that he had contacted multiple therapists and  



                                                                                                                              

even  met  with  one,  but  the  meeting  was  unsuccessful  because  the  disclosure  had  



                                                                                                                                

impaired his ability to trust.  Guy also testified about his desire to see a therapist in the  



                                                                                                                       

future.  And although true that Guy had not applied for Medicaid in order to facilitate  



                                                                                                                 

mental health treatment, Guy testified that the reason he had not applied for Medicaid  



                                                                                                                        

was  that  his  experience  with  Providence  made  him  wary  of  sharing  his  medical  



                                                                                                       

information.  A jury might conclude that Guy did not need money for psychiatric care  



                                                                                                                               

because he did not have a history of receiving such care.  But it could also conclude that  



                                                                                                                          

Guy did not obtain this care at least in part because of the paranoia and mistrust caused  



                                                                                                                        

by Providence, and that Guy should not be penalized for suffering fromthe very paranoia  



                                                                                                                              

and mistrust for which he now seeks redress.  Finally, even if a jury concluded that Guy  



                                                                                                                        

did not need damages for future therapy, it could still conclude that he needed damages  



                                                                                                                              

for home security and an identity theft prevention system, as he requested at trial.  



                                                               -17-                                                         7578
  


----------------------- Page 18-----------------------

                                                                                                                                                                       24  

                               Considering the evidence from the perspective of the jury,                                                                                   the inclusion   



of Jury Instruction 22 prejudiced Guy.                                                     Guy testified that the disclosure had caused him                                                       



feelings of fear and paranoia and affected his ability to heal from the 2013 assault.                                                                                                           This  



evidence was not so one-sided that this court can assume that, had the jury reached the                                                                                                             



issue of damages, it would have awarded Guy nothing.                                                                                  Because "the jury may have                                

                                                                                                                                                 25  we must reverse.  

returned a different verdict" if it had been properly instructed,                                                                                                                               



                C.	            We Remand For Further Proceedings On This Breach Of Contract  

                                                                                                                                                                            

                               Action.  



                               We remand for determination of the duties Providence owed to Guy.  In  

                                                                                                                                                                                                     



order to prevail in a breach of contract action, the plaintiff "must show that the defendant  

                                                                                                                                                                                    



had  a  duty  to  perform  and  that  the  defendant  failed  to  perform  as  agreed  in  the  

                                                                                                                                                                                                  

contract."26  

                                                                                                                                                                                             

                             It is undisputed that Laulu, a Providence employee, revealed Guy's health  



                                                                                                                       

information, and that this action violated HIPAA.  The question on remand is whether  



                                                                                                                                                                                        

this conduct violated any contractual duty that Providence owed to Guy.  The superior  



                                                                                                                                                                                                      

court denied summary judgment because there were "genuine issues of material fact as  



                                                                                                                                                                                                  

to the existence and terms of the contract for services entered between Mr. Guy and  



                                                                                                                                                                                                     

Providence and,  further, whether  the duty  of good  faith and  fair  dealing  would  be  



                                                                                                                                                                                                             

violated by the conceded unauthorized disclosure of private medical information."  



                24             Zamarello  v.   Reges,   321   P.3d   387,   392   (Alaska   2014)   ("We   evaluate  



whether any error was prejudicial by putting ourselves in the position of the jurors and                                                                                                           

determining whether the error probably affected their judgment." (quoting                                                                                                      Henrichs v.   

Chugach Alaska Corp.                                  , 250 P.3d 531, 535 (Alaska 2011))).                               



                25             Parnell v. Peak Oilfield Serv. Co., 174 P.3d 757, 765 (Alaska 2007), reh'g  

                                                                                                                                                                                               

Jan. 29, 2008.  

                                   



                26             Alaska Pattern Jury Instructions - Civ. 24.03 Cmt. (citing 5A A. C                                                                                          ORBIN,  

                                                                                                                                                                                 

    ORBIN ON CONTRACTS   1228 (1963) and 11 S. W                                                                        ILLISTON, A T                   REATISE ON THE                        LAW  

C                           

       CONTRACTS  1290 (3d ed. 1968)).                                  

OF                                    



                                                                                                 -18-	                                                                                         7578
  


----------------------- Page 19-----------------------

These are the threshold issues that must be resolved by briefing and, if necessary, trial  

                                                                                                    



on remand.  

     



V.       CONCLUSION  



                  We REVERSE the judgment of the superior  court  and  REMAND for  

                                                                                                                    



further proceedings consistent with this opinion.  

                                                         



                                                         -19-                                                    7578
  

Case Law
Statutes, Regs & Rules
Constitutions
Miscellaneous


IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights
Soteria-alaska
Choices
AWAIC