Part 2: Colorado Supreme Court Examines the Scope of Physician-Patient Privilege

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In this two-part series on physician-patient privilege in Colorado, we are examining the Colorado Supreme Court’s latest opinions exploring the boundaries of the privilege. Part One of this series provided a brief primer on the privilege, and outlined Bailey v. Hermacinski, a case about the consultation exception to the physician-patient privilege. In Part Two, we turn to In re Gadeco, a case exploring whether a defendant who holds a privilege can waive it by answering a complaint or raising counterclaims. After outlining this opinion, the post discusses some practice pointers in light of the case.

In re Gadeco: Implied Waiver in Answer and Counterclaims¹

In re Gadeco involved the interesting question of whether a defendant who holds a physician-patient privilege may impliedly waive that privilege by answering a complaint and raising certain counterclaims. Ultimately, the Colorado Supreme Court ruled that this defendant did not waive the privilege.

The case involved a business owner who transferred ownership interests in several businesses to his family on the condition that he would remain in control for his lifetime. The Family, however, quickly voted to remove him as president of the businesses on the ground that his mental health had declined. When the Businessman refused to honor the vote, the Family sued for a declaratory judgment and injunctive relief to prevent him from representing the businesses. The Family’s complaint cited the Businessman’s irrational decision-making and argued his mental health was deteriorating. The Businessman denied these allegations and brought counterclaims, including one for breach of contract where he asked for specific performance of the agreement that he remain in control of the businesses for until his death.

During the course of the litigation, the Family requested that the Businessman produce all of his mental health records. The Businessman refused, citing the physician-patient privilege. A special master appointed to deal with the discovery issues in the case ruled the Businessman had waived the privilege by arguing that he was capable of running the businesses by virtue of raising the specific performance counterclaim. According to the special master, by asserting that counterclaim, the Businessman had injected his mental state into the case and thus impliedly waived the privilege. The special master ordered him to produce all records from the past three years having to do with his mental condition for in camera review, and the trial court adopted that order. The Businessman petitioned the Supreme Court and asked that the order be vacated.

Ultimately, the Supreme Court agreed with the Businessman. The Court’s opinion provides a nice overview of the privilege generally, noting that it comes from statute and applies to both in-court testimony and pretrial discovery of information. The Court then outlined how a party may waive the privilege by injecting his mental condition into the case as the basis of a claim or defense, explaining that the Businessman had not waived it in this case.

The Court first pointed out that the Businessman “would have injected his mental condition into the case as a basis of a claim only if he ‘utilized his physical or mental condition as the predicate for some form of judicial relief.’”² While the Family argued that the Businessman had done this by essentially implying that he was mentally capable of running the companies, the Court disagreed. To the contrary, “[t]o prove his breach of contract claim, [the Businessman] will not need to waive the privilege, meaning he has not injected his mental condition into the case.”³ Relevant here, the contract made no mention of the Businessman’s mental condition.

The Court then reiterated the well-established fact that an opposing party cannot overcome the physician-patient privilege by raising defenses. The Family essentially tried to argue that, if they breached the contract, they were excused from that breach because of the Businessman’s declining mental health, and thus, in order to evaluate that defense, the Businessman’s mental health was at issue. The Court rejected that argument, stating that “[i]n order to determine whether a litigant waived the physician-patient privilege by injecting his mental condition in the case as the basis of a claim or an affirmative defense, we consider only the claims and affirmative defenses alleged by the privilege-holder, not the defenses that the opposing party may raise at trial.”⁴

Neither was the Court buying the argument that the Businessman had injected his mental health into the case by denying the allegations that he made irrational decisions in the course of running the businesses. The Court explained: “Privilege holders do not inject their mental or physical condition into a case by simply denying the opposing party’s allegations, even when those allegations relate to the privilege-holder’s mental health.”⁵ For these reasons, the Supreme Court held the trial court abused its discretion by asking the Businessman to produce the records for in camera review, making the rule to show cause absolute.

Practice Pointers

In re Gadeco is a good reminder of the importance of precise pleading. While privilege holders don’t waive the privilege by denying allegations about their mental health, raising counterclaims that inject one’s mental health into the case may waive the privilege. Here, the Businessman did not waive the privilege through either the answer or the counterclaim, despite the fact that the Family tried to argue he did, because he could defend the lawsuit and pursue his counterclaim without proving his mental state. This case is also an excellent opinion on implied waiver, particularly on the defense side. If you find yourself representing a defendant who holds the privilege, this case will likely become relevant in arguing the privilege has not been waived.

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¹ 2018 CO 22.

² Id. at ¶ 15 (internal citations omitted).

³ Id.

⁴ Id. at ¶ 18.

⁵ Id. at ¶ 22.