Issue 4:10, 11 & 12, October, November and December 2016

CAVEAT HOSPITIA:
Suits Alleging Negligent Credentialing Against Hospitals Get Exemption from Tort Reform

Billeaudeau v. Opelousas General Hospital Authority, — So.3d —, 2016 WL 6123862 (La. 2016)

Policymakers and scholars interested in medical malpractice and torts generally should read Billeaudeau v. Opelousas General Hospital Authority, — So.3d —-, 2016 WL 6123862 (La. 2016). In this recent and important decision, the Louisiana Supreme Court ruled that suits alleging negligent credentialing against a hospital sound in regular negligence, rather than medical malpractice, and consequently fall outside the purview of the state’s Medical Malpractice Act (MMA) and its limitations on liability. The Court made this decision in connection with the state’s cap on damages recoverable in medical malpractice actions, La. Rev. Stat. § 40:1231.2(B)(1), which limits the total amount that courts can award the victim to $500,000, plus interest and cost, on top of the victim’s future expenditures on medical care and support. For many victims of medical malpractice and their families this cap amount is meager, but the Court nonetheless upheld its constitutionality back in 1992. See Butler v. Flint Goodrich Hosp., 607 So.2d 517 (La. 1992).

The Court has now decided that suits alleging negligent credentialing against hospitals are not subject to this cap and that successful plaintiffs consequently will recover full compensation for any proven damage.

The Billeaudeau decision relied on the multifactor test that the Court previously developed in Coleman v. Deno, 813 So.2d 303, 315 (La. 2002). Under Coleman, in determining whether a suit sounds in medical malpractice, as opposed to regular negligence, or vice versa, the court should consider:

1) Whether the particular wrong is “treatment related” or caused by a dereliction of professional skill,
2) whether the wrong requires expert medical evidence to determine whether the appropriate standard of care was breached,
3) whether the pertinent act or omission involved assessment of the patient’s condition,
4) whether an incident occurred in the context of a physician-patient relationship, or was within the scope of activities which a hospital is licensed to perform,
5) whether the injury would have occurred if the patient had not sought treatment, and
6) whether the tort alleged was intentional.

For my discussions of this and similar tests, see here, here, here, and here.

The Court also reasoned, based upon prior precedent, that the MMA’s limitations on the liability of health care providers—the maximum amount of damages, the mandatory pre-suit review by a medical review panel, and the special prescriptive and peremptive periods for malpractice actions—“are special legislation in derogation of the rights of tort victims, and as such, the coverage of the act should be strictly construed” (citing Sewell v. Doctors Hospital, 600 So.2d 577, 578 (La. 1992)).

The social consequences of Billeaudeau are unclear. This decision motivates plaintiffs’ attorneys to increase their resort to negligent-credentialing allegations in suits filed in connection with hospital care (and potentially with managed outpatient care as well). The social cost of medical malpractice litigation in Louisiana will consequently increase. This increase, however, will not necessarily be socially wasteful because hospitals now have a stronger incentive to properly select and monitor doctors.

Note that this decision is not unprecedented: see, e.g., a similar ruling made in 2013 by the North Carolina Court of Appeals in Estate of Ray ex rel. Ray v. Forgy, 744 S.E.2d 468 (N.C.App. 2013) (holding that claims alleging corporate negligence require no expert-witness certification because they do not arise out of clinical care, but rather “out of policy, management or administrative decisions, such as granting or continuing hospital privileges, failing to monitor or oversee performance of the physicians, credentialing, and failing to follow hospital policies, [to which] the court should apply the ordinary negligence principles and the “reasonably prudent person” standard rather than defer to doctors.”). For my discussion of the Ray decision, see here.

This line of authority aligns with my distinction between “treatment rules” and “setup rules” (Alex Stein, Toward a Theory of Medical Malpractice, 97 Iowa Law Review 1201, 1229-32 (2012)). However, whether suits alleging negligent credentialing against hospitals (a setup rule violation that generally does not require expert testimony, according to my theory) should be completely exempted from tort reform is a separate issue that should be resolved on independent policy grounds.

The Billeaudeau decision and similar developments may prompt hospitals to take measures that will minimize their exposure to suits for negligent credentialing. Contracting away the patient’s right to sue is one such measure. Hospitals cannot contract away their vicarious liability for medical malpractice (see, e.g., Tunkl v. Regents of University of California, 383 P.2d 441 (Cal. 1963)), but negligent credentialing is an entirely different cause of action that may call for a different rule. I hope to address this issue in a future post.

Suits Alleging Negligent Credentialing Against Hospitals Get Exemption from Tort Reform

Billeaudeau v. Opelousas General Hospital Authority, — So.3d —, 2016 WL 6123862 (La. 2016)

Policymakers and scholars interested in medical malpractice and torts generally should read Billeaudeau v. Opelousas General Hospital Authority, — So.3d —, 2016 WL 6123862 (La. 2016). In this recent and important decision, the Louisiana Supreme Court ruled that suits alleging negligent credentialing against a hospital sound in regular negligence, rather than medical malpractice, and consequently fall outside the purview of the state’s Medical Malpractice Act (MMA) and its limitations on liability. The Court made this decision in connection with the state’s cap on damages recoverable in medical malpractice actions, La. Rev. Stat. § 40:1231.2(B)(1), which limits the total amount that courts can award the victim to $500,000, plus interest and cost, on top of the victim’s future expenditures on medical care and support. For many victims of medical malpractice and their families this cap amount is meager, but the Court nonetheless upheld its constitutionality back in 1992. See Butler v. Flint Goodrich Hosp., 607 So.2d 517 (La. 1992).

The Court has now decided that suits alleging negligent credentialing against hospitals are not subject to this cap and that successful plaintiffs consequently will recover full compensation for any proven damage.

The Billeaudeau decision relied on the multifactor test that the Court previously developed in Coleman v. Deno, 813 So.2d 303, 315 (La. 2002). Under Coleman, in determining whether a suit sounds in medical malpractice, as opposed to regular negligence, or vice versa, the court should consider:

  • Whether the particular wrong is “treatment related” or caused by a dereliction of professional skill,
  • whether the wrong requires expert medical evidence to determine whether the appropriate standard of care was breached,
  • whether the pertinent act or omission involved assessment of the patient’s condition,
  • whether an incident occurred in the context of a physician-patient relationship, or was within the scope of activities which a hospital is licensed to perform,
  • whether the injury would have occurred if the patient had not sought treatment, and
  • whether the tort alleged was intentional.

For my discussions of this and similar tests, see here, here, here, and here.

The Court also reasoned, based upon prior precedent, that the MMA’s limitations on the liability of health care providers—the maximum amount of damages, the mandatory pre-suit review by a medical review panel, and the special prescriptive and peremptive periods for malpractice actions—“are special legislation in derogation of the rights of tort victims, and as such, the coverage of the act should be strictly construed” (citing Sewell v. Doctors Hospital, 600 So.2d 577, 578 (La. 1992)).

The social consequences of Billeaudeau are unclear. This decision motivates plaintiffs’ attorneys to increase their resort to negligent-credentialing allegations in suits filed in connection with hospital care (and potentially with managed outpatient care as well). The social cost of medical malpractice litigation in Louisiana will consequently increase. This increase, however, will not necessarily be socially wasteful because hospitals now have a stronger incentive to properly select and monitor doctors.

Note that this decision is not unprecedented: see, e.g., a similar ruling made in 2013 by the North Carolina Court of Appeals in Estate of Ray ex rel. Ray v. Forgy, 744 S.E.2d 468 (N.C.App. 2013) (holding that claims alleging corporate negligence require no expert-witness certification because they do not arise out of clinical care, but rather “out of policy, management or administrative decisions, such as granting or continuing hospital privileges, failing to monitor or oversee performance of the physicians, credentialing, and failing to follow hospital policies, [to which] the court should apply the ordinary negligence principles and the “reasonably prudent person” standard rather than defer to doctors.”). For my discussion of the Ray decision, see here.

This line of authority aligns with my distinction between “treatment rules” and “setup rules” (Alex Stein, Toward a Theory of Medical Malpractice, 97 Iowa Law Review 1201, 1229-32 (2012)). However, whether suits alleging negligent credentialing against hospitals (a setup rule violation that generally does not require expert testimony, according to my theory) should be completely exempted from tort reform is a separate issue that should be resolved on independent policy grounds.

The Billeaudeau decision and similar developments may prompt hospitals to take measures that will minimize their exposure to suits for negligent credentialing. Contracting away the patient’s right to sue is one such measure. Hospitals cannot contract away their vicarious liability for medical malpractice (see, e.g., Tunkl v. Regents of University of California, 383 P.2d 441 (Cal. 1963)), but negligent credentialing is an entirely different cause of action that may call for a different rule. I hope to address this issue in a future post.

Choice of Law in Medical Malpractice Suits

Ginsberg v. Quest Diagnostics, 147 A.3d 434 (N.J. 2016)

This recent decision of the New Jersey Supreme Court articulates the choice of law principles for medical malpractice suits.

The plaintiffs, Mr. and Mrs. Ginsberg, resided in New York City during the period relevant to their suit against the defendants. When the plaintiffs’ daughter was seven months old, she was diagnosed with Tay-Sachs disease, a genetically inherited, incurable neurological disorder. At the age of three, the daughter died of that disease.

The plaintiffs filed a negligence suit against Quest Diagnostics, a New Jersey corporation, for failure to provide correct blood test results. Together with Quest, they sued several doctors and medical centers, also domiciled in New Jersey, to whom they attributed negligent medical counseling. The plaintiffs argued that the defendants’ negligence denied them critical information and the consequent opportunity to seek prenatal testing for Tay-Sachs disease and to terminate Mrs. Ginsberg’s pregnancy. They asserted claims for wrongful birth, wrongful life, negligence, negligent hiring and medical malpractice.

Quest filed a third-party claim for indemnification, contribution, and breach of contract against Mount Sinai Medical Center, domiciled in New York.

As far as wrongful birth is concerned, New Jersey law recognizes damages for the emotional injury of the parents and the special medical expenses attributable to raising a child with a congenital impairment (but not damages for the impairment itself). New York law, in contrast, limits wrongful-birth compensation to economic damages. Under this law, the aggrieved parents can only recover the pecuniary expense which they have borne, and must continue to bear, for the care and treatment of their child. Damages for psychic or emotional harm resulting from the birth of the child in an impaired state are not recoverable.

Unsurprisingly, all defendants moved for a determination that New York law govern the plaintiffs’ claims against them. The plaintiffs, for their part, argued that the case should be governed by the law of New Jersey. This controversy took the parties all the way up to the New Jersey Supreme Court.

This Court decided that the trial court must identify the applicable law for each individual defendant in accordance with the principles set forth in the Restatement (Second) of Conflict of Laws (1971), and remanded the case.

Specifically, the Court ruled that:

Where, as here, there is a genuine conflict between the laws of the relevant states, the trial court must identify the state that is the place of the injury and presume that the law of that state governs the action. This principle made New York law presumptively applicable to the case at bar.

This presumption, however, is defeasible. When a competing state has a more significant relationship to the parties and issues, the court should overturn the presumption and apply the law of that state. This exception requires the trial court to carry out the so-called “contacts analysis.” As part of that analysis, the trial court must consider not only the place of the injury and the place of the parties’ relationship, but also each defendant’s domicile, residence, nationality, place of incorporation and place of business, as well as a relevant state’s interest in deterring its citizens from engaging in unlawful conduct, in applying policies that underlie a particular field of law, and in protecting its citizens’ expectations and reliance.

The “contacts analysis” may identify a different state law as applying against each defendant, and the trial court was asked to carry out that analysis. The Court added in this connection that “In a case such as this, involving the law of only two states, a defendant-by-defendant approach is unlikely to prove impractical should the matter proceed to trial.”

The Court, however, also acknowledged that “[A] defendant-by-defendant choice-of-law analysis is not feasible in every matter. In very complex cases with many defendants and multiple claims, a defendant-specific choice-of-law analysis may generate a jury charge that is unwieldy and unclear. … In a complex case with many parties from different states, the trial court retains the discretion to decline a defendant-by-defendant approach and … apply the law of a single state to claims asserted against all defendants.”

Florida’s Supreme Court Prohibits Contracting Around the State’s Arbitration Statute for Medical Malpractice

Hernandez v. Crespo, 211 So.3d 19 (Fla. 2016)

Florida’s Medical Malpractice Act (MMA) contains a set of provisions that allow patients and care providers to arbitrate disputes over medical malpractice. See Fla. Stat. § 766.207(7)(f)–(g) (2003). This statute requires, inter alia, that the agreement (1) concede the provider’s liability; (2) guarantee independent arbitrators; (3) have the provider bear the arbitration’s costs; (4) guarantee that the provider pays interest on damages; and (5) establish the right to appeal the arbitrators’ decision.

Florida’s Supreme Court recently decided that parties cannot change these provisions by contract. The Court reasoned that “arbitration agreements which change the cost, award, and fairness incentives of the MMA statutory provisions contravene the Legislature’s intent and are therefore void as against public policy.”

Ohio’s Statute of Repose for Medical Malpractice Suits Held Constitutional

Antoon v. Cleveland Clinic Found., — N.E.3d —, 2016 WL 6275504 (Ohio 2016)

In this recent case, the Ohio Supreme Court upheld the constitutionality of the state’s statute of repose, R.C. 2305.113(C), that imposes an absolute limit on a plaintiff’s ability to sure care providers for medical malpractice. This statute provides that –

“(1) No action upon a medical, dental, optometric, or chiropractic claim shall be commenced more than four years after the occurrence of the act or omission constituting the alleged basis of the medical, dental, optometric, or chiropractic claim.

(2) If an action upon a medical, dental, optometric, or chiropractic claim is not commenced within four years after the occurrence of the act or omission constituting the alleged basis of the medical, dental, optometric, or chiropractic claim, then, any action upon that claim is barred.”

This statute was alleged to violate Article 1, Section 16, of the Ohio Constitution—a provision known as the “right to remedy” clause. This clause requires that “All courts shall be open, and every person, for an injury done him in his land, goods, person, or reputation, shall have remedy by due course of law.”

The Court held that no such violation is present. The Court started out its analysis by observing that “While mindful of Ohioans’ constitutional right to a remedy, we undertake our review cognizant that a statute of repose is not an unjust and discreditable defense but rather, a law designed to secure fairness to all parties.” The Court cited in this connection its prior decision, Ruther v. Kaiser, 983 N.E.2d 291 (Ohio 2012), that underscores the social benefits of the repose and limitations statutes:

“Forcing medical providers to defend against medical claims that occurred 10, 20, or 50 years before presents a host of litigation concerns, including the risk that evidence is unavailable through the death or unknown whereabouts of witnesses, the possibility that pertinent documents were not retained, the likelihood that evidence would be untrustworthy due to faded memories, the potential that technology may have changed to create a different and more stringent standard of care not applicable to the earlier time, the risk that the medical providers’ financial circumstances may have changed—i.e., that practitioners have retired and no longer carry liability insurance, the possibility that a practitioner’s insurer has become insolvent, and the risk that the institutional medical provider may have closed.

Responding to these concerns, the General Assembly made a policy decision to grant Ohio medical providers the right to be free from litigation based on alleged acts of medical negligence occurring outside a specified time period.” Id. at 296.

The Court then went on to make two critical observations. First, “For the statute to be constitutional, the General Assembly must have a rational basis for determining the period of time during which a party may bring suit based on a vested cause of action” and that “The presumption in favor of constitutionality is strong. … ‘[E]nactments of the General Assembly [are] constitutional unless such enactments are clearly unconstitutional beyond a reasonable doubt.’” (citing State ex rel. Dickman v. Defenbacher, 128 N.E.2d 59, 63 (Ohio 1955)). Second and as importantly, “The statute here, in compliance with the right-to-remedy clause, does not “completely foreclose a cause of action for injured plaintiffs or otherwise eliminate their ability to receive a meaningful remedy.” (citing Flagstar Bank, F.S.B. v. Airline Union’s Mtge. Co., 947 N.E.2d 672, 678 (Ohio 2011)).

Based on these observations, the Court ruled that the statute of repose “is constitutional both when it extinguishes a vested and a nonvested cause of action.”

Psychiatrists’ Liability for Patient’s Violence Against Other People: Washington Supreme Court Abolishes the Inpatient-Outpatient Distinction

Volk v. DeMeerleer, 386 P.3d 254 (Wash. 2016)

In a recent decision, Volk v. DeMeerleer, 386 P.3d 254 (Wash. 2016), the Washington Supreme Court relaxed the “control” prerequisite for psychiatrists’ duty to protect third parties against violent patients.

The Court made this decision in a case involving a psychiatric patient who murdered his girlfriend and her nine-year old son and then committed suicide (after attempting to kill the girlfriend’s older son as well). For nine years leading up to that tragedy, the patient received outpatient care from the defendant psychiatrist, during which he expressed suicidal and homicidal ideations (without naming the potential victims).

The Court held that the psychiatrist had a “special relationship” with the victims because he was able to control the patient. Correspondingly, the psychiatrist had a duty to exercise “reasonable care to act consistent with the standards of the mental health profession, in order to protect the foreseeable victims of his or her patient.” The Court reasoned in this connection that some ability to control the patient’s conduct is sufficient for the “special relationship” and the consequent duty of care to exist. For that reason, psychiatrists should assume responsibility not only for an inpatient’s actions, but also in connection with an outpatient’s violence against third parties.

The Court explained that “Even bearing in mind the lesser amount of control available to mental health professionals in the outpatient setting, sufficient control nevertheless exists to recognize the duty. There are a number of preventative measures mental health professionals can undertake in the outpatient setting, even without actual custodial control …. in order to mitigate or prevent their patients’ foreseeable violent-actions. Given this reasoning, we find that absolute control is unnecessary, and the actions available to mental health professionals, even in the outpatient setting, weigh in favor of imposing a duty.”

The Court also mentioned that a psychiatrist’s obligation to protect third parties against patients’ violence will normally set aside her confidentiality obligation to the patient.

This ruling expands the conventional scope of psychiatrists’ liability to third-party victims. Cf. Rivera v. New York City Health & Hosp. Corp., 191 F.Supp.2d 412 (S.D.N.Y. 2002) (imposing duty to protect third parties on a psychiatrist authorized to confine outpatient to mental institution). The Court justified this expansion by a strong public interest in safety from violent assaults (a factor that played an important role in the landmark California Supreme Court decision, Tarasoff v. Regents of Univ. of Cal., 551 P.2d 334 (Cal. 1976)) while underscoring that “requiring that mental health professionals use the standards of the mental health profession to arrive at the informed assessment of their patients’ dangerousness is not an unworkable requirement.”

Furthermore, the Court noted in its decision that a third-party victim’s suit against a psychiatrist sounds in “negligence” and not in “medical malpractice.” If followed by other courts, this categorization may remove from psychiatrists the special protections granted to defendants in suits for medical malpractice.

Justice Charles K. Wiggins dissented from this decision. His dissent favored the retention of the traditional “actual control” requirement. As he observed (properly, as far as positive law is concerned), “[the Court’s] expansion of liability is unsupported either by our case law or by the Second Restatement §§ 315-319; the majority functionally adopts the Third Restatement § 41, declining to find any capacity for control before imposing a duty to control. Such a substantial transition should be made plainly, explicitly, and only after full discussion and careful consideration—none of which has happened here.”

* * *

Doing away with the inpatient-outpatient distinction in the context of psychiatric malpractice is a developing trend among courts. Last year, Florida’s Supreme Court abolished this distinction in determining psychiatrists’ liability for a patient’s suicide. See Chirillo v. Granicz, 199 So.3d 246 (Fla. 2016), and my discussion of this decision here. This trend may have some undesirable chilling effects on psychiatric care: see Shahar Dillbary, Griffin Sims Edwards & Fredrick E. Vars, The Costs of Suicide, 92 Ind. L.J. (forthcoming in 2017).

Regular Negligence or Medical Malpractice? The Falling Patient Saga Continues

Watson v. Woldenberg Village, Inc., 203 So.3d 317 (La.App. 4 Cir. 2016)

This decision of the Louisiana Court of Appeals for the Fourth Circuit is noteworthy because it departs from the currently prevalent broad definition of “medical malpractice” that affords defendants in patient-fall cases all of the tort reform protections. The court held that a suit against a nursing home seeking tort damages for injuries sustained by an unsupervised resident who fell from his wheelchair sounds in regular negligence, rather than medical malpractice, and consequently does not require screening by a special medical review panel. The negligence allegation brought by the plaintiff accused the responsible employee of the nursing home of failing to properly secure a monitor to the resident’s wheelchair. If properly set up, this monitor would sound an alarm when the resident attempts to rise out of the wheelchair and walk unassisted.

The court found that the monitor was “a straightforward two-part device, whose proper installation requires only the common-sense action of placing the sensor on the patient and the monitor to the wheelchair, positioned so that it cannot fall off or be easily removed,” and then went on to explain that “While medical judgment may have been exercised initially in identifying the risk of harm, once it was identified, and the Fall Protection Protocol put in place, failure of a low-level employee to follow through by executing a routine task is ordinary negligence.”

In making this decision, the court relied on the Coleman multifactor test. See Coleman v. Deno, 813 So.2d 303, 315 (La. 2002). Under Coleman, in determining whether a suit sounds in medical malpractice, as opposed to regular negligence, or vice versa, the court should consider:

  • Whether the particular wrong is “treatment related” or caused by a dereliction of professional skill,
  • whether the wrong requires expert medical evidence to determine whether the appropriate standard of care was breached,
  • whether the pertinent act or omission involved assessment of the patient’s condition,
  • whether an incident occurred in the context of a physician-patient relationship, or was within the scope of activities which a hospital is licensed to perform,
  • whether the injury would have occurred if the patient had not sought treatment, and
  • whether the tort alleged was intentional.

The court’s categorization of the accident as “ordinary negligence” is controversial. Moreover, it is incompatible with the decision delivered by another appellate court of Louisiana: see White v. Glen Retirement System, 195 So.3d 485 (La.App.2d Cir. 2016) (suit complaining about nursing home residents’ fall from her bed categorized as sounding in medical malpractice).

For my discussion of the White decision, see here. For an important decision on the same issue delivered by the Texas Supreme Court, see here.

President Trump’s Tort Reform

Alex Stein

President Trump’s budget for Fiscal Year 2018 proposes a thoroughgoing reform of our medical malpractice system. Executive Office of the President of the United States, Major Savings and Reforms, Budget of the U.S. Government, Fiscal Year 2018, at 114 (2017) (hereinafter, the “Budget”). The reform’s stated goals are “[to] reduce defensive medicine … limit liability, reduce provider burden, promote evidence-based practices, and strengthen the physician-patient relationship.”

To achieve these goals, the reform will introduce the following measures:

  • a cap on noneconomic damage awards of $250,000 (adjustable to inflation);
  • a three-year statute of limitations;
  • allowing courts to modify attorney’s fee arrangements;
  • abolition of the “collateral source” rule (to allow judges and jurors to hear evidence of the plaintiff’s income from other sources such as workers’ compensation and insurance);
  • creating a safe harbor for clinicians who follow evidence-based clinical-practice guidelines.

The Trump administration is also planning to authorize the Secretary of Health and Human Services “to provide guidance to States to create expert panels and administrative health care tribunals to review medical liability cases.” The Budget does not specify the nature of the contemplated federal guidance and the powers that the expert panels and tribunals will receive. For that reason, I will not examine this reform item here.

The Budget does not specify the ways in which the administration is planning to implement the abovementioned reforms. The options are:

  • Direct congressional legislation.
  • A model Act that states will be encouraged to adopt. For example, the federal government will offer special funding to states that implement its model Act while denying it to the noncompliant states.
  • Model legislation combined with financial penalties for the noncompliant states. For example, the federal government may decide to reduce its participation in the noncompliant states’ expenditures on programs such as Medicaid.

Among these options, only (1) and (2) are constitutionally and politically viable. The third option will require Congress to pass a statute that will be opposed not only by many democrats, but also by republican supporters of state rights. More fundamentally, such legislation will violate the anti-commandeering doctrine of the Tenth Amendment and federalism, and will thus be unconstitutional. See New York v. United States, 505 U.S. 144 (1992). My examination of the proposed reforms therefore focuses only on Options (1) and (2).

 

DIRECT CONGRESSIONAL LEGISLATION

The Commerce Clause, U.S. Const. art I, § 8, clearly authorizes Congress to carry out nationwide reforms of medical liability to reduce the costs and increase the affordability of medical care (see, e.g., Katherine Shaw & Alex Stein, Abortion, Informed Consent, and Regulatory Spillover, 92 Ind. L.J. 1, 47-52 (2016)). The proposed reforms, nonetheless, would still face serious constitutional challenges. Some of those reforms are also ill-suited to promote their own goals.

 

(1) THE $250,000 CAP ON NONECONOMIC DAMAGES

The proposed cap on statutory damages replicates California’s $250,000 cap introduced in 1975 by the Medical Injury Compensation Reform Act. In today’s terms, the cap amount should be around $1.1M, but California’s Proposition 46 that purported to make this inflation-based adjustment was defeated in a November 2014 referendum.

The $250,000 cap is unconscionably low, especially for victims in cases of wrongful death and catastrophic injury. Under any plausible criterion, noneconomic damages—pain and suffering, diminished enjoyment of life, and loss of consortium—far exceed $250,000. The proposed cap will also produce disturbing regressive effect: it will disproportionately tax middle class and low-income victims by reducing their total recovery amounts at a much higher rate relative to medical malpractice victims with high-paying jobs (who will receive much higher amounts of compensation for their economic losses). This regressive effect will be further exacerbated by the fact that middle-class and low-income patients are also more likely to become victims of medical malpractice than wealthy patients, given that wealthy patients purchase for themselves and for their families better medical care.

The proposed cap also discriminates between medical malpractice victims and other tort victims, to whom the jury can award any compensation for noneconomic harms that falls within reason.

For these reasons, the cap will face an equal protection challenge under the Fourteenth Amendment. To withstand this challenge, the government must have a demonstrable legitimate interest in the nationwide cap. Specifically, the cap’s introduction must have the potential for reducing defensive medicine and the costs of medical care. This “legitimate interest” claim would not be easy to sustain in light of its recent repudiation in McCall v. United States, 134 So.3d 894 (Fla. 2014)—a decision that voided Florida’s $1M cap on noneconomic damages recoverable in connection with a malpractice victim’s death. For my analysis of this decision, see here. The fact that a doctor will not pay more than $250,000 in noneconomic damages will not reduce her incentive to practice defensive medicine, given that she still stands to pay substantial amounts of compensation to future plaintiffs and that her malpractice liability will be recorded at the National Practitioner Databank (for problems created by this blacklisting, see here).

If the Trump administration is right about doctors’ fear of frivolous suits and excessive liability, this problem should be tackled head-on. Instead of capping plaintiffs’ recovery for noneconomic damages, the legal system should put in place clear definitions of medical malpractice and adequate care that will shield doctors from liability in all cases in which they provide customary care by treating patients according to the practices and protocols established by the medical profession. Many states have already implemented this measure and virtually eliminated frivolous lawsuits: see Alex Stein, Toward a Theory of Medical Malpractice, 97 Iowa L. Rev. 1201, 1209-15 (2012).

Furthermore, studies cited with approval in the McCall decision show that the cost of medical liability insurance is not affected by caps on recoverable noneconomic damages. An increase in this cost over the past three decades was brought about by inflation and the vagaries of the market. A decrease in the level of compensation for malpractice victims’ noneconomic harms therefore will not make it cheaper for doctors to purchase liability insurance. Narrowing the scope of physicians’ malpractice liability is far more likely to achieve this result. See Stein id., at 1209-15, 1256-57.

The administration will also have to choose the appropriate mechanism for implementing its cap. This mechanism may come in the form of a simple jury instruction not to award the plaintiff noneconomic damages that exceed $250,000. This instruction would often be ineffectual. When jurors come to believe that the victim’s compensation is unreasonably low, they might boost the victim’s economic recovery to bring her total compensation award closer to the figure they believe is right. See Catherine M. Sharkey, Unintended Consequences of Medical Malpractice Damages Caps, 80 N.Y.U. L. Rev. 391 (2005).

For that reason, the administration might prefer the more common mechanism that allows jurors to come up with any estimate of the plaintiff’s noneconomic damage while mandating that judges reduce this estimate whenever it exceeds the maximal amount permitted by the statutory cap. See, e.g., Lebron v. Gottlieb Mem’l Hosp., 930 N.E.2d 895, 902, 908 (Ill. 2010) (explaining that under Illinois statute that caps medical malpractice victims’ noneconomic recovery at $1M, “the court is required to override the jury’s deliberative process and reduce any noneconomic damages in excess of the statutory cap, irrespective of the particular facts and circumstances, and without the plaintiff’s consent” and holding that this provision “effects an unconstitutional legislative remittitur” that violates separation of powers).

This mechanism, however, interferes with trial management in state courts. As such, it can hardly be forced upon states by congressional legislation. As Laurence Tribe put it in his testimony before the Senate Committee on the Judiciary, “For Congress directly to regulate the procedures used by state courts in adjudicating state-law tort claims … would raise serious questions under the Tenth Amendment and principles of federalism.” Anthony J. Bellia Jr., Federal Regulation of State Court Procedures, 110 Yale L.J. 947, 950-51 & n.13 (2001).

 

(2) STATUTE OF LIMITATIONS

The proposed statute of limitations brings about no change whatsoever. In fact, most state laws impose a 2 year limitations period.

 

(3) REGULATING ATTORNEY FEES

Authorizing courts to modify the conventional contingent-fee arrangement that entitles the attorney to collect one-third from the plaintiffs award (plus expenditures) is unlikely to promote the reform’s goals. The reformers will do well to learn from New York’s experience with its Judiciary Law § 474-a—a provision that set up an elaborate sliding-scale fee system for attorneys in actions for medical malpractice, while allowing courts to increase the attorney’s compensation in special cases. This experience shows no decline in the filings of medical malpractice suits. At the same time, it indicates that the system has created different conflicts of interest between attorneys and clients while limiting the victim’s ability to hire the best attorney for prosecuting her suit against the physician. See Senate Bill S554 to repeal Judiciary Law § 474-a (noting, inter alia, that attorneys representing plaintiffs in medical malpractice suits have an incentive to strike a cheap early settlement).

 

(4) DOING AWAY WITH THE “COLLATERAL SOURCE” RULE

The collateral source rule holds that a wrongdoer cannot benefit from payments a victim receives from other sources, such as insurance companies, government agencies, and private donors. Those payments belong to the victim alone. Consequently, abolishing this rule would transfer the victim’s money to the wrongdoer. This transfer is unfair and may also weaken the physicians’ incentive to avoid malpractice. See Alex Stein, The Domain of Torts, 117 Colum. L. Rev. 535, 597-98 (2017). Moreover, abolition of the collateral source rule may violate equal protection as well (compare Thompson v. KFB Insurance Co., 850 P.2d 773 (Kan. 1993) (equal protection violated) with Barme v. Wood, 689 P.2d 446 (Cal. 1984) (equal protection not violated)).

 

(5) CLINICAL-PRACTICE GUIDELINES AS A SAFE HARBOR

This part of the reform will introduce a statutory provision that incentivizes physicians to treat patients in accordance with clinical practice guidelines. Physicians who follow those guidelines will receive immunity from malpractice liability. The reformers thus favor a switch from the traditional medicine with its patient-specific applications of medical science to what has become known as “evidence-based medicine”—an evolving discipline that translates clinical experience into statistical data to formulate practice guidelines for physicians. Whether this switch will benefit patients is far from clear. Many doctors believe—for good reasons—that basic science that investigates actual causes and effects is more reliable than statistics and that their patient-specific observations and intuitions will deliver patients a better treatment than the “one size fits all” approach. See L. Jonathan Cohen, Bayesianism Versus Baconianism in the Evaluation of Medical Diagnoses, 31 Brit. J. Phil. Sci. 45 (1980).

Be that as it may, a switch to evidence-based medicine and clinical practice guidelines will create a serious problem for physicians, which might offset the advantages of the new immunity against suit. This switch will not change the nature of the traditional medicine as a body of knowledge that identifies successful methods of patient care. The doctors’ informed-consent requirements consequently will include the duty to inform the patient about the traditional treatment options that go beyond the guidelines and the guidelines’ statistics. As a result, the doctor would have to engage in a rather complicated informed-consent dialogue with her patient and face greater exposure to a suit for violating the patient’s right to be informed. To forestall this problem, the reformers would have to allow physicians not to inform patients about treatment options other than those included in the guidelines, but this freedom to misinform is not a viable possibility from both social standpoint and the medical profession’s point of view.

 

STATE LEGISLATION (MOTIVATED BY FEDERAL FUNDING)

This reform option has special implications for the proposed damage cap. As far as other measures are concerned, it will bring about the same advantages and face the same problems as a federal statute.

Having the states’ legislative assemblies pass a statute that caps medical malpractice victims’ noneconomic damages at $250,000 will forestall the Tenth Amendment challenge. Yet, it will give rise to two other constitutional problems. The statutory cap might be in violation of the constitutional right to a jury trial and the separation of powers principle. See Lebron, id.; Watts v. Lester E. Cox Med. Ctr., 376 S.W.3d 633 (Mo. banc 2012) (voiding Missouri’s cap on noneconomic damages resulting from medical malpractice for violating Article I, § 22(a) of the state’s constitution under which “the right of a trial by jury as heretofore enjoyed shall remain inviolate”). This violation is virtually certain to occur if the most effective and consequently most prevalent cap model, known as a “statutory remittitur,” is adopted. Under this model, the judge instructs jurors to assess the plaintiff’s noneconomic and economic damage separately from one another without informing them about the cap. Subsequently, if the jurors return an assessment of the plaintiff’s noneconomic damage that exceeds $250,000, the judge will bring it down to that amount. This model is unlikely to pass constitutional muster, as explained in Leebron, Watts, and several other state Supreme Court decisions.

The cap will also conflict with the constitutional provisions that entrench the citizen’s right to sue and recover full compensation for personal injury and wrongful death. These entrenchments protect the right to sue and recover compensation as it was on the day of the constitution’s ratification, and they are present in many state constitutions. See, e.g., Or. Const., Art. I, § 10 (entrenching “every man’s” right to “remedy by due course of law for injury done him in his person, property, or reputation”); Tenn. Const., § 17 (“…every man, for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law, and right and justice administered without sale, denial, or delay.”); Utah Const., Art. XVI, § 5 (“The right of action to recover damages for injuries resulting in death, shall never be abrogated, and the amount recoverable shall not be subject to any statutory limitation, except in cases where compensation for injuries resulting in death is provided for by law.”); N.Y. Const. Art. I, § 16 (“The right of action now existing to recover damages for injuries resulting in death, shall never be abrogated; and the amount recoverable shall not be subject to any statutory limitation.”).

Courts have interpreted these entrenchments as a complete ban on damage caps: see Smith v. United States, 356 P.3d 1249 (Utah 2015); Klutschkowski v. Oregon Medical Group, 311 P.3d 461 (Or. 2013). In Horton v. Oregon Health and Science University, 376 P.3d 998, 1028 (Or. 2016), the Oregon Supreme Court has slightly relaxed this approach when it ruled that “[w]hen the legislature does not limit the duty that a defendant owes a plaintiff but does limit the size or nature of the remedy, the legislative remedy need not restore all the damages that the plaintiff sustained to pass constitutional muster, but a remedy that is only a paltry fraction of the damages that the plaintiff sustained will unlikely be sufficient.” (citations omitted). Under this criterion, capping noneconomic damages for all types of victims of medical malpractice would still be unconstitutional. For my discussions of these developments, see here, here, here, and here.

 

* * *

For all these reasons, the medical malpractice reform contemplated by the Trump administration is unlikely to take hold and achieve its goals. The reformers should redirect their attention from remedies, attorney fees and evidence-based medicine to the definitions of medical malpractice and adequate care. Aligning these definitions with the medical profession’s customs, practices and protocols and ensuring that courts do not deviate from these definitions will go a long way toward creating a fair and socially beneficial tradeoff between patients’ rights and doctors’ protection against unmeritorious suits.

VACCINE LIABILITY IN EUROPE: A NEW DEVELOPMENT

On June 21, the European Court of Justice has issued an important ruling on vaccine manufacturers liability. N.W. et al. v. Sanofi Pasteur MSD, C‑621/15. This ruling triggered a hailstorm of criticism from different media outlets, including CNN. These outlets, however, have largely misreported the ruling and its underlying reasons, partly because of this misleading Press Release issued on behalf of the Court itself. In this post, I analyze the Court’s actual decision and compare it with the American law.

The case at bar was about an adult patient who developed multiple sclerosis shortly after being vaccinated against Hepatitis B. The vaccination he received was manufactured by Sanofi Pasteur. Following the patient’s death from multiple sclerosis, his family filed a products liability suit against the company. The suit was filed in a French court, whose decision on evidentiary matters triggered a series of appeals that brought the case before the European Court of Justice. The Court was asked to determine whether the French evidentiary rule which allows plaintiffs to prove the vaccine’s defect and causation by “serious, specific and consistent evidence” in the absence of medical research in either direction aligns with the European law of products liability. The Court ruled that it does while making a number of clarifications and setting up conditions for such rules being valid under Article 4 of the European Council Directive 85/374/EEC of 25 July 1985.

Specifically, the Court decided that European law precludes evidentiary presumptions with mandatory inferences with regard to a product’s defect. European law, the Court held, also precludes any presumption with a mandatory inference as to whether the manufacturer caused or did not cause the victim’s injury. Such factual issues need to be determined on a case-by-case basis when the plaintiff bears the burden of proof with regard to defect, damage and causation.

According to the Court, it should be permissible for the plaintiff to rely on evidence showing “the temporal proximity between the administering of a vaccine and the occurrence of a disease and the lack of personal and familial history of that disease, together with the existence of a significant number of reported cases of the disease occurring following such vaccines being administered.” This means that plaintiffs in vaccine injury or other products liability cases can prove causation as more probable than not based upon any relevant evidence—including differential etiology and naked statistics—even when there is no medical proof linking a vaccine product to, say, multiple sclerosis (as in the case at bar) or autism. Making medical proof a prerequisite for establishing products’ defects and causation would unduly deny plaintiffs access to justice as well as create unfairness in the “apportionment the risks inherent in modern technological production.”

Based on the same principles, the Court also decided that member states can have no mandatory presumptions with regard to manufacturers’ liability. The Court clarified in connection with this ruling that “even if the presumption … were to be refutable, the fact remains that, since the facts preidentified by the legislature or supreme judicial body would be proven, the existence of a causal link would be automatically presumed, with the result that the producer could then find itself, even before the courts ruling on the merits of the case had the opportunity to familiarise themselves with the producer’s evidence and arguments, in the position of having to rebut that presumption in order to defend itself successfully against the claim,” and that “such a situation would lead to the burden of proof provided for in Article 4 of Directive 85/374 being disregarded.”

Our system of vaccine liability is set up by the National Childhood Vaccine Injury Act of 1986, 42 U.S.C. § 300aa-1. This system differs from the European system, as interpreted in the Court’s present decision, in four fundamental respects. First and most important, our system relies on the special Vaccine Court (the Office of Special Masters of the U.S. Court of Federal Claims) while effectively denying plaintiffs access to the general courts system. Second, our system favors vaccine manufacturers in that it makes medical proof of causation a prerequisite for prosecuting a suit against the manufacturer—a requirement that the European Court of Justice has ruled invalid. On the other hand, our system also helps plaintiffs by establishing presumptions of liability that appear in special tables. When a plaintiff proves that she sustained an on-table injury following her immunization, the Vaccine Court must presume the vaccine to be the cause of the injury. See Lauren L. Haertlein, Immunizing Against Bad Science: The Vaccine Court and the Autism Test Cases, 75 Law & Contemp. Probs. 211, 213–17 (2012). Such mandatory pro-plaintiff presumptions also run afoul Article 4 of the European Council Directive 85/374/EEC, as interpreted by the Court. Finally, under the European system, a vaccine victim can only be awarded compensation when s/he proves that the vaccine s/he took fails the risk-utility test. If the vaccine protects millions against serious illness while injuring or even causing death to a single person, it will satisfy the test and will be deemed non-defective. This critical component of the European Court of Justice decision (and the bar it raises for the plaintiffs’ suit) was missed by many of the decision’s critics. In the United States, on the other hand, the victim would still be able to recover compensation if s/he has medical proof of causation or shows the presence of an on-table injury.

The two systems of vaccine liability—ours and the European—strike different tradeoffs between victims’ rights and society’s need to secure adequate supply of safe vaccines. Both tradeoffs are prima facie plausible. Which of them is better than the other is a separate question, too big to be discussed here.

MORE ON THE ECJ VACCINE LIABILITY DECISION

My friend and mentor, the former Israeli Chief Justice Aharon Barak, used to say that when neither side likes the court’s decision, chances are that the court was right. This is likely to be the case with the European Court of Justice (ECJ) decision on vaccine manufacturers’ liability, N.W. et al. v. Sanofi Pasteur MSD, C‑621/15. Popular press reacted to this decision with sharp criticism that included unsubstantiated assertions about the European law of products liability, about what the Court did and did not say, and about the economics of vaccines. My short blog-post, which appeared here, offered a more positive (and hopefully more informative) assessment of this decision and its implications. I argued that the decision was balanced and well grounded in the principles of evidence and products liability. The follow-ups and subsequent analyses that appeared in Nature, Science and Hipertextual (in Spanish) have largely vindicated the decision (while citing some of its critics alongside the decision’s supporters such as myself).

To remove any remaining confusion about the implications of the ECJ decision, I thought I should clarify the Court’s statement that a vaccine liability suit can only succeed when the plaintiff proves that the vaccine complained against was “defective” within the meaning of Article 6(1) of the European Council Directive on products liability (85/374/EEC) (the Directive). Critics of the Court’s decision have uniformly missed this important proviso.

The Article 6(1) test for “defectiveness” incorporates the totality of factors that need to be taken into account to secure the key goal stated in the Directive’s Preamble: “a fair apportionment of the risks inherent in modern technological production.” The Preamble also clarifies that “the defectiveness of the product should be determined by reference not to its fitness for use but to the lack of the safety which the public at large is entitled to expect” (emphasis added).

The ECJ’s earlier decision, Boston Scientific Medizintechnik GmbH, et al., C‑503/13 & C‑504/13, which the Court quoted in N.W. v. Sanofi Pasteur, interpreted those provisions to incorporate a cost-benefit analysis that juxtaposes the product’s risks against its social utility. The Boston Scientific ruling also included a statement that “assessment [of product defects] must be carried out having regard to the reasonable expectations of the public at large” and that “the safety which the public at large is entitled to expect … must therefore be assessed by taking into account, inter alia, the [product’s] intended purpose” (emphasis added).

All this is consequential for future vaccine liability decisions in Europe because vaccine products embody the risk-benefit calculation in their very design. Vaccines are designed to save many by risking just a few, and they therefore cannot be identified as defective when they bring about this social consequence. As a corollary, plaintiffs suing vaccine manufacturers in Europe will always need credible expert testimony in order to prove that the vaccine product fails the cost-benefit analysis and hence was defective. Absent such testimony, their suits will be doomed to failure.

For that reason, the Court’s decision to allow the plaintiffs in N.W. v. Sanofi Pasteur to rely on evidence showing “the temporal proximity between the administering of a vaccine and the occurrence of a disease and the lack of personal and familial history of that disease, together with the existence of a significant number of reported cases of the disease occurring following such vaccines being administered” will hardly give those plaintiffs an upper hand in the proceeding that will now resume in France. Vaccine manufacturers may well be unhappy about that decision, but the Court’s Article 6(1) ruling gives them every reason to suppress that feeling. In fact, it is vaccine plaintiffs who should feel lukewarm, if not unhappy, about the Court’s decision. For them, proving that a vaccine product was defective because it fails the cost-benefit analysis within the meaning of Article 6(1) will remain an uphill battle. Add to this the Court’s ruling that plaintiffs should bear the burden of proof on every products liability issue—defect, damage, and causation—and that member states cannot shift this burden to the defendant, and you will get the full picture. Cf. Alex Stein, The Domain of Torts, 117 Colum. L. Rev. 535, 561-63; 589-93 (2017) (outlining and rationalizing common law rules that relieve plaintiffs from the burden of proving causation following the defendant’s violation of a safety standard).

Contrary to what the doomsayers say, the ECJ’s decision is many miles away from imposing “crashing liability” on vaccine manufacturers.