Cal Biz Lit

How To Make a $15 Million Verdict Fly Away

[August 25, 2011 Update:  The Cal Supremes granted a hearing of this case on June 8.  Opening brief on the merits is due on September 8.]

There are lots and lots of multi-defendant tort cases in California.  And in many of them, some defendants settle without getting a good faith order under Code of Civil Procedure section 877.6, leaving other defendants to go to trial.  What if I were to tell you that, when that happens, the first defendant who takes a release wipes out most of the plaintiff's case against the other defendants?  I'm going out on a limb here and telling you that's the law.

Work with me here for a minute.  This is kind of inside baseball, but for those of you in the tort world, it's worth taking a look at.  Our case for today is called Leung v. Verdugo Hills Hospital (March 23, 2011) ___Cal.App.4th___ (Court of Appeals, 2nd Dist., B204908).

  Medical malpractice case v. doctor and hospital.  (If you do tort work but not med mal, keep reading anyway -- the med mal part doesn't matter). Catastrophic and tragic injury to newborn.  Doctor and plaintiff settle for doctor's $1 million policy, on condition that doctor sits as a defendant at trial.  Jury awards $250K in non-economic damages (the maximum under California's med mal reform statutes) and a thumping $15.2 million in economic damages (past and future medical, future lost earnings, etc., everything reduced to present cash value).  Jury finds doctor 55% at fault, hospital 40% and parents 5%.  But since California is a joint and several state for economic damages, the hospital is on the hook for (a) 40% of the $250K; (b) all of the $15.2M, less (c) about $10,000 from the doctors' settlement (just trust CBL on this -- we'll explain it some other time, and how the math works isn't the point of this case or this post). 

Instead, the point is this:  The case goes to the Court of Appeals, which takes all of the $15M+ in economic damages away.  Why? Because the Plaintiff's release of the doctor for the $1M policy is deemed a release of the hospital.

CBL hears you ask:  How did this happen and what does it mean to me?  Go the jump, and all will be revealed.

So What Exactly Did We Settle, Anyway?

Workers' compensation and workers' compensation liens are often an issue in personal injury cases and the settlement of personal injury cases.  But most of the time, when the 
tort defendant isn't a party to the workers' comp matter, the lien is really the plaintiff attorney's problem.  But what about when the tort defendant was also an employer?

In California as in most states, an employee can't sue his or her employer for injuries arising out of and in the course and scope of the employment (Labor Code §3601.)  But there are instances where an employee has parallel civil cases and workers' compensation claims against the same company:  for example, in a toxic exposure case where some of the exposure took place while working for the employer and some of it involved exposure to the employer's product while working for someone else (a surprisingly common fact pattern). 

Or, as in Steller v. Sears, Roebuck and Co. ( October 14, 2010) ___Cal.App.4th___ (Second App. Dist., No. B219935), there's the scenario where the employee files a worker's compensation case against the employer and a civil case for disability discrimination.  Here's a suggestion for employers in either scenario:  when you settle one case, settle them both.

In Stellar, the Defendant made an offer of judgment under Code of Civil Procedure § 998.  The offer stated that in exchange for payment of $95,000, the appellant / plaintiff would release:

all claims for, [appellant's] alleged damages, costs and expenses, attorneys' fees and interest asserted or that could have been asserted by [appellant] in this action, as well as all demands, actions, liabilities, obligations, damages and/or causes of action arising from this lawsuit or relating to [appellant's] employment with [respondent]." (Italics added.)

Then the parties went to a Superior Court settlement conference where the plaintiff announced she was accepting the offer.

And then the parties got into a kerfluffle over what was accepted.  According to the plaintiff, ""'the only legally permissible interpretation of the §998 Offer is that it did not include the settlement of the Workers['] Compensation proceeding within the dollar amount contained in the offer.'"  Of course, according to the employer, everything was settled.

The parties filed cross-motions, each seeking to enforce her or its own version of the deal.  They submitted declarations to help the court interpret the deal.  The trial court, however, held that the settlement unambiguously included the works comp claim.  Huh?  Really?  So, said the trial court, there's no need to even look at the declarations.

In a settlement where the subject of workers' compensation wasn't mentioned in the documents and where settlement would be invalid if not approved by the Workers' Compensation Appeals Board, the Court of Appeal wasn't prepared to go quite that far.  Instead, the Court said, well, yes, the settlement is ambiguous (ya' think?).  But once we look at the declarations, "the only plausible interpretation of the settlement agreement is that it encompassed both the disability discrimination and workers' compensation claims."  Well, ok, if you say so.

Advice for everybody on both sides:  don't lose sight of the ball.  Make it explicit what you're settling and what you aren't settling.   Skip the Court of Appeal part.  Save yourself some attorneys' fees.  Just sayin'.

Court of Appeal Issues New Tort Decision On Fault Allocation

    Today, Cal Biz Lit presents a guest post from Adams | Nye partner Barbara Adams.  Barbara discusses a new case allowing apportionment of fault to the U.S. Navy, even in situations where the Navy can't be sued.

    In California, since the passage of Proposition 51 (Civil Code §§ 1431 and following) in 1986, defendants in personal injury cases have been liable for non-economic damages only according to their share of “fault” as found by the jury at trial.  It is, of course, to the advantage of the defense to have as many entities as possible on the verdict form to whom the jury can attribute “fault” for the plaintiff’s injuries.  In 1992, the California Supreme court held that even if employers could not be used, they were entities to whom a share of “fault” could be attributed (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593.)  In 2003, a California Appellate Court held that, even if the plaintiff cannot recover damages from the Navy, the Navy is an entity to whom the jury can allocate “fault” (Taylor v. John Crane, Inc. (2003) 113 Cal.App.4th 1063.) 

    In 2008, in a trial in Alameda County Superior Court,  plaintiffs’ counsel managed to convince the trial judge that Taylor no longer applied, and after the defendant had offered lots of evidence of Navy fault, the Navy  could not be on the verdict form at all.

    The plaintiffs in the most recent case were the wife and daughter of Ulysses Collins, who died of mesothelioma in 2005.  He had worked as a welder at the Hunters Point Naval Shipyard from 1960 to 1973, and at Mare Island Naval Shipyard from 1976 to 1994 (from 1973 to 1976, he worked at an oil refinery.)  At the close of evidence, plaintiffs’ counsel moved for a directed verdict as to the Navy, arguing that, pursuant to Munoz v. City of Union City (2007) 148 Cal.App.4th 173, the Navy enjoyed sovereign immunity, without exception, and thus could not be listed on the verdict form.  The trial Judge agreed.  During deliberations, the jury asked why the Navy did not appear on the verdict form as an entity to whom they could allocate fault, and they were instructed that they could not apportion to the Navy as a matter of law.  The jury found Plant Insulation 20% at fault, in a verdict that included $1.8 million in non-economic damages (that’s $360,000 in liability, with no ability for set off), and $1,038,000 in economic damages (I would tell you what the set-off was, but the wording of the decision makes no sense whatsoever.)

    Appeal followed, resulting in last week's decision in Collins v. Plant Insulation Co. (June 3, 2010) ___Cal.App.4th___ Case  (California Court of Appeal No. A124268), overturning the trial court’s decision.   As the Collins Court explained, the difference between the holding in Munoz  and Taylor is that the former case held that there was an absence of duty, and thus a true absence of fault, where in the latter instance, there was only a decision that the Navy cannot be sued in civilian court, not an abrogation of fault. 

    The clearest case on this issue, cited by the Collins court, is Richards v. Owens Illinois (1997) 14 Cal.4th 985.  There, a defendant in an asbestos case attempted to have non-party tobacco companies on the verdict form for fault allocation.  The California Supreme Court held that fault could not be allocated to tobacco companies.  At that time, California barred suits against tobacco companies (a ban that has since been lifted).  The Supreme Court reasoned that the legislature had not just granted the tobacco companies immunity from suit;  it  had declared that the tobacco companies did not owe, and therefore could not breach, a duty to smokers.   Thus, there was no “fault” to allocate.

    The Court also distinguished Munoz.  In that police unreasonable use of force case,  the jury allocated fault both to the police officer for unreasonable use of force, and to the City of Union City for vicarious liability.  But the Court of Appeal held that, based provisions of the California Government Code designed to shield public entities from liability, the City owed no duty to the decedent, and therefore could not have any share of “fault.” 

    Plaintiff’s counsel in Collins attempted to construct a "sovereign immunity" parallel between Munoz and their case, arguing that since  sovereign immunity means, “the king can do no wrong”, then the Navy, like tobacco companies and the City of Union City, had no potential duty, and thus no “fault.”  But the Court held that the Navy can act "wrongfully" and still be immune.  And that .   British concepts of sovereign immunity don't, and never have, applied in the U.S..

    In conclusion, if you hope to add an unusual party to the verdict form in your trial, an entity that cannot otherwise be sued for this injury, be ready to examine the basis of that immunity.  Is it just immunity from suit, or complete lack of  duty, and thus fault?

Cal Supremes To Decide Personal Injury Reduced Medical Specials Issue

CalBizLit has posted on numerous occasions on the cases addressing this question:  "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?"  Previous posts are here,  here and here.   The defense has Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298  both holding that the plaintiff only gets the medicals that were actually paid.  After a concerted effort, the plaintiff side had Howell v. Hamilton Meats &  Provisions holding to the contrary:  that the plaintiff could recover the entire amount billed, regardless of what the providers too as payment in full.

But no more.  Last week, the Cal Supremes granted a hearing in Howell, describing the issues to be decided as follows:

(1) Is the "negotiated rate differential" (the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer) a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment? (2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury's award of damages by the negotiated rate differential?

So Howell is no longer citeable authority, and until the Supremes decide (many months from now), the only published decisions on these questions are the Hanif and Nishihama, both favoring the defense.

Witness Statements: Work Product or Not?

    California's attorney word product doctrine is codified in Code of Civil Procedure § 2018.030, and has both absolute and qualified components.  There is absolute protection against discovery for a "writing that reflects an attorney's impressions, conclusions, opinions, or legal research or theories," meaning that such writings are not discoverable under any circumstances.  Other work product (which is not defined) "is not discoverable unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery in preparing that party's claim or defense or will result in an injustice." 

    For the court's assistance in applying this law, the legislature (which hasn't bothered to define "work product") offers the following philosophical statement in Code of Civil Procedure § 2018.020:

It is the policy of the state to do both of the following:
   (a) Preserve the rights of attorneys to prepare cases for trial with that degree of privacy necessary to encourage them to prepare their cases thoroughly and to investigate not only the favorable but the unfavorable aspects of those cases.
   (b) Prevent attorneys from taking undue advantage of their adversary's industry and efforts.

    Well ok, it's a "policy" statement not a philosophical statement.  Still, it might have been nice for the legislature to say what it was they were talking about.  Instead, they supplied the following rather zen guidance in Code of Civil Procedure 2018.040:

This chapter is intended to be a restatement of existing law relating to protection of work product.  It is not intended to expand or reduce the extent to which work product is discoverable under existing law in any action.

    Fine.  And as a result, for as long as I've been a lawyer, trial courts, appellate courts and lawyers have been struggling with, and coming up with different answers to, what seems like a straightforward questions that out to have a bright line answers:  Are witness statements work product?  Are they discoverable?  

    And yesterday, in Coito v. Superior Court of Stanislaus County (March 4, 2010) ___ Cal.App.4th ___ (F057690)  the Fifth Appellate District muddied the waters some more. 

    More confusion after the jump.

Suing The Unknown Defendant: How The Doe Device Works

    Here's what got this post started:  I'm a big fan of Beck and Hermann's Drug & Device Law Blog, and have had it on CBL's list of approved blogs for years.  Although they both practice in the world of big law, they write like -- dare I say it? -- real people.  I even enjoy it when they post about how wacky California is, although that's supposed to be my department.

    However.  In a post late last week, they were puzzled over an unpublished decision in a district court case in Los Angeles called Dorsett v. Sandoz, Inc.   Their puzzlement seemed to stem from confusion between principles of deferred accrual of the statute of limitations law and relation back of so-called "Doe allegations." Anybody left awake now?

    So let's see if we can either put the rest of you to sleep, or else straighten this out.  And CBL will use the opportunity to show how the statutes of limitations and California's fictitiously named defendant statute interact with each other.

    To non-lawyers, the concept of statute of limitations probably seems straightforward:  you have so many years to file a lawsuit, if you're on one side of the line you're in, on the other you're out.  Simple?  Ha!  First of all, we have tons of different statutes of limitations, ranging from ninety days for conversion of property left at a hotel to ten years for an action against a real estate developer for latent property defects.  The statute for personal injuries and wrongful death is most often two years, although there are some exceptions (the most commonly applied one being the one year statute for asbestos-related disease or death).      But that's the simple part.  More after the jump.

SF Chron Reports On The Personal Injury Reduced Medical Specials Issue

    Cal Biz Lit has been following the trail of cases addressing what happens when a successful personal injury plaintiff had his or her medical bills paid by insurance, and the insurer has a deal with the providers to reduce fees to a pre-negotiated rate.  As CBL has posted here and here, the question is whether the plaintiff recovers the amounts the providers accept as full payment, or the amounts they initially billed before the write-offs. 

    This morning's San Francisco Chronicle has coverage of the issue, and the new decision in Howell v. Hamilton Meats & Provisions, Inc. (November 23, 2009) ___ Cal.App.4th ___ (Fourth Dist., D053620), here.

    As the Chron points out, Howell was the result of an aggressive campaign by the California plaintiff bar to find suitable cases and attack this issue in the Courts of Appeal.  There are three other cases on this issue pending in appellate courts.  And the Chron also quotes predictions, accurate in CBL's view, that this issue is headed to the Cal Supremes.

Can A Personal Injury Plaintiff Recover For $3 Aspirins? For $75 Booties? Issue Now Joined In California

    It's been more than  year since Cal Biz Lit posted about the whole Hanif / Nishihama / Olsen question.  That question, specifically, is this:   "Just what does a personal injury plaintiff get when her medical bills are $200,000 but the hospitals and doctors have deals with the insurance companies, Medicaid (or MediCal as we Californians call it) or Medicare to take a whole bunch less as payment in full?"   Anybody who's working in the product liability or personal injury law world knows the drill.  So does anybody who's ever been in a hospital.  The plaintiff gets hurt.  The hospital fills up her bill with $5 Q-tips, and $10 bandages, and $3 aspirin tablets and  $75 disposable slippers, not to mention Ritz-Carlton-like room charges. 

    Then it's time for the public agency or insurance company to settle up.  And under a pre-existing deal between the insurer and the hospital, the hospital takes something like twenty cents on the dollar and writes off the rest.  So almost nobody ever pays all those $10 charges for razors and $30 for disposable IV bottles full of salt water.  Or whatever.

    So, now our plaintiff is discharged from the hospital, feeling fit as a fiddle (or so we hope) and ready to proceed with her lawsuit.  Assume liability is established, does she get what the hospital and the doctors billed?  Or does she get what they accepted from the insurance company? 

    For some years now, the answer has been pretty clear:  she can put on evidence of the large amount of her bills so the jury will think she must have had a pretty significant injury.  But after the jury awards all those medicals and goes home to their families, the judge will reduce them down to what the providers actually accepted.  That's the ruling by the Courts of Appeal in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298.

    Well, in July of last year, another Court of Appeal came out with a decision in Olsen v. Reid (2008) 164 Cal.App.4th 200.  That Court didn't have to decide whether or not Hanif and Nishihama were correct, because the defendant in that case didn't meet his burden of showing what the reduced medical bills were.  But in a gratuitous concurring opinion, Justice Moore of that Court let loose with a lengthy argument that Hanif and Nishihama had been wrongly decided, and the plaintiff should be entitled to recover for the entire amount billed, even if nobody was ever going to pay it.

    At the time, CBL commented as follows:

As a concurring opinion, this has no binding effect, and trial courts throughout the state are still bound to follow Hanif and Nishihama.  But this looks like an invitation for a plaintiff in another case to directly attack these decisions at the Fourth District Court of Appeal when the record is better for the defendant.  In fact, it looks like an out-and-out advisory opinion that this district will, in the right case, issue a decision holding that the plaintiff recovers the amount billed, not just the amount paid.

    Well, a stopped clock is right twice a day, and CBL gets it right once in awhile as well.  Because here is the Fourth District again, in Howell v. Hamilton Meats & Provisions, Inc. (November 23, 2009) ___ Cal.App.4th ___ (Fourth Dist., D053620) squarely holding that Hanif and Nishihama were wrongly decided and declining to follow them.  In short, this court rules that if a plaintiff has health insurance, and as part of the insurer's deal with the hospital and doctors, large amounts of the bills get written off so that neither the insurer nor the plaintiff has to pay the excess amounts, that is a "benefit" to the plaintiff.   The defendant didn't pay for the benefit.  So under the collateral source rule, the defendant can't take advantage of the benefit.  And the plaintiff can recover for the full amount of the  bill, even though nobody is ever going to pay most of it.

    So now, there are directly conflicting Court of Appeal decisions.  Which means that under Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal. 2d 450 , every trial court in California can follow either rule.  Until the Cal Supremes intervene.  Which, CBL feels confident, they will.