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Chan v. Curran

California Court of Appeals, First District, First Division

June 9, 2015

JESSICA CHAN et al., Plaintiffs and Appellants,
v.
PETER CURRAN, Defendant and Respondent.

San Francisco City & County Super. Ct. No. CGC-10-502053 Honorable Wallace P. Douglass Trial Judge.

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COUNSEL

The Dolan Law Firm, Christopher B. Dolan, Mary C. Barnes; Smith & McGinty, Daniel U.Smith and Valerie T. McGinty for Plaintiffs and Appellants.

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Cole Pedroza, Curtis A. Cole, Kenneth R. Pedroza, Cassidy C. Davenport; Donnelly Nelson Depolo & Murray and Thomas J. Donnelly for Defendant and Respondent.

Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae on behalf of Defendant and Respondent.

Tucker Ellis, Rebecca A. Lefler and Lauren H. Bragin for California Medical Association, California Dental Association, California Hospital Association and American Medical Association as Amici Curiae on behalf of Defendant and Respondent.

OPINION

Banke, J.

I. Introduction

After plaintiff and appellant Jessica Chan’s mother died from internal hemorrhaging related to Coumadin use following heart surgery, Chan successfully sued defendant and respondent Peter Curran for medical malpractice. Neither the sufficiency of the evidence to support the malpractice verdict, nor any other issue associated with the trial and the rendition of the jury verdict, is before us. Rather, the sole issue on appeal is the trial court’s postverdict reduction of the $1 million noneconomic damages award to $250, 000, as required by the Medical Injury Compensation Reform Act of 1975 (MICRA; Stats. 1975, 2d Ex. Sess. 1975–1976, ch. 1, § 26.6, pp. 3975-3976; Civ. Code, § 3333.2.)[1] Chan attacks the MICRA cap on multiple constitutional grounds-as violating equal protection, due process and the right to jury trial. All of her arguments, however, are ultimately grounded on the assertion she is entitled to seek noneconomic damages sufficient to cover attorney fees. No California court has ever endorsed such a proposition, and, as we discuss, it is contrary to many well-established legal principles.

Since MICRA’s enactment in 1975, the cap on noneconomic damages has been before the California Supreme Court many times. In 1985, the high court upheld the cap against equal protection and due process challenges. (Fein v. Permanente Medical Group (1985) 38 Cal.3d 137 [211 Cal.Rptr. 368, 695 P.2d 665] (Fein).) In 1994, the court ruled the cap also applies to actions for partial indemnity, voicing no criticism of the statute and reiterating

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MICRA “reflects a strong public policy to contain the costs of malpractice insurance by controlling or redistributing liability for damages, thereby maximizing the availability of medical services to meet the state’s health care needs.” (Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 112 [32 Cal.Rptr.2d 263, 876 P.2d 1062] (Western Steamship).) In 1998, the court explained how the damages cap interacts with MICRA’s provision for periodic payments, stating the cap is “an attempt to control and reduce medical malpractice insurance costs by placing a predictable, uniform limit on the defendant’s liability for noneconomic damages.” (Salgado v. County of Los Angeles (1998) 19 Cal.4th 629, 641 [80 Cal.Rptr.2d 46, 967 P.2d 585] (Salgado).) The following year, in 1999, the court held the cap applies to negligence-based claims under the federal Emergency Medical Treatment and Labor Act (42 U.S.C. § 1395dd), discerning Congress incorporated state damages law to preserve damages limitations and to respond to concerns raised about the federal statute’s impact on the medical malpractice insurance problem. (Barris v. County of Los Angeles (1999) 20 Cal.4th 101, 112 [83 Cal.Rptr.2d 145, 972 P.2d 966] (Barris).) Most recently, in 2014, the court ruled the cap cannot be further diminished by setoffs for settlements attributable to noneconomic damages. The Legislature’s focus in enacting the statute, the court stated, was “to address the problem of unpredictable jury awards, ” the impact on settlements being only indirect. (Rashidi v. Moser (2014) 60 Cal.4th 718, 720–721 [181 Cal.Rptr.3d 59, 339 P.3d 344] (Rashidi).) Although asked to do so, the court declined to grant review in Rashidi on the continuing constitutional validity of the damages cap.

Chan nevertheless maintains Fein, which rejected equal protection and due process challenges, is no longer controlling, claiming she has shown there no longer is a medical malpractice insurance “crisis” and therefore the rationale for the cap (indeed, for all of MICRA) no longer exists. Thus, according to Chan, the time is ripe to re-examine the constitutionality of section 3333.2 under a “changed circumstances” analysis. She further contends the Supreme Court has never considered her claim the cap infringes on the right to jury trial.

As we explain, the courts are extremely chary of invalidating legislative acts that have previously been held constitutional. Our Supreme Court has done so only on rare occasion, and we conclude Chan has not shown there is no reasonably plausible purpose presently advanced by section 3333.2. The high court has also considered and rejected variations of Chan’s right to jury trial argument, and, in any case, statutes defining the measure or limit of legally recoverable damages do not constitutionally interfere with the

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fundamental fact-finding province of a jury. We therefore conclude the legitimate debate over the wisdom of MICRA’s noneconomic damages cap remains a matter for the Legislature and state electorate.[2]

II. Discussion

A. MICRA

“In May 1975, the Governor—citing serious problems that had arisen throughout the state as a result of a rapid increase in medical malpractice insurance premiums—convened the Legislature in extraordinary session to consider measures aimed at remedying the situation. In response, the Legislature enacted the Medical Injury Compensation Reform Act of 1975 (MICRA)..., a lengthy statute which attacked the problem on several fronts.” (American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359, 363 [204 Cal.Rptr. 671, 683 P.2d 670], fn. & citation omitted (American Bank).) “In broad outline, the act (1) attempted to reduce the incidence and severity of medical malpractice injuries by strengthening governmental oversight of the education, licensing and discipline of physicians and health care providers, [3] (2) sought to curtail unwarranted insurance premium increases by authorizing alternative insurance coverage programs and by establishing new procedures to review substantial rate increases, [4] and (3) attempted to reduce the cost and increase the efficiency of medical malpractice litigation by revising a number of legal rules applicable to such litigation.” (36 Cal.3d at pp. 363–364.)

In the Legislature’s view, “[t]he continuing availability of adequate medical care depends directly on the availability of adequate insurance coverage, which in turn operates as a function of costs associated with medical malpractice litigation.” (Western Steamship, supra, 8 Cal.4th at p. 111.) “Accordingly, MICRA includes a variety of provisions all of which are calculated to reduce the cost of insurance by limiting the amount and timing of recovery in cases of professional negligence. (See Bus. & Prof. Code, § 6146 [limiting contingency fees in medical malpractice actions]; Civ. Code, § 3333.1 [admitting evidence of collateral source payments and precluding

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subrogation on behalf of collateral sources]; Code Civ. Proc., § 667.7 [authorizing periodic payments for future damages in excess of $50, 000, with termination of benefits in the event of death])” (Western Steamship, at pp. 111-112.)

The cap on noneconomic damages set forth in section 3333.2 is one of these inter-related provisions.[5] “The Legislature has enacted a comprehensive, multifaceted scheme designed to address a perceived threat to our state’s health care system by reducing the cost of medical malpractice insurance. Section 3333.2 constitutes a key component of this program.” (Western Steamship, supra, 8 Cal.4th at p. 114.)

During the 1980’s, the Supreme Court upheld many of MICRA’s provisions against constitutional challenges, including section 3333.2. (Fein, supra, 38 Cal.3d at p. 159 [upholding § 3333.2]; Roa v. Lodi Medical Group, Inc. (1985) 37 Cal.3d 920, 931–932 [211 Cal.Rptr. 77, 695 P.2d 164] (Roa) [upholding Bus. & Prof. Code, § 6146, limiting contingency fees]; Barme v. Wood (1984) 37 Cal.3d 174 [207 Cal.Rptr. 816, 689 P.2d 446] (Barme) [upholding § 3333.1, limiting collateral source recovery from malpractice defendants]; American Bank, supra, 36 Cal.3d at p. 372 [upholding Code Civ. Proc., § 667.7, governing periodic payouts of and imposing some limits on future damages].) As noted at the outset, the court has also subsequently addressed the noneconomic damages cap numerous times, without criticism of the statute and reiterating MICRA’s public policy underpinnings. (Rashidi, supra, 60 Cal.4th at 726–727; Barris, supra, 20 Cal.4th at pp. 108–116; Salgado, supra, 19 Cal.4th at pp. 638–645; Western Steamship, supra, 8 Cal.4th at p. 112.)

As to section 3333.2, specifically, the Supreme Court has observed, “ ‘[o]ne of the problems identified in the legislative hearings was the unpredictability of the size of large noneconomic damage awards, resulting from the inherent difficulties in valuing such damages and the great disparity in the price tag which different juries placed on such losses. The Legislature could reasonably have determined that an across-the-board limit would provide a more stable base on which to calculate insurance rates.’ ” (Western Steamship, supra, 8 Cal.4th at p. 112, quoting Fein, supra, 38 Cal.3d at p. 163.) The court further noted, “[s]ubjecting health care providers to unlimited liability for noneconomic damages in third party suits can only thwart the goal of containing insurance costs by eliminating the statutory constraint on litigation

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expenses.” (Western Steamship, at p. 114; see Salgado, supra, 19 Cal.4th at p. 641 [cap is “an attempt to control and reduce medical malpractice insurance costs by placing a predictable, uniform limit on the defendant’s liability for noneconomic damages”].)

B. Showing With Respect to “Changed Circumstances”

1. Chan’s Showing

Chan acknowledges the cases discussed above, but contends the medical malpractice climate is profoundly different today than it was in 1975 when MICRA was enacted and in the 1980’s when the Supreme Court passed on the constitutionality of its provisions.

In the trial court, Chan offered evidence that, since 1975, inflation has caused a roughly four-fold devaluation of the dollar. Thus, adjusted for inflation, the $250, 000 noneconomic damages cap enacted in 1975 was worth $1.06 million in 2012 dollars. Or, flipped around, $250, 000 in 2012 dollars equaled only $59, 000 in 1975 dollars. Chan also offered the declaration of Phillip Allman, an economist, who observed there has been an approximately six-fold increase in the cost of legal services since 1976 and opined the $250, 000 noneconomic damages cap discourages contingent-fee lawyers from taking many malpractice cases. Government statistics proffered by Chan also showed a precipitous increase in the cost of medical services and medical experts’ hourly fees.

Chan additionally offered declarations from current California attorneys who take personal injury cases on a contingency basis. However, because of MICRA, they either refuse to consider medical malpractice cases altogether, or take only those cases that appear strong and involve large economic damages, so the total amount of recoverable damages is likely to exceed $1 million. These attorneys declared they turn away from 50 to over 90 percent of facially meritorious malpractice claims. Thus, according to these attorneys, cases involving severe injury or death to the elderly and unemployed often do not reach the courts because economic damages are likely to be small, since lost wages are usually nonexistent and, if the victim is deceased, there are no future medical costs.

These attorneys also discussed their view that there are serious imbalances in the resources the plaintiffs and defendants are able to bring to bear in contingency fee cases, claiming insurance-industry lawyers can far outspend and out-staff cases because their clients pay by the hour and MICRA does not limit the amount of collectable fees. As did Chan’s economist, these attorneys pointed out the high cost of investigating and proving medical malpractice

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given the ever rising costs of litigation, including the cost of expert witnesses. Some also noted the additional risk that doctors, aware of the noneconomic damages cap, will invoke another provision of MICRA allowing them to unilaterally reject settlement offers an insurer might otherwise accept, further driving up litigation costs.

Chan also pointed to empirical studies of lawyers across the country, recounted in legal periodicals, confirming the anecdotal evidence provided by the attorney declarations—that damages caps appear to reduce contingency fee lawyers’ interest in taking medical malpractice cases with limited noneconomic damages and encourage them to focus on cases with high economic damages. Across all states, most attorneys rejected more than 90 percent of the medical malpractice cases brought to them. About 39 percent of time this was because the damages expected from a victory were viewed as insufficient to make the case worth the attorney’s time. On the whole, if a lawyer perceived a 95 percent chance of success, the lawyer would want a case worth $250, 000; a 51 percent chance of success, a case worth $500, 000; and a 25 percent chance of success, a case worth $1 million.

As for this case, specifically, Chan’s attorney submitted declarations outlining how the costs incurred (approximately $103, 000) and legal fees (approximately $450, 000, if based on hourly rates between $250 and $650 an hour) far exceeded the total jury award after the adjustment under MICRA ...


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