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In Long Beach
Memorial Medical Center v. Superior Court (Connors) (March 27, 2009)
09 C.D.O.S. 3930, defendant hospital petitioned the court for a writ
of mandate seeking an order that the trial court vacate its
determination that the settlement of co-defendant physicians was
made in good faith. The court issued an order to show cause why the
order on the good faith determination should not be vacated and
after a consideration of the evidence issued the writ.
The court gave a lengthy description of the factual background of
the case. Briefly, it involved a very tragic birth injury due to the
alleged negligence of the attending perinatologist, Dr. Asrat, his
employer Magella Medical Group (together the physicians), Long Beach
Memorial Medical Center and Fastaff, the defendant-nurse’s employer.
There was testimony that Dr. Asrat had breached the standard of care
and co-defendant nurses had testified that Dr. Asrat had been given
information about the progress of the baby’s delivery that he claims
he was not given (suggesting there was probably considerable
finger-pointing). There was evidence that the status of fetal
monitors could be viewed by Dr. Asrat from multiple places in the
hospital, though Dr. Asrat testified that had be been told about any
abnormal tracings, he would have gone to see the patient. Several
nurses testified they called Dr. Asrat every couple of hours to
relate the status of the delivery; one testified she did not
“advise” Dr. Asrat that the baby could not tolerate any more pushing
because he would have been able to ascertain that himself from
viewing the fetal tracings in the doctor’s lounge. Eventually, a
nurse asked Dr. Asrat to evaluate the patient “stat” at which point
he did a “crash” c-section. The child sustained ongoing neurological
damage.
Plaintiffs filed their complaint and alleged negligence and
emotional distress. Plaintiff’s perinatology expert testified Dr.
Asrat violated the standard of care in myriad ways, not the least of
which was “abandoning” the patient by leaving the room without a
defined plan and failing to return to see the patient—whose delivery
was considered high risk—for over three hours.
Plaintiffs calculated their damages, including lost future earnings,
future care and past expenses to be in excess of $10 million. In
2007 they made a “global” settlement demand in that amount to all
defendants and indicated they would not settle with any defendants
individually.
After a mediation, two tortfeasors not a party to the writ
proceeding settled for $250,000. The court indicated in its opinion
that that left $7.75 million as the remainder of the global demand.
Also following the mediation, the remaining parties (physician,
Fastaff and the Medical Center) discussed a settlement proposal in
which the “physicians would pay $1.5 million, Fastaff would furnish
$2 million, and the hospital would supply $4 to a global settlement,
subject to a final allocation of respective contributions in binding
arbitration. These conversations occurred about two weeks prior to
the April 16, 2007 final status conference. Plaintiffs soon stated
that unless their demand was met by April 15, 2008, their offer
would be withdrawn and increased. On April 14, 2008, Fastaff agreed
to pay $2.5 million and the hospital consented to paying $5.25
million.”
According to the decision, the hospital was under the impression
that the physicians had no settlement authority. However, “the day
after the hospital and Fastaff reached a settlement, the physicians’
attorney contacted plaintiffs’ counsel. When plaintiffs confirmed
the agreed settlement did not include them, counsel for the
physicians offered plaintiffs $200,000 as separate, additional, new
money in return for a dismissal of his clients from the lawsuit.”
The court observed that “just hours” after the settlement of the
hospital and Fastaff was put on the record, the hospital learned of
the $200,000 settlement by the physicians.
Six days after the physicians settled with plaintiffs for $200,000
they made a motion for a determination of good faith settlement. In
support of their motion they submitted an expert declaration that
Dr. Asrat did not breach the standard of care. This was the first
“testimony” by an expert on Dr. Asrat’s behalf in the litigation.
Physicians pointed to this expert’s declaration as evidence they
would prevail at trial on the negligence issue. The physicians also
submitted a declaration by counsel indicating they had no settlement
authority until two days after the other defendants had settled.
Finally, they argued that the fact the hospital and Fastaff settled
for $7.75 in order to avoid going to trial did not in and of itself
render their subsequent settlement of $200,000 “bad faith.”
The hospital opposed the motion. It argued not only was the
settlement amount disproportionate to Dr. Asrat’s role in the care
of plaintiff—he was the only physician monitoring the patient’s care
on the night of her labor—but that physicians’ attorney had engaged
in bad faith tactics to avoid paying the $1.5 million amount
previously discussed among counsel for the parties. Hospital counsel
pointed out that the settlement amount of $200,000 was only 10
percent of the physicians’ liability coverage of $2 million, while
counsel estimated Dr. Asrat was between 25 and 50 percent at fault
for plaintiffs’ damages. The trial court granted the motion and
found the settlement was entered into in good faith.
Thereafter, the hospital timely petitioned the court of appeal for
an order vacating the trial court’s good faith finding. Hospital
“contended the physicians’ settlement was entirely disproportionate
to Dr. Asrat’s liability and the physicians’ attorney’s refusal to
participate in settlement negotiations was bad faith conduct.” The
court issued an order to show cause.
In its discussion, the court explained the purpose and intent of CCP
§877.6 is to promote equity—both the equitable sharing of costs
among the parties and the encouragement of settlement. It noted the
determination that a settlement has been made in good faith bars
fellow tortfeasors from seeking indemnity or contribution from the
settling tortfeasor. Therefore, there can only be a finding that a
settlement has been made in good faith “if there has been no
collusion between the settling parties and where the settlement
amount appears to be within the ‘reasonable range’ of the settling
party’s proportionate share of comparative liability for a
plaintiff’s injuries.”
The court pointed out that a settling tortfeasor’s liability for
indemnity to joint tortfeasors is a significant issue and should be
“an important consideration for the trial court in determining
whether to approve a settlement by an alleged tortfeasor.” While the
trial court does have discretion in ruling on a motion for good
faith determination, such discretion “is not unlimited and should be
exercised in view of the equitable goals of the statute, in
conformity with the spirit of the law and in a manner that serves
the interests of justice. (Cite). The party asserting lack of good
faith bears the burden of proof. (Cite) That party must show that
the settlement is so far ‘out of the ballpark’ as to be inconsistent
with the equitable goals of section 877.6.” (Cite)
A “settling party’s proportionate liability is one of the most
important factors” in determining whether a settlement was made in
good faith. In this case, the hospital contended the “physician’s
$200,000 settlement—representing 2 percent of plaintiffs’ $10
million damages estimate—was so far out of the ‘ballpark’ it was not
even in the parking lot.” The court found physicians’ claim—that the
settlement was reasonable because Dr. Asrat had no liability and
their settlement amount represented a “nuisance value” intended to
avoid the costs of trial—“unavailing.”
Among the reasons the court cited for its conclusion the settlement
was not made in good faith included: Dr. Asrat’s expert only offered
a declaration after the time of the settlement and in support of the
good faith determination motion—his opinion did not play a part in
convincing plaintiffs that Dr. Asrat bore no liability; the payment
of $200,000 by the sole physician in charge of plaintiff’s high risk
delivery is wholly disproportionate to the $10 million settlement;
Physician’s counsel “admitted” in settlement discussions that the
physicians’ share of liability was actually around $1.5 million;
“the physicians’ settlement is simply not defensible in view of
their financial condition and policy limits.”
The court stressed, though, that the most important consideration
before it was issue of indemnification and the “settlor’s potential
liability for indemnity to the other alleged tortfeasors.” The court
found the record showed conduct by physicians’ counsel conducted
after the mediation in which all parties participated “was designed
to benefit the physicians at the expense of the interests of the
hospital and Fastaff.”
In language that should serve as a cautionary tale to any defendant
who intends to (or should) settle but wants to hold out from
participating in a global settlement in the hopes of “playing
hardball” and possibly securing a “better deal” on his own, the
court said:
“the timing of the
physicians’ offer, outlined above, suggests only one result,
namely, that the physicians’ reason for entering into the
settlement with plaintiffs was to cut off the hospital’s and
Fastaff’s right to indemnity from the physicians…. Plaintiffs’
counsel indicated that plaintiff accepted the physicians’ $200,000
offer because plaintiffs were not enthusiastic about proceeding to
trial against the physicians alone, and they had already obtained
the amount demanded for settlement. Hence, by the time the
physicians’ counsel contacted plaintiffs’ attorney to make an
offer in settlement, the physicians’ liability exposure to the
hospital for indemnity was far greater than their potential
exposure to plaintiffs for negligence. The true value in the
settlement to the physicians, then, was not the dismissal of
claims as to them, but rather the dismissal of the indemnity
claims of the hospital and Fastaff. When a joint tortfeasor
‘enters into a disproportionately low settlement with the
plaintiff solely to obtain immunity from the cross-complaint, the
inference that the settlement was not made in good faith is
difficult to avoid.’ To immunize the physicians from the indemnity
claims of the hospital and Fastaff under these circumstances,
where Dr. Asrat was the sole physician responsible for the care of
plaintiff during her labor and delivery, serves neither the goal
of encouraging settlement among all interested parties nor the
goal of equitably allocating costs among multiple tortfeasors.
(Cite) If section 877.6 is to serve the ends of justice, it must
prevent a party from purchasing protection from its
indemnification obligation at bargain-basement prices.”
The appellate court found
the conclusion “inescapable” that the physician’s settlement offer
was purely tactical, did not “reflect the cooperative
decision-making among all interested parties that is one of the aims
of settlements” and should not have been found to have been entered
into in good faith by the trial court. Because the court felt the
trial court abused its discretion in determining the settlement was
made in good faith, the trial court was ordered to vacate its
decision.
This is a very interesting opinion. It is unfortunate that the
evidence against Dr. Asrat seems to be so profound, as you will see
if you read the entirety of the opinion. There was certainly a lot
of finger-pointing among the doctor and nursing staff. It just did
not seem plausible that he would be defensed if he went to trial in
this case, which I think the court found compelling. However,
finding that counsel acted in bad faith by not participating in a
global settlement for which they apparently had no authority and
later securing a “bargain-basement” deal because plaintiffs did not
want to go to trial against the doctors alone, seems a bit extreme.
As is clear from the opinion, though, a number of different factors
were at play that when taken together led the court to its
conclusion.
As a practical matter, an unanticipated result of this decision
could be that co-defense counsel become reluctant to candidly
discuss the value of a case, and their clients’ relative liability,
for fear of having numbers thrown back at them at the time of a good
faith determination hearing. One can see how the physicians’ counsel
in this case could have been brainstorming with his co-counsel about
a theoretical value of the case and apportionment of
liability—perhaps without any authority from the carrier—and the
next thing he knows he not only does not have authority to settle,
but has co-counsel telling the court that he “admitted” his client
was liable in “x” amount. This decision could end up stifling
discussions about settlement among co-defendants unless they are in
a confidential mediation.
Notes:
1) The math does not seem
to add up, but I checked two versions of the advance sheets and both
indicate the plaintiffs made a $10 million global demand, after
mediation two defendants settled for $250,000, which “left $7.75
million as the remainder of plaintiffs’ global demand.”
2) All italics in this
summary were used by the court in its decision.
3) The court
observed that statements made and materials used during mediation
are confidential and may not be used after the mediation ends.
However, it noted that it “may consider oral statements of the
settlement terms.” In addition, it pointed out that the “record of
negotiations conducted after mediation concluded indicates here that
the physicians’ settlement with plaintiffs was designed to benefit
the physicians at the expense of the interests of the hospital and
staff. (Cite) It was the physicians’ attorney who, during discovery,
indicated the willingness to explore the possibility of the parties
contributing to a global settlement and later arbitrating the
relative allocation of contributions.” Still, the suggestion the
attorney “admitted” the physicians’ liability was around $1.5
million seems a stretch. |
