By Sweta PatelIMG_2656

A recent Second District Court of Appeals decision illustrates how the intersection of three laws can significantly reduce damages at trial.

In Rashidi v. Moser, 219 Cal. App. 4th 1170 (2013), the defendant utilized the Medical Injury Compensation Reform Act (“MICRA”) (California Civil Code, Section 3333.2), the California Fair Responsibility Act of 1986 (“CFRA”) (Code of Civil Proc. Section 1431.2), and the good faith settlement statute (Code of Civil Proc. Section 877.6) to reduce his damages by almost 99%.  MICRA limits a plaintiff’s recovery for pain and suffering to $250,000 in medical malpractice cases.  Additionally, CFRA apportions pain and suffering damages based on the defendant’s percentage of fault in causing the plaintiff’s injury.  Lastly, a joint tortfeasor may seek court approval that the settlement is in good faith (reasonable) to protect himself from claims for indemnification or contribution by non-settling parties.

Generally, a defendant in a personal injury case (i.e. medical malpractice) is liable for his percentage of the fault in causing the plaintiff’s pain and suffering.  However, MICRA places a $250,000 cap on pain and suffering damages.  In turn, a defendant could end up paying less than his share of pain and suffering damages when there is a pretrial settlement.   MICRA does not cap damages for medical care or lost wages.  However, defendants are jointly liable for medical care and/or lost wages in a personal injury case.  In other words, one defendant could end up paying for all of the plaintiff’s medical care and/or lost wages (and, of course, such a defendant could seek reimbursement from his codefendant).

In Rashidi, the plaintiff became permanently blind in one eye from a surgery to prevent sever nose bleeds.  The plaintiff then sued the hospital and the surgeon for medical malpractice and the manufacturer of the product used during surgery for products liability.  Prior to trial, the plaintiff settled with the manufacturer and hospital, which the court approved to be in good faith.  The only remaining defendant, the surgeon, was found liable at trial and the plaintiff was awarded $1,450,000 ($125,000 for medical care and $1,325,000 for pain and suffering).

Although the trial court denied the surgeon’s efforts to reduce the verdict based on the pretrial settlements, he prevailed on appeal.  Since there was no allocation between medical care and pain and suffering damages in either of the pretrial settlements, the Appellate Court mirrored the jury’s apportionment to determine the appropriate offset.  Following offsets from the pretrial settlements, the plaintiff recovered nothing for medical care costs and only $16,655 for pain and suffering from the surgeon.

Thus, following a pretrial settlement, the remaining parties in a medical malpractice case should attempt to estimate the jury’s findings.  When MICRA applies to the settling and non-settling defendant, the parties can reasonably estimate the maximum pain and suffering damages at trial given the $250,000 cap.  If there is no allocation in the settlement the court will mirror the jury’s verdict after imposing the $250,000 cap.  For example, if the plaintiff is claiming $400,000 for medical care then it can be assumed that at trial the plaintiff would be awarded a maximum of $400,000 for medical care.  Since the maximum recovery for pain and suffering in a MICRA case is $250,000 it can further be assumed the maximum liability at trial would be $650,000 ($400,000 for medical care and $250,000 for pain and suffering).  The breakdown here is 61.5% in medical care and 38.5% in pain and suffering.  Therefore, if a codefendant settles for $1,000,000 a court would find that the plaintiff already recovered $385,000 (38.5% of the settlement) for pain and suffering and the plaintiff would not recover additional damages for pain and suffering at trial.  The lesson here is that pretrial settlement benefits all parties.  Both parties can avoid unnecessary litigation costs in light of the real possibility that plaintiff will not recover damages for pain and suffering at trial even with a verdict against the defendant.

If a settlement specifically allocates funds for medical care, then the parties can also reasonably calculate the maximum liability for medical care at trial.  However, if there is no allocation in the settlement, then the court would mirror the jury’s verdict (prior to imposing the MICRA cap).  Determining the likely allocation at trial can be difficult because the parties may not know how much a jury will award for pain and suffering.  Nevertheless, the parties should not be discouraged from attempting to calculate the potential maximum liability for medical care.

If you are involved in a medical malpractice case with multiple defendants you should consider the following guidelines when there is a pretrial settlement:

1)    It is crucial to analyze whether MICRA applies to the settling codefendant.  If MICRA does not apply to the settling codefendant, then you will not receive an offset from the settlement for pain and suffering damages at trial.

2)    Chances are you may not know the settlement terms between the codefendant and plaintiff prior to trial unless there is a motion for good faith settlement.  If you have an opportunity to review the settlement agreement, determine whether there is an allocation between medical care and pain and suffering damages.  An allocation in the settlement agreement would make it easier to calculate the potential damages at trial.

3)    If there is an allocation in the settlement agreement, you should make sure it is reasonable and fair.  You could challenge the motion for good faith settlement if the allocation is unfair or unreasonable; or you could challenge the allocation at trial since the trial court is not bound by the allocation in the settlement agreement even if the settlement is approved to be in good faith. (Gouvis Engineering v. Sup.Ct. (Cambridge Terrace) 37 CA4th 642, 651(1995).)

4)    Evaluate possible damages at trial and share your calculations with opposing counsel.  The strong possibility of negligible recovery at trial could aid in settling the case.

Rashidi may prove to be an incentive for all parties to settle when one defendant in the case enters into a pretrial settlement.  The remaining parties should have an honest discussion about how much the plaintiff could recover at trial (if, the plaintiff prevails). The combination of MICRA, CFRA and the good faith settlement statute could aid the parties in reaching a fair settlement.