NMSC: Medical Malpractice Act Does Not Prohibit Hospital from Assigning Indemnity Claim

In Leger v. Gerety, the New Mexico Supreme Court held that hospitals–but not patients–may assign their claims under the medical malpractice act.

Background

This case is a strange cross between medical malpractice and civil procedure. A patient who needed a procedure to drain fluid from the area around his lungs. However, at the start of the procedure, immediately after he was intubated, his heart stopped and he died. The patient’s family sued the hospital (but none of the doctors) for wrongful death and malpractice.

The doctor who was about to perform the procedure when the patient died did not work for the hospital. Instead, he worked for a different group but was credentialed at the hospital. In response to the lawsuit, the hospital denied all wrongdoing. In addition, it sued the credentialed doctor and his employer, claiming they were at fault.

The plaintiffs settled their case against the hospital for a confidential amount. As part of the settlement, the hospital assigned its claims against the doctor to the plaintiff. This let the hospital out of the lawsuit while giving the plaintiff the opportunity to seek additional recovery from the third-party defendants.

There are two legal concepts at play in this opinion: the medical malpractice act’s prohibition on assignments, and the common law concept of indemnity.

The Medical Malpractice Act (“MMA”) language at issue was simple enough. Section 41-5-12 provides that “[a] patient’s claim for compensation under the [MMA] is not assignable.” Plaintiff argued that the since the hospital was not a “patient,” section 41-5-12 did not apply. Defendants contended that viewing the MMA as a whole, the legislative intent was to prohibit all assignments of claims.

The type of claim at issue was the hospital’s claim for common law Indemnity against the defendants. Indemnity allows a defendant to recover from a third party the portion of its loss which the third party’s conduct caused. In other words, the hospital could seek to recover from the defendants the portion of its confidential settlement that was caused by the defendants. To do so, it would essentially be in the somewhat awkward position proving up a malpractice case against its accredited physician, albeit under the guise of an indemnity lawsuit. Here, rather than do that, it gave its right to do so to the plaintiff. Whether doing so is lawful is the subject of this appeal.

The Majority Opinion

Though the majority opinion laid out a fair amount of background, none of it was particularly relevant to its analysis. Looking at the single sentence of the MMA at issue, Section 41-5-12, it stated that “it is difficult to envision language more plain.” Section 41-5-12 dealt with the assignability of “patient claims,” not “malpractice claims.” By its plain language, the majority reasoned, this section could only apply to claims held by patients. As the hospital was not a patient, Section 41-5-12 did not apply to it, and it was free to assign its malpractice claim.

Despite having already decided the issue, the majority went on to discuss legislative intent, primarily in the context of two of defendant’s arguments.

First, the majority found its interpretation was not inconsistent with legislative intent because it did not permit a double recovery. Defendants appear to have contended that double recovery would go against the purpose of the MMA. Plaintiffs argued that there was no additional recovery because they would receive no more than the hospital was entitled to receive. The court agreed with plaintiffs, reasoning that damages recoverable in indemnity, though arising out of negligence, are separate and distinct from the underlying tort.

Oddly, as part of its reasoning the majority also asserts that assignment increases the likelihood of settlement, including in this case. This appears not to be the case–the assignment generated years of appeals, and plaintiff has been pursuing the same medical malpractice lawsuit against different defendants during all of that time. At best, this factor seems neutral here. At worst, as the dissent suggests, it is part of an emerging strategy, and we can expect future malpractice lawsuits to turn into similar two-part proceedings.

The majority next addressed defendants’ concern that assignment could allow some plaintiffs to bypass the protections of the MMA entirely. Defendants argued that permitting assignment of claims would “create a market for trafficking those claims.” For similar reasons, assignment of personal injury claims has long been prohibited. Plaintiff contended that the present case was distinguishable because the injured party, not a random third party, would own the claim. Again the majority agreed with plaintiff, essentially reasoning that patients needed to be protected from others, not themselves, and noting that in any event the indemnity claim would continue to be subject to the protections of the MMA.

Strictly speaking, the majority’s legislative intent analysis is dicta–that is, discussion that has nothing to do with the decision, has no legal force, and is therefore unnecessary. However, one can understand why it might have felt it necessary to include this discussion. The majority’s reasoning depends on its conclusion that the statute is not ambiguous. Ambiguity simply means that the language is susceptible to two or more interpretations. And, as we discuss next, two of the five judges on this decision believed the language was ambiguous (and 2 of the 3 court of appeals judges below). The majority wins, but the fact that the appellate judges were evenly split (4-4) seems to me to call into question the persuasiveness of the majority’s plain language reasoning.

The Dissent

Retired Justice Nakamura, joined by Fifth Judicial District Judge James Hudson, wrote in dissent. The dissent treads on well-worn judicial ground: the perils of the plain language rule. Indeed, the majority quoted one of the best New Mexico critiques of this approach:

[T]he plain meaning rule[‘s] . . . beguiling simplicity may mask a host of reasons why a statute, apparently clear and unambiguous on its face, may for one reason or another give rise to legitimate (i.e., nonfrivolous) differences of opinion concerning the statute’s meaning. In such a case, it can rarely be said that the legislation is indeed free from all ambiguity and is crystal clear in its meaning.

Majority ¶ 29 (quoting State ex rel. Helman v. Gallegos, 1994-NMSC-023, ¶ 23).

The dissent found Section 41-5-12 to be ambiguous. Viewing the statute in the broader context, it believed that the phrase “patient’s claim for compensation under the [MMA]” referred more broadly to all malpractice claims. Looking to the definition of “malpractice claim,” rather than “patient,” the dissent noted that the legislature used the two terms interchangeably. The dissent went on to analyze language from elsewhere in the MMA and the Court’s prior decisions on the MMA in support of this point which, by and large, the majority did not engage head on.

Whether or not the dissent’s view is correct, the dissent seems to be entirely correct in asserting that “reasonable minds can and do differ on the meaning of Section 41-5-12.” The two appellate opinions in this case would seem to prove that point. My own personal experience as a lawyer has taught me again and again that language that appears to me to be clear often is equally clear to someone else–and means something different to them.

The dissent also dives into a more interesting but somewhat tangential issue. Procedural decisions below meant that the defendants were not permitted to participate in years of discovery that the plaintiff took against the hospital. Once the hospital settled, defendants’ opportunity for discovery was diminished, and plaintiff had a significant advantage. Indeed, the plaintiff almost immediately filed a motion for summary judgment based on its extensive discovery. Though there was nothing wrong with this procedure (and, though the details are unclear, the defendants appear to have agreed to some of it) the dissent seemed to be legitimately concerned that it was not a procedure designed to lead to a fair and accurate trial on the merits. However, this seems to be less a question of the perceived “gamesmanship” of the plaintiff (who appears to have simply followed the rules in the way most advantageous to his client), but on whether there are systemic deficiencies in play that undermine due process. That issue does not appear to have been raised in this appeal.

Ultimately it is now clear how a decision like this is helpful outside of its narrow context. To be sure, the Court has adjudicated the meaning of the statute. If the legislature disagrees, the ball is now in its court. But a 3-2 decision on the basis of plain meaning is just too fact- and Justice-specific to tell the public and practitioners much more than the specific holding. And, since only one of the authors is a sitting Justice, the opinion does not even help practitioners to know how the current Court (apart from Justice Zamora) will handle similar issues of ambiguity in future cases. At the end of the day, I found this to be a somewhat frustrating case that raised more questions than it had answers for.

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