In re Failla: Let Them Eat Cake

For the past several years, it has been common practice for a mortgagor to “surrender” property subject to a mortgage through a bankruptcy case and later defend (or continue to defend) a foreclosure action in state court. In this manner, mortgagors have been able to enjoy significant benefits afforded by the Bankruptcy Code, such as discharge of the debt and cessation of negative reports to credit bureaus, while at the same time enjoying prolonged possession and ownership of collateral.

A recent opinion from the Eleventh Circuit Court of Appeals threatens to end this practice.

In the case of, In re Failla, 15-15626, 2016 WL 5750666 (11th Cir. Oct. 4, 2016), the Eleventh Circuit held debtors who surrender real property in a chapter 7 bankruptcy case may not oppose a foreclosure action in state court pertaining to that property.  In reaching this conclusion, the Failla court admonished: “In bankruptcy, as in life, a person does not get to have his cake and eat it too.”  Id. at *5.  Moreover, the Failla decision provides that a bankruptcy court has statutory authority to compel mortgagors to withdraw defenses and dismiss counterclaims asserted in state court foreclosure litigation.  Id. at *6.  This memorandum addresses the specifics of the Failla decision and the potential limitations of its reach.


The Failla opinion resolves two important questions: (i) whether a debtor who surrenders real property in a Chapter 7 bankruptcy case may oppose a state court foreclosure action pertaining to that property; and (ii) whether a bankruptcy court has authority to order a mortgagor to cease opposing a foreclosure action.  Based on an analysis of the duties imposed on debtors pursuant to 11 U.S.C. § 521(a)(2) (“section 521(a)(2)”), the Failla court determined a debtor may not oppose a state court foreclosure action pertaining to real property surrendered in a Chapter 7 case.  Relying on the broad enforcement powers bestowed by 11 U.S.C. § 105(a), the Failla court held a bankruptcy court has authority to order a mortgagor who surrendered real property in a Chapter 7 bankruptcy case to cease opposing a foreclosure action pertaining to that property.

  • Mortgagors May Not Oppose State Court Foreclosure Actions After Declaring the Collateral Surrendered Under 11 U.S.C. § 521(a)(2).

In every individual Chapter 7 bankruptcy case, section 521(a)(2) requires that a debtor file a statement of intentions regarding what the debtor intends to do with property serving as collateral for a debt (the “Statement of Intentions”).  Through the Statement of Intentions, a debtor must provide a sworn declaration stating whether the debtor will surrender the collateral, redeem the collateral, or reaffirm the debt.  11 U.S.C. § 521(a)(2); Fed. R. Bankr. P. 1007(b)(2).  Additionally, section 521(a)(2)(B) mandates a debtor must perform the stated intention.  Thus, clearly, a debtor must effect surrender of real property serving as collateral for a mortgage if a debtor indicates on his or her Statement of Intentions that is what the debtor elects to do.  The issue resolved in Failla was to whom a debtor is required to surrender the collateral, as section 521(a)(2) states a debtor must “surrender” collateral but does not specify to whom.  The Faillas argued section 521(a)(2) merely requires a debtor to surrender collateral to the Chapter 7 bankruptcy trustee, not the creditor.  However, the Failla court determined, based upon a thorough analysis of the use of the term “surrender” in section 521(a)(2) and other sections of the Bankruptcy Code, that section 521(a)(2), “requires debtors who file a statement of intent to surrender to surrender the property to both the trustee and to the creditor.”  Id. at *2-3.

Next, the Failla court considered the meaning of the term “surrender,” as it relates to a debtor’s obligation under section 521(a)(2) and ultimately concluded:

Because “surrender” means “giving up of a right or claim,” debtors who surrender their property can no longer contest a foreclosure action. When the debtors act to preserve their rights to the property “by way of adversarial litigation,” they have not “relinquish[ed] … all of their legal rights to the property, including the rights to possess and use it.” Id., at *4 (quoting In re White, 487 F.3d 199, 206 (4th Cir. 2007).

While the holding in Failla is promising news for creditors, bankruptcy courts hesitant to interfere in state court matters may opt to narrowly apply the opinion.  Specifically, section 521(a)(2) only applies to cases filed under Chapter 7 by individuals.  Consequently, the Failla opinion directly applies only to foreclosure actions where collateral was surrendered in an individual Chapter 7 case.  Also, in order for the reasoning of Failla to directly apply, the name of the foreclosing creditor arguably must match the name of the creditor to whom the collateral was surrendered in the bankruptcy case.  Furthermore, a foreclosure action may involve additional defendants who were not party to the bankruptcy case and, thus, did not relinquish their rights to oppose the action.

  • Bankruptcy Courts Have Statutory Authority to Order Mortgagors to Stop Opposing State Foreclosure Actions After Real Property is Surrendered in a Chapter 7 Case.

 “Bankruptcy courts have broad powers to remedy violations of the mandatory duties section 521(a)(2) imposes on debtors.”  Id. at * 5 (citations omitted).  11 U.S.C. § 105(a) authorizes bankruptcy courts with the power to, “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code].”  The Failla court appropriately noted a bankruptcy court’s powers under § 105(a), “includes section 521(a)(2).”  Id.  Bankruptcy judges regularly enter orders pursuant to 11 U.S.C. § 105(a) which compel action by parties outside of bankruptcy cases in order to redress violations of the Bankruptcy Code and compel compliance with orders of bankruptcy courts.  Id. at *6.  Thus, a bankruptcy court would have authority under section 105(a) to enter an order compelling compliance with a debtor’s Statement of Intention.

Unfortunately, in instances where the Failla opinion does apply, it is not self-effectuating.  Creditors seeking the relief afforded by this opinion must take the additional step of filing a motion to compel in the relevant bankruptcy case.  The necessity of filing a motion to compel may arise after the Chapter 7 case has been closed, thus requiring payment of a reopening fee.  While a bankruptcy court would have authority to order payment by the debtor of the court costs and attorneys’ fees incurred due to filing the motion, the reality of actual payment by the debtor absent other costly legal action is, at best, uncertain.

In conclusion, while the Failla opinion is certainly positive new case law for creditors, the expanse of its practical impact is yet to be seen.

Per Ober: Lis Pendens Protection Is Over Upon Entry Of Final Judgment Of Foreclosure

Author: Starlett M. Massey, Partner at McCumber Daniels

On August 24, 2016, the Fourth District Court of Appeal issued a troubling opinion in Ober v. Town of Lauderdale-By-The-Sea, 4D14-4597, 2016 WL 4468134, interpreting anew the statute governing lis pendens, Florida Statute § 48.23.  The Ober opinion holds that a lis pendens expires upon the entry of the final judgment of foreclosure.  Therefore, the lis pendens no longer precludes the attachment of liens that are recorded after the entry of final judgment through the date of the foreclosure sale.  This holding upends the current understanding of lis pendens protection amongst practitioners and lenders by creating the potential for cloud on title in a variety of circumstances involving a delayed foreclosure sale.lis-pendens-imageLIS PENDENS IN GENERAL

Upon commencing a real estate foreclosure action in Florida, in conjunction with filing a complaint for foreclosure with the clerk of court, a lender records a lis pendens in the Official Records for the county in which the property is located. Lis pendens literally means “pending suit.” Med. Facilities Dev., Inc. v. Little Arch Creek Properties, Inc., 675 So. 2d 915, 917 (Fla. 1996). A notice of lis pendens protects both the lis pendens proponent and third parties. Id. The notice protects the lis pendens proponent’s interest both from extinguishment and from any impairment from intervening liens. Id. The notice also protects future purchasers or encumbrancers of the property by informing them that there is a current suit involving the property’s title. Id.


In Ober v. Town of Lauderdale-by-the-Sea, 2016 WL 4468134 at *1 (Fla. 4th DCA August 24, 2016), the Court addressed the question as to how long a lis pendens protects a lis pendens proponent. The court held that the duration of the action itself determines the duration of the lis pendens.  Id.  The lis pendens takes effect when a notice of action is filed.  An action terminates upon the court’s issuance of a final judgment[1]. Id.  Therefore, the lis pendens does not affect liens that are recorded after that date, regardless of whether they attach prior to the judicial foreclosure sale of the property. Id.

In Ober, a bank recorded a lis pendens against certain property located in Lauderdale-by-the-Sea (the “Town”) on November 26, 2007.  Id. On September 22, 2008, the court entered a final judgment of foreclosure in favor of the bank.  Id. Beginning on July 13, 2009 and continuing through October 27, 2011, the Town recorded seven liens for code violations. Id. The liens stemmed from violations occurring after the court entered its final judgment on September 22, 2008.  Id. On September 27, 2012, Ober purchased the property at foreclosure sale for $37,900.00.  Id. Ober then filed suit to quiet title, attempting to strike the liens from his property. Id. The Town counterclaimed to foreclose on the liens.  Id. Both parties moved for summary judgment and the court granted the Town’s motion for summary judgment and held that the lis pendens only barred liens existing or accruing prior to the date of the final judgment. Id.  The court granted the Town a final judgment of foreclosure against Ober in the amount of $345,092.59.  The current value of the property is approximately $310,000.00.

Ober appealed. Id. In the appeal, the Town again argued that the lis pendens applied only to liens existing or accruing prior to the date of the final judgment. Id. Ober argued that the lis pendens continued through the date of the judicial sale, which in this case was over four years later. Id. The court ultimately held that the lis pendens only prevents the accrual of liens recorded after the court’s issuance of a final judgment, regardless of when the clerk holds the foreclosure sale.  Id.

This opinion is a new interpretation of an existing statute and will control throughout Florida until other opinions are issued.  Trial courts in all jurisdictions in the state will be bound by this case until their own controlling District Court of Appeal weighs in on the matter.


This holding is concerning, as it will create substantial problems for lenders when a foreclosure sale is put on hold after the court enters a final judgment of foreclosure.  A foreclosure sale might be delayed for a number of reasons, with, perhaps, the most common causes being a mortgagor’s filing of a bankruptcy case post-judgment and a lender’s voluntary cancellation or postponement of a sale pending loss mitigation negotiations.

During the period of time after the entry of the final judgment, but before the foreclosure sale is held, the mortgagor remains the titled owner of the property. Thus, once the lis pendens protection expires, liens against the mortgagor can attach to the property without the lender’s knowledge.  Third-party purchasers at a foreclosure sale purchase the property “as is” and are responsible for conducting their own research as to the property being sold, including whether any potential liens or other defects in title exist. Thus, lenders may escape the liability and cost associated with intervening liens if they are not the successful bidder at the foreclosure sale.  The real problems arise for lenders where the lender is the winning bidder at a foreclosure sale and a lien or liens have attached to the property between final judgment and the sale. Worst case scenario, as in Ober, a lender could purchase the property at the foreclosure sale only to have its interest extinguished by lien foreclosure. Alternatively, a lender could purchase the property at foreclosure sale and be forced to pay or settle a lien(s) in order to convey clear title to a third-party purchaser.


Foreclosing lenders should consider changes to their current practices in order to reduce the risk of intervening liens by minimizing delays between the entry of final judgment and sale.  For example, lenders may consider limiting or discontinuing loss mitigation once the court has entered its final judgment.  Lenders may also decline to offer consent judgments with extended sale dates, which might previously have been offered to allow the borrower to undertake loss mitigation efforts.  Where a lender is working with a borrower who is seeking a refinance of the debt, the lender should require an updated title report to and require that the borrower be responsible for eliminating any intervening liens in order to ensure that the new mortgage lien will have the agreed upon priority.  Lenders should additionally consider obtaining updated title reports prior to a delayed foreclosure sale in order to determine the existence of any intervening liens because such liens may alter the lender’s maximum bid at the foreclosure sale.

[1] When no appeal is taken, an action terminates when the time for appeal expires. S. Title Research Co. v. King, 186 So. 2d 539, 544-45 (Fla. 4th DCA 1966).  That time is thirty days after rendition of the order. Fla. R. App. P. 9.110(b).  The Ober court declined to determine whether a lis pendens expires at the time of entry of the final judgment or whether it expires thirty days after the entry of the final judgment because none of the liens in that case were recorded during that time period.

McCumber Daniels Attorney Amy L. Miles Achieves Board Certification Status

Tampa, FL — June, 2, 2014 — McCumber Daniels is pleased to announce that attorney Amy L. Miles has become board certified by The Florida Bar in the area of appellate practice.  Only six percent of lawyers in Florida are board certified and are the only lawyers who receive “legal expert” status by The Florida Bar.

“Amy has been a tremendous asset to the firm.  Her appellate practice allows ourfirm to fully represent all of our clients from pre-suit through trials and appeals,” says Andrew McCumber, McCumber Daniels’ managing partner.  “Amy is always  finding  creative  solutions  and arguments  and I  am proud  that  she  is  being recognized by The Florida Bar and her peers for hFla Bar flame 2er excellent work.”

Board certified lawyers’ experience and competency have been rigorously  evaluated,  and  they  are  the  only  Florida  lawyers  allowed  to  refer  to themselves  as  specialists  or  experts  or  to  use  the  letters  B.C.S.  to  indicate  Board Certified Specialist when referring to their legal credentials. Board certified lawyers have met The Florida Bar’s highest standards for special knowledge, skills and proficiency invarious areas of law and professionalism and ethics in the practice of law.

Fixing Hasan v. Garvar: Keeping Physicians In-the-Know

Author:  Amy L. Miles

In December of last year, the Supreme Court of Florida released a broadly-sweeping opinion that appeared to strip from non-defendant physicians the right to consult with an attorney when they are called upon to give testimony on their treatment of a plaintiff/patient: Hasan v. Garvar, Case No. SC10-1361 (Dec. 20, 2012). We described this opinion in our December 26, 2012 entry. In response to the Supreme Court opinion, the Florida Legislature took the issue head-on by amending Florida’s Physician-Patient Confidentiality Statute, section 456.057, Florida Statutes. The amendment, which became effective on July 1 of this year, provides physicians and health care providers with the right to consult with their attorneys whenever they become involved in litigation or administrative action relating to their treatment of a patient, even if they are not a named defendant. For the most part, however, that statutory right must be known exercised by the physician. Under the new provisions, if the physician’s insurer represents a defendant or prospective defendant in the action, it may not initiate contact with the non-party provider to assist him or her in securing legal representation for his or her part in the action.

getty_rf_photo_of_doctor_and_patient_talkingBefore the amendment, the Physician-Patient Confidentiality Statute provided that confidential patient information and records could not be disclosed to anyone other than the patient’s other health care providers without the patient’s authorization. It had one exception, which permitted a health care practitioner or provider to disclose confidential patient information when he or she “reasonably expects to be named as a defendant” in a medical negligence action. Then, a health care provider could disclose the patient’s confidential information to the extent that he or she needed to in order to defend the potential malpractice claim.

With the amendment in place, the Legislature has broadened the health care provider’s right to disclose confidential patient information to his or her attorney not only when the provider is or expects to be a defendant in a medical negligence case, but also to when he or she “reasonably expects to be deposed, to be called as a witness, or to receive formal or informal discovery requests in a medical negligence action, presuit investigation of medical negligence, or administrative proceeding.” § 456.057(7)(d)(4), Fla. Stat. (2013).

In an apparent concession to the Hasan opinion, however, that expanded right to disclose limits the health care provider’s insurer’s ability to contact the health care provider or assist him or her in selecting legal counsel if the insurer also represents a defendant or a prospective defendant in a medical negligence action. § 456.057(7)(d)(4)(a). Under the current statute, if the health care practitioner’s insurer represents a current or prospective defendant, it “may not contact the health care practitioner or provider to recommend that” the provider seek legal counsel and may not select an attorney for the provider. § 456.057(7)(d)(4)(a)(I), (II). If the practitioner initiates the contact with his or her insurer, however, the insurer may recommend an attorney (who does not represent a defendant or prospective defendant in the matter) to represent the practitioner. The practitioner may select an attorney that represents the insurer or the insurer’s other insureds in other matters, but that attorney must not directly or indirectly disclose information to the insurer that relates to representing the provider, other than the attorney’s billing information for the services provided.

The amendment to the Physician-Patient Confidentiality Statute is welcome relief for physicians who had been facing potential depositions and discovery requests without the possibility of representation under the Supreme Court’s Hasan decision. Happily, the legislature intended the amendment to apply retroactively to causes of action that had accrued before the July 1 effective date. By denying the insurer who represents a defendant or potential defendant—i.e., the insurer that is the most likely to know about the medical negligence action in the first place—the right to contact any non-party health care provider to recommend that the provider seek legal counsel, however, the statute still leaves health care providers who are unaware of their right to representation in the dark. Therefore, insurers of health care practitioners and providers must re-double their efforts to inform their insureds of the right to seek counsel whenever they are contacted with discovery requests, or for purposes of deposition or other testimony before that contact occurs.

Tattoos and Piercings in the Workplace

It is becoming more and more common to see a young professional with a “sleeve” tattoo, a small stud nose piercing, or even one of those trendy fingerstache tattoos.  But what happens when this professional is applying for a job, is your employee, or the caregiver for an older family member?

Tattoo man in suit

Customers, clients, co-workers and particularly the older generation, including long-term care patients, have found it hard to accept this new trend.  Some find it offensive.  In fact, in 2012, the Captivate Network polled more than 600 U.S. workers and found that 61% of white-collar staffers over the age of 50 find tattoos distracting.  Employers are left swimming in murky waters as to where they should draw the line on policies and practices to change with societal norms while still respecting the feelings of customers, clients and co-workers.

Self-expression plays an intricate role in making America the country that it is.  However, tattoos and piercings are choices made knowing they won’t be “popular” with every audience.  Limiting an employee’s self-expression in the workplace is necessary to balance competing desires to respect individual preferences.  An inappropriate tattoo such as a rebel flag or swastika is sure to offend a significant portion of an employer’s customers.  An appearance policy which includes not only dress code standards, but tattoos and piercings as well sets boundaries to respect the rights of your employees and the people they serve.

The employer has the right to create and enforce appearances policies that includes the limitations on tattoos and piercings as long as the policy does not discriminate.  According to The U.S. Equal Employment Opportunity Commission: Title VII of the Civil Rights Act of 1964 prohibits employers with at least 15 employees, as well as employment agencies and unions, from discriminating in employment based on race, color, religion, sex, and national origin. 

No Appeal for Group of Hospitals Inadequately Reimbursed

On January 22, 2013, in a unanimous decision, the US Supreme Court rejected a bid from 18 Hospitals to revisit 25-year old Medicare reimbursement claims.

In the case of Sebelius v. Auburn Regional Medical Center, U.S. Supreme Court, No. 11-123, the providers claimed that from 1987 to 1994 the Centers for Medicare & Medicaid Services undercalculated Medicare payments for care provided to low income patients, based on the Supplemental Security Income (SSI) fraction.   number crunching

The US Supreme Court’s decision reinforces earlier decisions that the appeal was too old, where the imposed law governing these appeals is within 180 days of receiving the Notice of Program Reimbursement (NPR).  By regulation, the Secretary of HHS authorized the PRRB to extend the 180 day limit, for good cause, up to three years. See 42 CFR 405.1841(b) (2007).

The hospitals claimed it was unfair to impose the deadline under the circumstances, alleging the agency knew about and failed to disclose its calculation errors.

Should this same rationale apply to errors citizens make in calculating their tax liability? Do government vendors really need to also incur the expense of auditing payments received within a period as short as180 days, even where the particular agency is aware of an error in their methodology and chooses to not advise all other impacted?

Hasan v. Garvar-Protecting Patients’ Rights or Ripping Rights Away From Physicians?

Author:  Amy L. Miles

On December 20th, the Supreme Court of Florida released an unprecedented, broadly-sweeping opinion that appears to strip from non-defendant physicians the right to consult with an attorney when they are called upon to give testimony on their treatment of a plaintiff/patient. In the opinion authored by Justice Lewis, Hasan v. Garvar, Case No. SC10-1361 (Dec. 20, 2012), the Court relied on Florida’s physician-patient confidentiality statute to hold that a patient’s privacy trumped the physician’s right to consult with an attorney about the circumstances surrounding the physician’s treatment of the patient even if the consultation was limited to avoid disclosing any confidential patient information.

In Hasan, a patient sued his dentist for failure to diagnose his dental condition.  After seeing his dentist, the patient had visited an oral and maxillofacial surgeon, who treated the patient.  The medical malpractice carrier for the dentist and the surgeon was the same insurance company.  During the course of the suit against the dentist the patient sought to take the surgeon’s deposition.  The surgeon had not been named as a defendant.  Accordingly, the insurer retained an attorney to consult with the surgeon for an ex-parte, pre-deposition conference.  The attorney was not the same attorney, or even from the same law firm, that had been retained to defend the dentist.

Ruling on the patient’s challenge to that pre-deposition conference, the trial court placed limitations on the consultation that prevented the surgeon from disclosing confidential patient information, but otherwise permitted the surgeon to meet with the attorney.   The Fourth District Court of Appeal  affirmed that order.  Quashing the Fourth District opinion, the Supreme Court held that “the physician-patient confidentiality statute,” section 456.057, Florida Statutes (2009), “prohibits a nonparty treating physician from having an ex parte meeting with an attorney selected and provided by the defendant’s insurance company.”  The Court determined that the meeting is prohibited “whether or not they intend to discuss privileged or non-privileged matters without measures to absolutely protect the patient and the privilege.”      cet5007

Based on prior cases that prevented only the defendant’s counsel from ex parte meetings with a non-party physician, the Hasan opinion seems to broaden that prohibition to any counsel at all.  The Supreme Court stated that the legislature’s intent in enacting section 456.057 was to “safeguard privileged medical information and to strictly control the dissemination of a Florida patient’s medical information.”

The Hasan opinion left the actual extent to which a nonparty physician may consult with any counsel prior to a deposition unclear.  Under the facts in Hasan, the surgeon’s counsel was retained by the defendant’s insurer because both physicians were insured by the same company.   Thus, the court found that even though the counsel the insurer selected to consult with the surgeon was not defense counsel, “counsel provided by the defendant’s insurer also presents the same compromised interest as other outsiders, and, therefore, is barred from meeting with a nonparty treating physician.”  The Court’s holding expressly prohibited only “ex parte meetings between a patient’s nonparty treating physician and counsel provided by the defendant’s insurance company.”  Nevertheless, the Court seemed to prohibit a physician’s consultation with any counsel by its statement that “ex parte meetings between a nonparty treating physician and outsiders to the patient-health care provider relationship are not permitted.”  (Emphasis added).

In prohibiting ex parte meetings with counsel provided by the insurer, the Court also stated that privileged medical information is “not limited to information made ‘in the course of the care and treatment.’”   Therefore, even if the meeting was limited to issues outside of the actual patient care, the Court prohibited the consultation.   The Court was concerned that the insurer’s provision of counsel to the surgeon would foster “an environment conducive to inadvertent disclosure of privileged information.”

Of course, under the statute, a nonparty physician is not prohibited from consulting with counsel when he or she “reasonably expects to be named as a defendant.”  Under the holding in Hasan, future court decisions may be required to define what a reasonable expectation of being named a defendant would be in order to clarify nonparty physicians’ right to consult with counsel before giving deposition testimony.

The Supreme Court rejected arguments that its interpretation of the statute infringed on a physician’s First Amendment right to free speech or right to counsel, finding that if the physician becomes a party to a medical negligence legal action, he or she may discuss confidential patient information with an attorney.

In his dissent, in which Justice Canady concurred,  Justice Polston characterized the majority opinion as “so breathtakingly broad that it even forbids the nonparty physician from consulting a lawyer that she may choose to hire independently.”  Justice Polston opined that “the majority wrongfully prohibits a physician from consulting with her own lawyers, paid for by her insurance, by assuming that ethical violations will occur.”  He stated, “I am unaware of any other circumstance where this Court has prohibited someone from consulting a lawyer for legal advice.”  “There is no reason in this case to question whether the physician and her lawyer would do anything other than abide by the court order and their respective ethical obligations.”

McCumber Daniels’ Tampa Office Relocates to Hoover Boulevard

McCumber Daniels announced today the relocation of its Tampa office to 204 South Hoover Boulevard, Suite 130, Tampa, Florida 33609.

The new office will accommodate the company’s current staff and enable further expansion for the firm’s future growth.

We've movedMcCumber Daniels offers a wide variety of litigation services for insurers, health care facilities, businesses, financial institutions and licensed professionals. The firm regularly handles cases involving Medical Malpractice Defense, Commercial Litigation, Bankruptcy and Creditors’ Rights, Insurance Coverage, General Liability, Professional Liability Defense, Appeals, Long-Term Care Defense, and Health Care Law (including ZPIC Reviews and Audit Appeals.) With years of legal, corporate, medical, commercial, administrative and legislative experience, we are able to provide full-service representation for all of our clients in all types of disputes or litigation.

For more information visit our website at All email inquiries can be sent to

And the Survey Says…More Tort Reform Please

Authors: Marc Penchansky and Stephanie Hedrick

The U.S. Chamber Institute for Legal Reform (ILR) polled 1600 voters from last week’s election about their opinions on tort reform.   Nearly 9 out of 10 voters feel that the number of frivolous lawsuits is a “total serious problem.”  These lawsuits are considered to be with “little merit filed by lawyers mostly out to make money.”  The survey also revealed that 83% of the polled number believes that the next Congress should continue to pass legislation to reform the class action lawsuit system.

Prior to the election, The American Tort Reform Association along with Sick of Lawsuits, a campaign headed by Citizens against Lawsuit Abuse, released a report in August 2012, regarding public opinions about tort reform.   Of those polled, 89% felt that lawsuit abuse is a problem and 60% believe that the number of lawsuits have hurt the economy. Similar to the ILR survey, the majority of voters agree, “enacting lawsuit reform is an important part of improving the U.S. business environment and attracting and keeping jobs”

At the State Level

Although tort reform on a national level is important, 2012 was a busy year for medical malpractice tort reform in the states.  As detailed below, these states have enacted approaches, and sometimes made changes to past mandates, to assist in reducing the cost of malpractice claims.

Patient Safety and Defensive Medicine Workgroup

In February, 2012, Senate Bill 1580 was passed in Oregon establishing a Governor-appointed Patient Safety and Defense Medicine Workgroup (PSDM); a workgroup created to recommend a medical liability legislative proposal for the 2013 Legislative session.  The workgroup met three times in 2012 to discuss the Governor’s proposal for an Early Disclosure and Resolution (EDR) program, while guided by these principles listed in the Bill:

  • Improve the practice environment to allow physicians to learn from medical errors and improve patient safety;
  • More effectively compensate individuals who are injured as a result of medical errors; and,
  • Reduce the collateral costs associated with the medical liability system including costs associated with insurance administration, litigation, and defensive medicine.

The workgroup’s final recommendations and draft legislation, which will be introduced in the 2013 Legislative session, recommend working toward an Early Disclosure and Resolution (EDR) program.  This program is a first step after a serious event occurs to avoid claiming malpractice and avoiding the trial process.  This program will include a notice of a serious event, a 30-day cooling off period and finally a 90-day resolution process in which the parties must discuss and agree upon compensation, and if not, they move into the next phase of the process, mediation.  Finally, if the case is not resolved at mediation, the patient or representative may pursue legal action through the traditional litigation system, where the EDR and Mediation process will not be admissible.

Apology Legislation

This blog has been tracking the trend of state “apology legislation,” which is designed to allow medical professionals to express empathy for and take ownership of an unforeseen outcome without the risk of retaliatory litigation based solely on the statements made at the time of the apology. This year, Massachusetts joined the growing list of states that have enacted the “Apology Approach” to facilitate the early resolution of medical malpractice cases.

On August 6, 2012, Massachusetts Governor Deval Patrick signed the Healthcare Cost Control Bill, known as “Disclosure, Apology and Offer” (“DA&O”), a joint initiative by Massachusetts physicians and lawyers to utilize a more compassionate approach to handling medical errors and malpractice.  “The new model includes provisions for a six-month, pre-litigation resolution period that affords the time to go through a DA&O process with the sharing of all pertinent medical records by the patient, full disclosure by providers, and makes inadmissible all statements of apology during litigation.”[   Finally, the organizations work with their liability insurers to give patients a fair and timely offer of financial compensation.  “By giving patients the opportunity to receive transparent information and prompt financial recourse, the hope is that the court system would be used only as a last resort.

Tort Reform in New Hampshire

In New Hampshire, Governor John Lynch vetoed “early offer” legislation.  SB 406 established a voluntary program to allow medical providers’ insurance companies to make “early offers” to injured patients who may bring a malpractice suit.  If a patient agreed to participate in the program but rejected the early offer, the patient would need to post a bond to cover the defense’s attorneys’ fees and costs.  If the jury awards the injured patient less than 125 percent of the early offer, the patient would have to pay the defense’s attorneys’ fees and costs.  Supporters argued that the bill would streamline the process and allow patients access to quicker settlements.

Medical Malpractice Caps

Tort reform legislation was established to create a sense of balance between the interest of the patients that are affected by medical negligence and the interest of the physicians who are burdened with the rising cost of insurance premiums and possible threat of a lawsuit.   Medical malpractice caps were created to sufficiently compensate patients faced with medical malpractice, without having the physicians become priced out by high insurance premiums (and aim to reduce the amount of frivolous lawsuits brought by personal injury attorneys.)

Overturning States Medical Malpractice Caps

This year, the Missouri Supreme Court, in a 4-3 decision, overturned a $350,000 cap on non-economic medical malpractice damages.  The cap was created by the Missouri General Assembly in 2005.  On July 31, 2012, in Watts v. Lester E. Cox Medical Centers, the Court ruled the cap unconstitutional because it infringed on an individual’s right to trial by jury.

Upholding States Medical Malpractice Caps

Conversely, the Kansas Supreme Court recently upheld a 25-year-old law, in the case of Miller v. Johnson.  That case involving a woman who had the wrong ovary removed by a doctor, reaffirmed the medical malpractice cap of $250,000.  The Kansas Medical Society, an association that represents most of the state’s physicians, stated, “The Court properly observed that the intent of the cap was to ensure quality health care availability in Kansas and to promote affordable, available malpractice insurance for health care providers. The court recognized these objectives as legitimate state interests that promote the general welfare.”[

Deciding Fate

This year the Florida Supreme Court heard arguments in the case of Evette McCall v. United States of America SC11-1145 addressing the malpractice law on the noneconomic medical malpractice caps of $500,000 per claimant and practitioner with an aggregate cap of $1,000,000.  These caps were set in 2003. The decision on whether or not the caps are constitutional now rests in the hands of the Florida Supreme Court.

More Tort Reform Please

The proper balance between plaintiff’s rights and an affordable health care system remains difficult to achieve.  It is clear that the populace is skeptical about the validity of many medical malpractice lawsuits brought in this county and see tort reform as a way to achieve everyone’s goal of more affordable health care.  The answers are not easy but it is clear that federal and state legislatures continue to work to find a system that is fair to all.

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