Court of Appeal Finds Recipe for Mixing MICRA, Prop. 51 and the Good Faith Settlement Statute to Reduce Economic and Non-Economic Damages in Medical Malpractice Award

October 2013

A $1.45 million medical malpractice jury verdict was reduced to $16,655 by the Court of Appeal for a man who was blinded in one eye by a medical procedure that was only supposed to stop him from having nosebleeds. The decision is the result of the uniquely synergistic effect of MICRA, Prop. 51 and the Good Faith Settlement Statute.

In Hamid Rashidi v. Franklin Moser, M.D. (Los Angeles County Super. Ct. No. BC392082; 2013 DJDAR 12903) the Second Appellate District, Division 4 was asked to decide how to apply offsets from prior settlements by a hospital and by a biomedical technology company in a medical malpractice action that proceeded to trial against the physician. The two pre-trial settlements were silent as to how much was for “economic” and for “non-economic” damages.

Summary of Holding

The Appellate Court divided the settlement dollars between economic and non-economic damages to mirror the jury’s apportionment between economic and non-economic damages. The Court applied the percentage of the total jury award that was economic damages to the settlement amount to determine how much of the settlement could be used as an economic damages offset. The Court next reduced the non-economic damages award to $250,000 (per MICRA). It then calculated the percentage that economic damages represented in relationship to the total court-adjusted award (the $250,000 plus economic damages) and then applied that percentage to the settlement amount to find out how much of the settlement could be used as an non-economic damages offset.

The Facts and Allegations

In April of 2007, 26-year-old Ramid Rashidi went to the emergency room of Cedars Sinai Medical Center in Los Angeles, California for a severe nosebleed. He returned in May with another severe nosebleed. On the second visit, Dr. Franklin Moser proposed an embolization procedure. Via a catheter inserted into an artery in the plaintiff’s leg and extending up into his nose, Dr. Moser injected “embospheres” into the catheter to cause permanent occlusion of only the targeted blood vessels. The patient awoke from the procedure to discover that he was now blind in one eye.

It was alleged that the embosphere particles had such chemical and elastic properties that they traveled outside of the surgical target area and to other sites, causing the blindness. The embospheres were manufactured by Biosphere Medical, Inc., which was not covered by MICRA.

The Settlements

Biosphere settled with Plaintiff for $2 million. Cedars-Sinai settled with Plaintiff for $350,000. The settlement agreements were silent as to any apportionment of the funds as between economic and non-economic damages. Biosphere and Cedars-Sinai each moved for determination by the Court that their settlements were in good faith, so as to bar any (non-contractual) indemnity claims by any other party. The Motions were unopposed and granted.

The Jury Verdict

Trial proceeded against the doctor, resulting in a plaintiff’s verdict and an award of damages as follows: $331,250 past non-economic damages, $993,750 for future non-economic damages, and $125,000 for future medical care (reduced to present value). The Trial Court reduced the non-economic damages ($1.325 million) to $250,000 per MICRA and entered Judgment against Dr. Moser for $125,000 in economic damages and $250,000 for non-economic damages.

The Motion to Apply Offsets

Dr. Moser moved the Court for offsets based on the Biosphere/Cedars-Sinai settlements. The trial court said no, because there was no allocation of the settlement funds as between economic and non-economic damages, and as the jury was not asked to apportion any amount of fault to the defendants who settled before trial. Dr. Moser appealed.

The Conundrum

The Appellate Court was asked to reconcile MICRA (California Civil Code, Section 3333.2), Proposition 51 (aka the Fair Responsibility Act of 1986, California Code of Civil Procedure, Section 1431.2) and the Good Faith Settlement Statute (California Code of Civil Procedure, Section 877) in order to calculate the allowable economic and non-economic offsets from the two pre-trial settlements, which were totally silent as to how much money was allocated to economic damages and non-economic damages. Additionally, the jury was not asked to apportion any fault as to parties who did not participate in the trial.

MICRA limits the amount of non-economic damages (subjective damages, such as pain and suffering) that a Plaintiff may recover against all healthcare providers, combined, to $250,000.

CCP Section 877 holds that a settlement and release with one party does not discharge any other party from liability, but it shall reduce the non-settling party’s obligation to pay damages by an amount set forth in the settlement documents, or by the amount paid, whichever is greater.

CCP Section 1431.2 says that when comparative fault is in play, the liability of each defendant is several, not joint, meaning that each defendant is liable only for its percentage of fault (as found by the jury) of the non-economic damages. As to economic damages (objectively provable expenses and losses, aka “out of pocket” damages), each defendant remains jointly liable with all other parties at fault for the total amount awarded.

The Economic Damages Offset Calculation

The jury awarded $1.45 million against Dr. Moser ($125,000 in economic and $1.325 million in non-economic damages). Economic damages of $125,000 were 8.62 % of the total award of $1.45 million. The Court then multiplied Biosphere’s $2 million settlement by 8.62% to derive the amount of the settlement to be allocated to economic damages, or $172,400. Dr. Moser was thus entitled to an offset of $172,400 in economic damages. But as the jury only awarded $125,000 in economic damages against Dr. Moser, the Biosphere settlement completely offset Dr. Moser’s financial obligation to Mr. Rashidi for economic damages.

The Non-Economic Damages Offset Calculation

The Appellate Court then turned to the available offset for non-economic damages. To calculate the percentage of the Cedars-Sinai award attributable to economic and to non-economic damages the calculation proceeded differently, as both Cedars-Sinai and Dr. Moser were healthcare providers, enjoying the protections of MICRA. The jury’s $1.325 million in non-economic damages against Dr. Moser was reduced to $250,000 (per MICRA). The new, MICRA-adjusted subtotal for all damages came to $375,000. The $125,000 in economic damages awarded represented 33.33% of the $375,000. Cedars-Sinai settled for $350,000. 33.33% of $350,000 is $116,655, which was found by the Appellate Court to be the amount of the Cedars-Sinai settlement attributable to economic damages. The remainder, $233,345, was found to be the amount of the Cedars-Sinai settlement attributable to non-economic damages.

At trial, Moser was the only party found to be at fault. Since Dr. Moser did not point any fingers of liability toward any settled parties during trial, the jury did not determine any percentage of fault for either Cedars-Sinai or for Biosphere. Plaintiff Rashidi argued that Dr. Moser should therefore be required to pay the entire $250,000, without any offset. But the court found that MICRA set an absolute limit on non-economic damages for all healthcare defendants. As a result the court applied the $233,345 offset for non-economic damages, leaving plaintiff to recover the balance up to $250,000, or only $16,655, from Dr. Moser for non-economic damages.

The Award, Following Offsets

Since the Biosphere settlement wiped out Moser’s obligation to Rashidi on economic damages, and as the Cedars settlement provided a $233,345 offset on non-economic damages, plaintiff’s net recovery in the trial was $16,655.

Rashidi v. Moser is useful as a guide in determining the amount of both economic and non-economic offsets to which a non-setting healthcare defendant is entitled even when the pre-trial settlements are silent as to any allocation between the two categories of damages, and even when the pre-trial settlements involve both healthcare and non-healthcare defendants.

Mark Kiefer is a partner in the Los Angeles office and a member of the firm’s healthcare practice group.