Tuesday, July 31, 2012

Watts v. Cox Medical Centers[1]

Opinion handed down July 31, 2012

Deborah Watts filed a medical malpractice suit against Cox Medical Centers after her son, Naython Watts, was born with disabling brain injuries.  After the jury returned a verdict in favor of Watts for $1.45 million in non-economic damages and $3.371 million in future medical damages, the trial court entered a judgment reducing Watts’ non-economic damages to $350,000 as required by RSMo 538.210.  The court also established a periodic payment schedule requiring immediate payment of half of all net future medical damages with the other half paid in equal annual installments over the next 50 years with an interest rate of 0.26 percent pursuant to RSMo 538.220.  Watts appealed to the Supreme Court of Missouri alleging that RSMo 538.220 violates, among others, the right to trial by jury provision of the Missouri Constitution and that the periodic payment schedule established by the court did not assure full compensation due to the low interest rate and 50-year payment.  Cox filed a cross-appeal asserting that the trial court erred in its immediate award of half of future medical damages.  The Missouri Supreme Court reversed and remanded, holding that section 538.210 is unconstitutional, that the trial court abused its discretion when entering the periodic payment schedule, and that section 538.220 gives the judge the authority to determine the manner in which future damages shall be paid.

I.  Facts & Holding

A.  Section 538.210 Violates Right to Trial by Jury

Deborah Watts filed a medical malpractice action alleging that the negligent care provided by Cox Medical Centers and its associated physicians (hereinafter Cox) caused her son, Naython Watts, to be born with disabling brain injuries.[2]  On October 30, 2006, when Watts was roughly 39 weeks pregnant, she went to a clinic associated with Cox because she was cramping and noticed decreased fetal movement.[3]  Dr. Herman, a third-year medical resident, examined Watts, and her supervisor, Dr. Kelly, signed off on her findings.[4]  Evidence indicated that Dr. Herman failed to perform appropriate tests, did not notify Watts of the importance of decreased fetal movement, and failed to perform further diagnostic monitoring.[5]

On November 1, 2006, Watts was hospitalized due to lack of fetal movement, and placed on a fetal monitor, which indicated fetal hypoxia and acidosis.[6]  Expert testimony established that the standard of care for such a diagnosis required an immediate Caesarean-section delivery; however, the Caesarean-section did not begin until two hours later.[7]  Naython was born with catastrophic brain injuries.[8]

Watts sued Cox, claiming that its negligence caused Naython’s brain injuries.[9]  The jury held in favor of Watts and awarded $1.45 million in non-economic damages and $3.371 million in future medical damages.[10]  Pursuant to section 538.210 the trial court reduced the non-economic damages to $350,000, and the jury then reduced the future medical damages to present value under section 538.220 at a rate of four percent per annum.[11]  The trial court additional entered a payment schedule under section 538.220 which required half of the future damages to be paid immediately in a lump sum and half over a 50-year period at an interest rate of 0.26 percent.[12]

In a direct appeal to the Missouri Supreme Court[13], Watts claimed that the section 538.210 cap on non-economic damages “violates the right to trial by jury and several other provisions of the Missouri Constitution,”[14] and that “the section 538.220 periodic payment schedule was arbitrary and unreasonable in that it does not assure full compensation due to the low interest rate and 50year payment schedule.”[15]  Cox filed a cross-appeal claiming the trial court erred in its immediate award of future medical damages and that section 538.220 “requires that all future medical damages be paid pursuant to a periodic payment schedule regardless of when the need for the medical damage payments will arise.”[16]

The Court noted that article I, section 22(a) provides “the right of trial by jury as heretofore enjoyed shall remain inviolate…”, and stated that “the plain language of article I, section 22(a) requires analysis of two propositions to determine if the cap imposed by section 538.210 violates the state constitutional right to trial by jury.”[17]  The Court held that the first portion of article I, section 22(a) “requires a determination of whether Watts’ medical negligence action and claim for non-economic damages is included within ‘the right of trial by jury as heretofore enjoyed,’”[18] and the second portion requires “[the] Court to determine whether the right to trial by jury ‘remain[s] inviolate’ when a statute cap requires the court to reduce the verdict.”[19]

To determine the nature of the right to trial by jury as “heretofore enjoyed,” the first prong of the analysis, the Court noted that it must assess the state of the common law when the Missouri Constitution was adopted in 1820.[20]  In doing so, it held that “Watts has a right to trial by jury on her claim for non-economic damages caused by medical negligence,” and that because statutory caps “were not contemplated by the common law when the people of Missouri adopted their constitution in 1820 guaranteeing that the right to trial by jury as heretofore enjoyed shall remain inviolate.  The right to trial by jury ‘heretofore enjoyed’ was not subject to legislative limits on damages.”[21]

After it established that the right to trial by jury “heretofore enjoyed” did not include legislative limits on damages, the Court shifted its focus to whether the right to trial by jury “‘remain[s] inviolate’ after application of the section 538.010 cap on non-economic damages.”  In doing so, the Court noted that the jury’s primary function is fact-finding, which includes the determination of damages, and that once the right to trial by jury attaches, “the plaintiff has the full benefit of that right free form the reach of hostile legislation.”[22]  The Court held Section 538.210 violates the state constitutional right to trial by jury because the individual right to trial by jury cannot “remain inviolate” when an injured party is deprived of the jury’s constitutionally assigned role of determining damages according to the unique facts of the case.[23]

The Court went on to hold that to the extent Adams v. Children’s Mercy Hospital., 832 S.W.2d 898 (Mo. Banc 1992) holds that the section 538.210 caps on non-economic damages do not violate the right to trial by jury, it is overruled.[24]  The Court expressed that it is always hesitant to overturn precedent, but it should do so when the precedent is based on flawed reasoning.[25]  It noted four fundamental flaws in Adam’s rationale.[26]  First, the Court held that Adams misconstrues the nature of the right to trial by jury, as “statutory limits on damages directly curtail the individual right to one of the most significant constitutional roles performed by the jury—the determination of damages.”[27]  As such, the Court claimed that a statutory cap “clearly nullifies the jury’s findings of fact regarding damages and thereby undermines the jury’s basis function.”[28]  Second the Court held that Adams “further misconstrues the right to trial by jury because it specifically permits legislative limitation of an individual constitutional right.”[29]  Third, the Court held Adams improperly relied on Tull v. United States, 481 U.S. 412 (1987), a case interpreting the federal constitution and dealing with civil penalties, for the proposition “that the right to jury trial does not extend to the determination of damages, even though determining the facts is the jury’s primary function.”[30]  The Court reiterated that Missouri law has “long recognized that the jury’s role is precisely to determine both liability and damages.”[31]  Finally, the Court found that Adams reached its conclusion without any citation to Missouri law, relying instead on Tull and Etheridge v. Medical Center Hospital, 376 S.E.2d 525 (Va. 1989).[32]  Etheridge, however, “is analytically irrelevant because, unlike Missouri’s guarantee that the right to trial by jury shall ‘remain inviolate,’ the Virginia Constitution merely states that ‘trial by jury is preferable to any other, and ought to be held sacred.”’[33]  In turn, because the trial court reduced the non-economic damages in reliance on Adams, that aspect of the judgment was reversed.[34] 

B.  Section 538.220

In addressing section 538.220, the Court reiterated that the “general purpose of chapter 538 is to reduce the cost of medical malpractice and that the specific purpose of section 538.220 is to spread that cost over time and to guard against squandering the judgment while reducing future burdens on government social services.”[35]  The Court then directed its attention to the plain language of Section 538.220 and concluded that “once the defendant requests a periodic payment schedule for future damages, [the statute] plainly requires the trial court ‘to include in the judgment a requirement that future damages be paid in whole or in party in periodic or installment payments,’” while sentences toward the end of the section make clear that it is up to the court to determine what portion of future damages are to be included in future payments.[36]  Therefore, it held that “the issue of how to pay future damages and at what interest rate [is] in the hands of the [trial] court,” and it denied Cox’s cross-appeal because the statute does not require that all future medical damages be paid according to a payment schedule.[37] 

The Court went on to hold that when the jury discounted the future medical damages to present-day value as required by section 538.215, it should have used a higher interest rate than 0.26 percent.[38]  The 0.26 percent interest rate “virtually guaranteed that inflation in health care costs would result in Naython having insufficient funds to pay his future medical costs,” and therefore took away from the full value of the award.[39]  In so holding, the Court reversed this portion of the judgment and remanded the case to the trial court “to enter a new periodic payment schedule that, consistent with the goal of reducing medical malpractice costs, also ensure that Naython will receive the benefit of the jury’s award for future medical care.”[40]

C.  Judge Russell’s Opinion Concurring With 538.220 Holding and Dissenting with Non-Economic Damages Cap Holding

Judge Russell dissented to the extent the principal opinion “overrules the Court’s well-reasoned, longstanding precedent in Adams without persuasive justification.”[41] Adams holding - that section 538.210, RSMo, does not violate the Missouri Constitution’s right to a jury trial because, once the jury completes its fact-finding duty of determining liability and measuring damages, both economic and non-economic, it has completed its constitutional task - is dispositive in this case.[42]  Judge Russell made mention that just this year, the Court upheld section 538.210, RSMo 2000, with regard to statutorily created causes of action in Sanders v. Ahemed, 364 S.W.3d 195, 204 (Mo. banc 2012).[43] The dissent claimed that because section 538.210 establishes the substantive legal limits of a plaintiff’s damage remedy, it is a matter of law, not fact, and the trial court applies the law of this section only after the jury completes its fact-finding duty.[44]  The dissent also noted that the Court in Adams held that “the legislature is permitted to abrogate a cause of action cognizable under the common law completely and, therefore, has the power to limit recovery in the same causes of action.”[45]  The dissent further claimed the majority’s reasons for departing from the holding in Adams were not persuasive, and expressed that “[t]he trial court’s application of the law to the facts after they have been found by the jury does no harm to the right to a trial by jury,” and “[i]n general, the legislature is free to establish the substance of a claim.”[46]  In her dissent, Judge Russell went on to provide numerous examples of states holding that statutes limiting non-economic damages do not violate those states’ respective rights to a jury trial, including states with “inviolate” language the same as that in the Missouri Constitution.[47]

II.  Legal Background

In order to rebuff a previous tort reform enacted by Missouri legislature in 1986, former Missouri Governor Matt Blunt made comprehensive tort reform a main priority when he took office in 2005.[48]  “I took office in January 2005 at a time when runaway lawsuits were driving up the cost of doing business in my state and forcing doctors and business owners to close their doors,” said Blunt in a September 2009 article in the Wall Street Journal.  He went on to say that ‘“[v]enue-shopping,’ a tactic that involves shifting a case to a friendly court regardless of where the injury occurred, was common.  Defendants could be made to pay 100% of a judgment even if they were only 1% responsible for the injury.  And caps on damages had been rendered meaningless by state court decisions.”[49]
Blunt and supporters of the tort reform attributed high health care costs and lack of quality physicians to Missouri’s plaintiff friendly legal environment.[50]  “We had widespread problems with practices recruiting before the reforms,” said Tom Holloway, director of government relations for the Missouri State Medical Association.[51]  “The states physician population shrank by 225 doctors from 2002 until 2005.  The drop reflected doctors fleeing the high premiums they had to pay for malpractice insurance in Missouri.”[52]  To combat junk lawsuits and drive down the costs of malpractice insurance, H.B. 393 became effective on August 28, 2005.[53]  Among the safeguards to “prevent baseless cases from getting off the ground” was a familiar $350,000 cap on noneconomic damages.
Following the enactment of the 2005 tort reform, Missouri’s medical malpractice claims reached a 30-year low.[54]  The $26 million decline in malpractice insurance premiums not only represents money that doctors and patients will hold on to, but also has lead to year after year profits for malpractice insurers.[55]  “This will drive down costs, which will save government programs money as well as improve the system for patients.”[56]  Dr. Dwain Roberts, declared that “[a]fter tort reform was enacted it was like night and day.  Malpractice premiums decreased by as much as 40 percent. Missouri became attractive to the best doctors and rural practices once again made economic sense.  Moreover, tort reform helped control medical costs.”[57] 

III. Comment

The well-established precedent set forth in Adams more than 20 years ago should have been followed.  The Adams Court properly stated that “the legislature has the right to abrogate a cause of action cognizable under common law completely,” and accordingly, “[i]f the legislature has the constitutional power to create and abolish causes of action, the legislature also has the power to limit recovery in those causes of action.”[58]  For an example, one can look to the development of common law negligence.  Dating back to its inception, any form of contributory negligence was a bar to recovery.[59]  However, the majority of states throughout the Union have altered this common law action by enacting various standards of comparative negligence to provide a fair result.  Limiting non-economic damages is no different.

The Missouri legislature is entrusted with duty of making policy judgments reflective of the peoples’ wishes, not the courts.  Though there may be instances where such a statute seems unsympathetic, these situations were surely taken into account by the legislature when drafting the damages cap and should not influence the constitutional validity of a statute.  Damages caps were enacted in an effort to create an attractive economy for doctors and to combat high health care costs and a lack of quality physicians.  These caps are constitutional and reflective of the peoples’ choices, and the Court has no business departing from well-established precedent and destroying effective policy.

-  Cody Reinberg

[1]  No. SC91867 (Mo. July 31, 2012), available at http://www.courts.mo.gov/file.jsp?id=55761.  The West reporter citation is Watts v. Cox Medical Centers, 376 S.W.3d 633 (Mo. 2012) (en banc).
[2]  Id. at 1.
[3]  Id. at 3.
[4]  Id. at 3-4.
[5]  Id.
[6]  Id. at 4.
[7]  Id.
[8]  Id.
[9]  Id.
[10]  Id.
[11]  Id.  4 percent per annum represents “the estimated yield on a safe long-term investment, which worked out to a present value of $1,747,600.”
[12]  Id.  Cox had initially requested that all future damages should be paid in periodic payments pursuant to section 538.220.
[13]  The Supreme Court of Missouri has exclusive jurisdiction over appeals involving the validity of a Missouri statute.
[14]  The court only addressed the violation of the right to trial by jury.  Id. at 2 n.2.
[15]  Id.
[16]  Id.
[17]  Id. at 6.
[18]  Id.
[19]  Id. at 7.
[20]  Id.
[21]  Id. at 10.
[22]  Id. at 11.
[23]  Id. at 12.  The court went on to provide examples of various states that have “concluded, that because the assessment of damages is one of the factual findings assigned to the jury rather than to a judge, any limit on damages that restricts the jury’s fact-finding role violates the constitutional right to trial by jury.
[24]  Id. at 22.
[25]  Id. at 20.
[26]  Id. at 15
[27]  Id.
[28]  Id.
[29]  Id. at 16.
[30]  Id. at 17.
[31]  Id.
[32]  Id. at 18.
[33]  Id. Va. Const. art. I, § 11.
[34]  Id. at 22.
[35]  Id. at 23 (citing Vincent, 833 S.W.2d at 867).
[36]  Id. at 24.
[37]  Id. at 26.
[38]  Id.
[39]  Id.
[40]  Id. at 26-27.
[41]  Id. at 2 (dissent)
[42]  Id.
[43]  Id. at 3 n.1(dissent)
[44]  Id. at 3 (dissent).
[45]  Id.
[46]  Id. at 3-4 (dissent).
[47]  Id. at 5 (dissent).
[48]  Matt Blunt, How Missouri Cut Junk Lawsuits http://online.wsj.comg/article/
[49]  Id.
[50]  Id.
[51]  Missouri Tort Reform Reverses Doctor Exodus, http://news.heartland.org/print/26312
[52]  Id.
[53]  Paul J. Passanante & Dawn M. Mefford, Anticipated Changes to Tort Reform, 62 J. Mo. B. 206 (2006).
[54]  Matt Blunt, How Missouri Cut Junk Lawsuits http://online.wsj.comg/article/
[55]  Id.
[56]  Id.
[57]  Dwain Roberts, MD, Tort Reform: the Best Health Care Reform, Jefferson City News-Trib 2010 WLNR 25875985.
[58]  Adams, 832 S.W.2d at 907.
[59]  Contributory negligence is “a doctrine of common law that if a person was injured in part due to his/her own negligence (his/her negligence "contributed" to the accident), the injured party would not be entitled to collect any damages (money) from another party who supposedly caused the accident. Under this rule, a badly injured person who was only slightly negligent could not win in court against a very negligent defendant. If Joe Tosspot was driving drunk and speeding and Angela Comfort was going 25 m.p.h. but six inches over the center-line, most likely Angela would be precluded from any recovery (receiving any money for injuries or damages) from a car crash. The possible unfair results have led some juries to ignore the rule and, in the past few decades, most states have adopted a comparative negligence test in which the relative percentages of negligence by each person are used to determine damage recovery (how much money would be paid to the injured person).”  http://dictionary.law.com/Default.aspx?selected=341