The Texas Supreme Court has agreed to review a San Antonio Court of Appeals decision declaring the Chapter 33 settlement credit unconstitutional under the Open Courts doctrine. TCJL filed an amicus curiae brief in Jesus Vilar, M.D. and GMG Health Systems Associates, P.A. a/ka and d/b/a Gonzaba Medical Group v. Jo Ann Puente (No. 20-093 urging the Court to grant review and reverse the decision. No date has yet been set for oral argument.

The case raises a number of issues, but TCJL’s brief concentrates on a single issue of overriding concern to the Texas business and health care community: the application of the settlement credit when the “claimant” includes both the injured party and another person seeking recovery based on the harm to the injured party (i.e., a derivative claim) (see § 33.011(1), CPRC).

The issue arose out of a medical malpractice case involving a patient who suffered complications from gastric bypass surgery that left her with serious brain dysfunction requiring 24-hour long term care. The plaintiff and her mother (as guardian for the plaintiff’s minor daughter) sued the physicians (Virlar, Patel, and Martinez), their employer (Gonzaba), and other providers for negligence seeking damages for physical pain, mental anguish, loss of earnings, loss of future earning capacity, and past and future medical expenses. The plaintiff’s minor daughter alleged past and future damages for loss of parental consortium, emotional trauma, and loss of care, maintenance, companionship and other damages. The plaintiff’s mother alleged separate damages for loss of services resulting from her daughter’s injury.

Prior to trial, the plaintiff’s mother settled and nonsuited both her own and the minor child’s claims with all defendants, including those against the doctors and the employer. The plaintiff settled with or nonsuited her claims against all defendants except the doctors and the employer. The jury assigned responsibility to Virlar (60%) and Patel (40%) and awarded the plaintiff $133,202 for past loss of earnings, $888,429 for future loss of earning capacity, and $13,263,874.86 for future medical expenses. The defendants filed a motion to apply a settlement credit for the plaintiff’s, plaintiff’s mother, and minor child’s settlements with the other defendants, as well as for an order for periodic payments of the future medical expenses. The trial court denied both motions and entered judgment against Virlar and Gonzaba for $14,109.349.02.

The defendants appealed to the San Antonio Court of Appeals. In a split decision, with Chief Justice Marion and Justice Alvarez filing separate concurring and dissenting opinions, the court of appeals upheld the judgment, subject to ordering a remittitur of $8,000 on the future loss of earning capacity award. The court of appeals rejected the plaintiff’s motion to remit the total award by $434,000 to cure potential error from the trial court’s denial of the defendants’ motion for settlement credit. The defendants appealed to the Texas Supreme Court, where the case is now in the merits briefing stage.

TCJL’s brief takes up the issue of whether the trial court abused its discretion by refusing to apply the settlement credit on the basis that “her daughter’s settlement for her daughter’s independent damages should not reduce her award for injuries she suffered as a result of Dr. Virlar and Gonzaba’s negligence.” The court of appeals acknowledged that under §33.012(c), CPRC, the defendants were entitled to a settlement credit. The court likewise agreed that the definition of “claimant” in §33.011(1) includes a derivative claimant, as the plaintiff’s mother and daughter are here. But rather than simply applying the plain language of the statute (as the dissenters Chief Justice Marion and Justice Alvarez would have done), the majority held that to the extent these sections reduced the plaintiff’s award of economic damages (noneconomic damages are of course capped in health care liability actions), they violate the Open Courts provision of the Texas Constitution (Art. 1, §13). The majority relies heavily, indeed almost exclusively, on SCOTX’s holding in Lucas v. United States, 757 S.W.2d 687 (Tex. 1988), which struck down Texas’ then-statutory cap on damages in health care liability cases as violating open courts. Setting aside whether this decision, handed down by a notoriously activist court dominated by the plaintiff’s bar, is still good law in Texas, we believe that the court of appeals’ reliance on this case is misplaced and inapposite. As our brief argues:

TCJL only adds its voice to question the court of appeals’ premise that the definition of “claimant” in § 33.011(1), Tex. Civ. Prac. & Rem. Code, “restricts a common law cause of action” and thus triggers an Open Courts analysis to begin with. Virlar, 613 S.W.3d at 694. How does defining a “claimant” to include derivative claims arising from the underlying plaintiff’s injury “restrict a common law cause of action”? The statute does not limit causes of action in any way. The entirety of the court of appeals’ analysis of the question appropriates this Court’s reasoning in Lucas v. United States, 757 S.W.2d 687 (Tex. 1988) without the slightest attempt to examine whether Lucas is even apposite in this case (assuming that Lucas remains good law).

Specifically, Chapter 33 has nothing to do, as the court of appeals seems to think, with “impos[ing] the burden of supporting the medical care industry solely upon those persons who are the most severely injured and therefore most in need of compensation.” Vilar, 613 S.W.3d at 690. Chapter 33 establishes a comprehensive scheme for implementing the Legislature’s policy decision, first taken in 1987 and extended in 1995, to adopt a proportionate liability system and to limit a defendant’s joint and several liability. See § 33.013(b)(1), Tex. Civ. Prac. & Rem. Code. In 2003 the Legislature took the additional step of allowing a defendant to designate any responsible third party, including the claimant’s employer in a worker’s compensation and a debtor in bankruptcy. See Acts 2003, 78th Leg., ch. 204, Sec. 4.10(2). These legislative policy decisions, along with others (including the settlement credit and, for example, the paid or incurred rule) could all in some way effect the amount of economic damages recoverable by a claimant when compared to prior law. If the court of appeals’ analysis is permitted to stand, we can expect to see similar Open Courts attacks all up and down the line.

The purpose of the Chapter 33 reforms was simply to bring all potentially responsible parties into the lawsuit so that the finder of fact could assess each party’s percentage of fault and require a liable defendant to pay only for the portion of damages attributed to that defendant. The court of appeals’ commentary on the “one-satisfaction rule” entirely misses the point. The ultimate test has to do with the fairness of the system as a whole, not its effect on individual parties in individual lawsuits. Therein lies the problem with the court of appeals’ whole premise.

A second issue of compelling importance in the case involves the periodic payments provision of Chapter 74, CPRC, a key component of the 2003 medical liability reforms in HB 4. The trial court denied the defendants’ request to order periodic payments. The court of appeals initially remanded on this issue, but on rehearing reversed course, holding that the defendants did not produce sufficient evidence necessary for the trial court to determine the amount and schedule of periodic payments of future damages as required by §74.503(c) and (d), CPRC. This part of the decision came on the heels of SCOTX’s decision in Regent Care of San Antonio, L.P. v. Detrick, 610 S.W.3d 830 (Tex. 2020), which for the first time required defendants to produce evidence supporting a trial court determination to award a portion of future damages in periodic payments. The petition for review argues that the defendants indeed produced sufficient evidence to satisfy the statute. In the alternative, petitioners ask the Court to provide additional guidance as to what constitutes sufficient evidence under Detrick and to remand the case to the trial court so that the appropriate evidence can be produced. The petition raises two additional unbriefed issues with respect to the admission of evidence about Dr. Virlar’s loss of admitting privileges and the exclusion of evidence relevant to the percentages of responsibility of responsible third parties (the court of appeals’ consideration of these issues is detailed in our prior post on the case).

Obviously, this case is of major import to the legislature’s comprehensive scheme for implementing proportional responsibility, not only in medical liability cases, but in tort litigation in general. It also goes to the heart of one of the key reforms in Chapter 74: the periodic payments provision. We applaud the Court for accepting review and giving the court of appeals’ decision the scrutiny it deserves.

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