Stethoscope-Medmal

It has long been axiomatic that a plaintiff may not recover twice in tort for the same injury. This directive makes intuitive sense. Although a number of parties may have contributed to the plaintiff’s injury, the injury itself is a discrete measurable event. Insofar as the the aim of awarding compensatory damages is to make the injured party whole, a duplicative or excessive award is plainly improper. Indeed, such an award goes beyond the scope of a plaintiff’s injury and creates a double recovery. Tort law is designed to compensate injured parties for their injuries, not provide a windfall.

Med Mal Cases

In medical malpractice cases, this axiom is especially important to consider because of the various consequences to the potentially liable parties, including national reporting requirements, local reporting requirements, potential regulatory or licensing issues, certifications and privileges, and increasing insurance premiums. In such cases, plaintiffs often receive care from a number of practitioners acting in multiple specialties over an extended period of time. Moreover, the injuries complained of may manifest themselves years after the alleged malpractice was committed. As injuries emerge, new parties may be implicated. Both the duration of the course of treatment and the potential delayed implication of new parties complicate apportionment. Courts are often forced, therefore, to find creative solutions to ensure that each party pays their fair share to make the plaintiff whole.

Further complicating this dynamic, the damages ultimately awarded must contemplate and valuate any future medical expenses the injured party will incur and any potential loss of income that will arise from their continuing injuries. For this reason, both parties engage in complex, expensive and time-consuming discovery, and seek out the assistance of experts to come to a reasonable case valuation. Given the complexity and nuance of this process, it would be especially problematic to allow a double recovery to improperly elevate an injured party’s recovery. Such an outcome would circumvent and eviscerate the entire, normally entertained, valuation process.

However, a recent New Jersey Appellate Court decision may have created a pathway for plaintiffs to take advantage of ambiguities in New Jersey’s statutory scheme and case law to obtain a double recovery in certain situations. Specifically, in Kranz v. Schuss, ___ N.J. Super. ___ (App. Div. 2016), the Appellate Division held, as a matter of first impression, that New Jersey defendant doctors were not entitled to a credit or offset representing the value of a prior New York settlement concerning the identical claims against prior treating physicians. The Appellate Division instead held that the Defendants were entitled only to an apportionment of liability at trial. However, in that particular case, it would clearly result in a double recovery for the plaintiff.

In so holding, the Appellate Division failed to consider two crucial implications of the decision. Initially, had the plaintiff filed the matter in New Jersey first and thereafter sought a pre-trial credit in New York, it would have been granted as a matter of right. Moreover, given the facts in Kranz, the court’s holding places the New Jersey defendants in the untenable position of having to accept liability in order to obtain an apportionment. It is not difficult to envision a scenario where a defendant would opt to permit a double recovery in order to preserve his theory of the case.

Therefore, while the facts in Kranz are somewhat unique, the windfall potential exists for plaintiffs who may use it to capitalize on similar facts. It could also lead to forum shopping in similar circumstances.

The Kranz Facts

In Kranz, the infant plaintiff, Rachel Kranz, sought damages for failure to timely diagnose hip dysplasia. Rachel received care from doctors in both New York and New Jersey during the time period relevant to her complaint. However, because each state lacked personal jurisdiction over the out-of-state defendants, all potential defendants could not be included in the same action. Therefore, Rachel first filed suit in New York against the doctors who had treated her from the time of her birth in 2003 until March 2004. Her complaint sought damages for injuries arising from the failure of the New York defendants to timely diagnose her hip dysplasia. Rachel and the New York defendants settled the case before trial for $2 million by way of a Compromise Order, which contained a hold harmless provision.

After the New York matter was resolved, Rachel brought suit in New Jersey against the defendant doctors by whom she had subsequently been treated. The New Jersey case remains ongoing. The New Jersey defendants became involved in Rachel’s care in January 2005. Approximately one year later, New Jersey defendant Dr. Schuss diagnosed Rachel’s hip dysplasia. Rachel seeks damages from the New Jersey defendants for the identical injuries complained of in the prior New York matter. Specifically, injuries suffered as a result of the ongoing failure to timely diagnose her hip dysplasia. In fact, Rachel attached an expert report relied upon to settle the New York case to her Answers to Interrogatories in the New Jersey Matter. Though she proffered an additional expert report in the New Jersey matter, it was offered by the same expert and alleged the same injuries.

In the New Jersey matter, Rachel’s theory of liability deviates little from her theory in New York: specifically, that the defendant doctors failed to timely diagnose her hip dysplasia, causing her to suffer injuries. The New Jersey defendants countered that Rachel’s condition was not diagnosable prior to Dr. Schuss’s January 2006 diagnosis. The defense experts in the New Jersey action opined that hip dysplasia is typically not diagnosable in infants younger than two years of age.

The New Jersey defendants sought a credit from the trial court in the amount of $2 million, representing the value of the funds plaintiff already received in the New York matter. The logic underlying this request is simple and intuitive: Rachel received a settlement in the New York Matter to compensate her for the entirety of her alleged injuries and, therefore, if a jury values her injuries at a number greater or less than that amount, it should be taken into account with respect to any damage award against the New Jersey Defendants. It is undisputed that the settlement in New York was reached without consideration for any liability that may be subsequently imposed on the New Jersey defendants. If Rachel were permitted to collect a second full award for these injuries, she would receive a considerable and inequitable windfall. The credit, therefore, would ensure that Rachel could not collect twice for her injuries.

The trial court granted the credit requested by the New Jersey defendants because the New York settlement already compensated Rachel for the exact claims and injuries complained of in the New Jersey matter. Thereafter, Rachel appealed the trial court’ s grant of the pre-trial credit.

A Matter of First Impression

As observed by the Appellate Division, and agreed by both parties, the unique posture of this case has not yet been addressed by the courts in New Jersey. Initially, although both the New York and New Jersey matters involve the same injuries, the respective defendants cannot be tried together because New York does not have personal jurisdiction over the New Jersey defendants and New York does not have jurisdiction over the New Jersey defendants. This dynamic creates unique complications in New Jersey that are not present in New York.

Indeed, under under New York’s Release or Covenant Not to Sue statute, the outcome is clear cut. The statute prescribes a uniform approach to the facts presented in this case. Specifically, the statute provides:

When a release or a covenant not to sue or not to enforce a judgment is given to one of two or more persons liable or claimed to be liable in tort for the same injury, or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms expressly so provide, but it reduces the claim of the releasor against the other tortfeasors to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, or in the amount of the released tortfeasor’s equitable share of the damages under article fourteen of the civil practice law and rules, whichever is the greatest.

Notably, the New York framework allows for a credit as between two defendants as long as the injuries alleged are the same. This credit is awarded in New York notwithstanding the posture of the respective defendants. By contrast, New Jersey’s statutory framework for preventing double recovery varies heavily, depending on the posture of the case.

New Jersey’s Collateral Source statute, N.J.S.A. 2A:15-97, applies to civil actions “brought for personal injury or death[.]” As explained in Perreira v. Rediger, 169 N.J. 399, 409 (2001), the primary purpose of the Collateral Source statute is to prevent an injured party from being compensated twice for the same injury. Therefore, the statute requires that a plaintiff disclose to the court any “benefits [received] for the injuries allegedly incurred from any other source other than a joint tortfeasor[,]” and, where the amount of those “ benefits” “duplicates any benefit contained in the award[,]” the court should deduct it from plaintiff’s recovery. N.J.S.A. 2A:15-97.

However, unlike New York’s Release or Covenant Not to Sue statute, the New Jersey statute is narrow in its definition of benefits. Notably, these “ benefits” include payments that were covered by health insurance, less insurance premiums paid by the plaintiff, or a member of his or her family. Also included are social security disability payments, but “only those future payments of social security benefits that are neither contingent nor speculative nor subject to change or modification may be included.” Woodger v. Christ Hosp., 364 N.J. Super. 144, 153-54 (App. Div. 2003) (citing Parker v. Esposito, 291 N.J. Super. 560, 565-566 (App. Div.), certif. denied, 146 N.J. 566 (1996)). Expressly excluded from the definition of “benefits” are those paid out by joint tortfeasors. N.J.S.A. 2A:15-97. Nevertheless, New Jersey case law provides that a trial defendant is entitled to a set-off for the equitable share of liability apportioned to a settled co-defendant by the jury. Under the Comparative Negligence Act, in order for the jury to allocate a percentage of fault, the defendant must have been a “party” to the action.

The facts in the Kranz case are unique, therefore, because the New York Defendants are not, and could not be, parties to the New Jersey action. Initially, it is uncontested that New Jersey lacks personal jurisdiction. Moreover, the New York Defendants already settled with Rachel for $2 million prior to the initiation of the New Jersey action. As the New York Defendants are not parties to the New Jersey action, they are, by definition, neither co-parties nor joint tortfeasors. There is, therefore, no clear directive as to how to treat the $2 million New York settlement.

The Appellate Court’s Holding

The Appellate Court held that while the New Jersey defendants are entitled to an apportionment at trial, there was no basis for the trial court’s grant of a credit. The Appellate Court reasoned that the New Jersey defendants are best treated as joint tortfeasors because it is alleged that the New York and New Jersey defendants’ collective negligence delayed the diagnosis of Rachel’s hip dysplasia. If all defendants were parties to one suit, liability would be apportioned among them. In the Appellate Division’s view, the fact that the New York defendants could not be included in the same action should not change this dynamic.

The court relied heavily on Carter v. University of Medicine and Dentistry of New Jersey, 854 F. Supp. 310 (D.N.J. 1994), in reaching this conclusion. In Carter, the plaintiffs filed two concurrent actions alleging a failure to diagnose and treat their son’s congenital brain condition. The plaintiffs’ son had been treated by doctors in New Jersey until he was approximately six months old. Thereafter, the plaintiffs moved to Maryland and their son was treated by doctors there. One action, filed in the District Court in New Jersey, alleged that New Jersey doctors involved in the infant child’s care failed to diagnose a congenital brain disease. The second action was filed in Washington, DC, alleging the same failure to diagnose, but naming the Washington, DC, defendants involved in the infant’s care.

The plaintiff settled with the Washington, DC, defendants. Thereafter, the New Jersey defendants moved in limine to have a jury apportion fault as between the settling and non-settling defendants. The plaintiffs argued that apportionment was improper because the settling defendants were not joint tortfeasors because they were not parties to the New Jersey action. In rejecting this argument, the Carter court reasoned that jurisdictional happenstance should not be a bar on apportionment where the claims at issue are identical and interwoven.

The Kranz court found these facts to be nearly identical to those before it, and persuasive in resolving the apportionment issue. This decision, however, failed to account for the unique circumstances in the Kranz case: namely, that the asserted defense by the New Jersey defendants is that the condition was not diagnosable, meaning that they could not simultaneously point the finger at the prior treating New York physicians, as that would undercut the defense. Without being able to criticize those doctors, even if the court would allow their liability to be put before the jury on the verdict sheet (an unlikely occurrence as they were not joint tortfeasors as understood in New Jersey law), there could be no apportionment, ensuring a double recovery.

Shopping for Double Recovery

The Appellate Court’s over-reliance on Carter has a number of troubling implications. To begin with, the Appellate Division did not adequately consider the consequences of apportionment in the Kranz matter. Indeed, unlike in Carter, the New Jersey defendants in Kranz have utilized a defense that is wholly inconsistent with apportionment of liability with the New York defendants. Specifically, the New Jersey defendants claim that the plaintiff’s hip dysplasia was not diagnosable until she was two years of age. Any liability attributed to the New York defendants would necessarily also mandate a finding of negligence against the New Jersey defendants. Therefore, the New Jersey defendants have to either accept liability in order to obtain an apportionment, or risk Rachel receiving a duplicative award without the benefit of a credit.

Moreover, and perhaps of more concern, plaintiffs’ counsel was able to create this dynamic by taking advantage of the distinctions between New York and New Jersey law. Indeed, had Rachel first filed suit in New Jersey and settled the matter, the New York defendants would have been entitled to a credit for the value of the New Jersey settlement as a matter of right. However, because the plaintiffs filed in New York first, they were able to avoid New York’s Release or Covenant Not to Sue statute.

Permitting the defendants a credit in the instant case would dissuade plaintiffs from “forum shopping” by first filing a lawsuit in New York and then coming to New Jersey, when possible, and filing a second lawsuit in New Jersey with the hopes of receiving a double recovery for the same injuries. New Jersey public policy should prohibit plaintiffs from doing in this case in New Jersey what they could not do in New York. It undermines the exclusively compensatory nature of tort law to allow this form of double recovery. Permitting this type of decision encourages forum shopping and leads to unfair results.

Conclusion

The Appellate Court’s decision in Kranz is a significant victory for the plaintiffs’ bar. Indeed, it is not difficult to imagine scenarios wherein a plaintiff who has treated in both New York and New Jersey (not an unusual situation, as many New Jersey patients cross the rivers for care in New York or Philadelphia) may use this decision to seek a double recovery. In failing to account for the unique facts present in Kranz, the Appellate Division has invited plaintiffs to do so. Counsel for the Defendants in Kranz have recently filed a Petition for Certification to the New Jersey Supreme Court to appeal this decision.


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Gary L. Riveles is a member of this newsletter’s Board of Editors and an attorney with MacNeill, O’Neill & Riveles, LLC. Ethan Lillianthal is an associate with the firm.