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When Florida’s 4th District Court of Appeal overturned a record $80 million jury verdict in a denial of benefits case against HMO giant Humana last month, the reaction of attorneys on both sides was muted. The three-judge appellate panel in West Palm Beach based its decision largely on several “glaring errors” made by Palm Beach Circuit Judge James T. Carlisle before and during the trial. It reversed the jury’s verdict and remanded to the trial court the case over benefits to a girl who suffers from cerebral palsy. But this week, in a 12-page request for rehearing by the full 4th DCA, Joel Eaton, who’s representing plaintiffs Mark Chipps and daughter Caitlyn in the appeal, unleashed an angry denunciation of the appellate panel’s ruling. Eaton, who argued the case against Humana’s original appeal, all but calls the 4th DCA panel biased. He complains that the judges “misapprehended the state of the record” and essentially ignored his arguments. Eaton, a name partner at Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin in Miami, suggests that the panel reversed the trial court for rulings “it simply did not make.” Both Eaton and opposing lawyers for Humana declined to comment on the appellate court’s reversal. But an examination of the record and interviews with appellate experts not involved in the case provide insights into how an enormous and nationally significant verdict affecting a major industry could fall apart. A review of the record also raises questions about whether Eaton has a strong enough case to warrant reconsideration of the appellate court’s emphatic ruling. In January of last year, when the jury in West Palm Beach handed down the huge verdict — which included $78.5 million in punitive damages and $1.1 million in compensatory damages — it was the talk of the health maintenance organization industry and the legal community. Plaintiffs’ lawyers hoped it would be a bellwether victory, clearing the way for more lawsuits against health plans accusing them of dealing with their subscribers in bad faith. They saw in the jury’s huge verdict a signal that the public no longer would put up with HMO abuses. EXPLOSIVE ALLEGATIONS The suit, filed in 1996, involved explosive allegations. Plaintiff Mark Chipps, of Loxahatchee, Fla., contended that Humana cut off payment for costly but essential special care for his daughter, Caitlyn, now 9 years old. Initially, the case appeared to be a straightforward denial of coverage for Caitlyn. But during discovery, lawyers found Humana had engaged in a pattern of coverage denials, which they alleged was designed to save the Louisville, Ky.-based health insurer millions of dollars. The lawsuit ultimately alleged breach of contract, bad faith and fraudulent inducement. The information about Humana’s coverage denial policy was discovered despite the HMO’s efforts to conceal it. In fact, the Chipps’ attorneys, Theodore Leopold and Edward Ricci of Ricci Hubbard Leopold Frankel Farmer & McAfee in West Palm Beach and Marjorie Gadarian Graham of Palm Beach Gardens, accused Humana of repeatedly failing to turn over requested documents. The alleged discovery violations caused Carlisle to enter, and the 4th DCA to uphold, a default judgment against Humana. That allowed the case to go forward on damages alone. Such a ruling is highly unusual, particularly on an alleged discovery violation, legal observers say. The 4th DCA’s ruling last month was a dramatic reversal of fortune for the plaintiffs, which may be why Eaton sounds so angry in his motion for a rehearing. With $80 million at stake, many lawyers probably would have taken a more deferential approach in addressing the court. But in his petition, Eaton accused the 4th DCA of giving Humana “a second bite at the apple” on the damage total. He contends that the three-judge panel, in its “anxiety” over the large size of the judgment, “worked backwards to find as many reasons as it could muster from the appellant’s brief to support the reversal.” Angry or not, Eaton faces an uphill battle. Last month’s opinion was unanimous. It’s often easier for an appellate lawyer asking for a rehearing to get one if there was a dissenter on the original panel. Here, he is alone in asking nine appellate court judges to second-guess their brethren. The list of errors found by the 4th DCA is extensive. Among other things, the 4th DCA chastised Carlisle for not allowing the jury to arrive at its own decision regarding the alleged egregiousness of Humana’s conduct. Carlisle had instructed the jury that Humana’s conduct was so “gross and flagrant as to show reckless disregard of human life or the safety of persons exposed to the effects of its conduct.” Another major error, in the appellate court’s view, was that Carlisle allowed the plaintiffs to switch horses in midrace. The original complaint was filed on behalf of Mark Chipps; it was on his claim that the default judgment was entered. But at the start of the trial, the plaintiffs’ lawyers added the allegation of intentional infliction of emotional distress on behalf of young Caitlyn. The appellate court held that the original complaint didn’t name Caitlyn as a plaintiff, and that “a fair and objective reading of the allegations shows that [Mark] Chipps was seeking damages for himself individually” and not for or on behalf of his daughter. But Eaton, in his motion for rehearing, argues that Humana knew all along that the claim was on behalf of Mark and his daughter, and that at no time did the plaintiffs attempt to mislead the court. In another error, according to the 4th DCA, Carlisle should not have allowed the jury to take the parent company’s deep pockets into consideration in deciding punitive damages, when the suit named only Humana’s Florida division. The court held that unless the parent company was a party to the suit — which the 4th DCA found it was not — its financial condition could not be taken into account. Eaton, however, argues in his motion for rehearing that Humana had engaged “in a misguided effort to mislead the jury” about its finances, and that the jury was well within its right to consider an indemnification agreement between Humana’s Florida division and the parent company when ruling on punitive damages. The appellate court also found Carlisle committed a reversible error in preventing Humana from interviewing a juror who, after the trial ended, was found to have lied about the fact that she had been party to no fewer than four lawsuits, including one in which she had been sued by a doctor for failing to pay a bill. But in his motion for a rehearing, Eaton notes that the appellate panel’s opinion on this biased-juror issue “squarely conflicts” with an earlier 4th DCA ruling. He notes that the juror wasn’t obliged to disclose the prior health care litigation during voir dire because it was a small-claims case that was quickly dropped and that the juror didn’t consider relevant. Finally, the appellate court found that Carlisle failed to instruct the jury that it had the discretion to reject punitive damages or to award only a nominal amount. But in his original appellate arguments, Eaton noted that Carlisle instructed the jurors that they could award punitive damages, “if any”; Humana had agreed with that instruction during the trial, in order to inform the jurors that they didn’t have to award punitive damages if they didn’t want to. Appellate experts point out, however, that jury instruction errors are a powerful issue on appeal. “The verdict cannot stand if the jury was improperly instructed,” says Beverly Pohl, an appellate attorney at the Fort Lauderdale firm Bruce Rogow. The appellate panel did not specify the other “glaring errors” it said Carlisle committed. In his motion for rehearing, Eaton criticized the 4th DCA for this omission, calling this “disrespectful to the trial court.” He also argued that his client “deserves an explanation so the error will not be repeated at the retrial.” SAME OUTCOME LIKELY? Even if the full appellate court decides not to rehear the appeal, it wouldn’t be a fatal blow to the Chipps’ case. It simply means that the two sides must go back to Palm Beach Circuit Court to retry the case. In fact, the 4th DCA reversal could help the plaintiffs and judge by serving as a road map for avoiding reversal the second time around, suggests David Durkee, an associate at Angones Hunter McClure Lynch & Williams in Miami who has represented numerous plaintiffs in lawsuits against HMOs. “They are saying if you are going to try this again, we are going to give you some direction,” says Durkee, who is not involved in the Chipps case. Of course, there’s a good chance that the case may never go back to trial. Faced with the prospect of taking a bad set of facts before a jury probably not enamored with the HMO industry and risking another multimillion-dollar loss, Humana may think it best to settle, legal experts say. “I doubt that the evidence will be so very different the next time around, and it’s certainly possible that a properly instructed jury would rule in [the plaintiff's] favor again,” Pohl says.

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