In an apparent case of first impression, a Philadelphia judge, in upholding a $78.4 million medical malpractice verdict, has ruled that attorney fees must be based on the present value of the jury’s future damages award, not the cost of an annuity, to satisfy the judgment for future medical costs.

As a result of the judge’s ruling, the plaintiffs firm is entitled to $9.9 million in counsel fees.

Last year, a Philadelphia jury rendered a $78.4 million medical malpractice verdict in the case of a child who has quadriplegic cerebral palsy because of a loss of oxygen during a delay in her delivery. The jury, which estimated Parrys Nicholson-Upsey would live until 2058, awarded $65 million in future damages.

The jury found Pottstown Memorial Medical Center 100 percent negligent.

Philadelphia Court of Common Pleas Judge Mark I. Bernstein, writing earlier this month in Nicholson-Upsey v. Touey, said the Medical Care Availability and Reduction of Error Act requires that future damages be reduced to present value to determine attorney fees because "the plain language of MCARE dictates that payment of attorney’s fees are to be made in a lump sum and not sequentially as future medical costs accrue."

The defendant had argued that a $12.5 million annuity could be purchased to cover the future damages award, and that attorney fees should be based on the price of the annuity, Bernstein said.

But after calculating the present value of the future damages award with a 2.96-percent discount rate, the present value is $29.8 million and the plaintiffs firm, Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig, is entitled to $9.9 million, or one-third of the award, under its contingent fee agreement with its clients, Bernstein said.

While MCARE does not define present value, the General Assembly "knows and understands prior Supreme Court decisions" and present value is not a novel concept, but a sum, which if paid on the date of the verdict, would be a "’just cash equivalent of the sum total of such lost future earnings,’" Bernstein wrote, citing the 1993 Pennsylvania Supreme Court decision in Littman v. Bell Telephone Co. of Pennsylvania.

"Defendant’s argument that attorney’s fees must be calculated on the cost of an annuity because the defendant must be allowed to fund the settlement by annuity completely and directly contradicts the MCARE Act. … Defendant Pottstown and its parent company, which operates 190 hospitals around the country, could reasonably decide to take upon itself the risk of having to pay the full judgment periodically, and save for itself the potential benefit obtained from Parrys Nicholson-Upsey’s early demise" by creating a qualified funding plan with the approval of the court, Bernstein said.

Lead plaintiffs attorney Daniel S. Weinstock of Feldman Shepherd said that what Bernstein did was "very supportable."

While MCARE was designed to save the insurance industry money and prevent windfalls where plaintiffs have a lot of future medical damages awarded but do not live long enough to need the care, Weinstock said MCARE was not intended to reduce counsel fees.

The issue of first impression likely developed because most cases tend to settle, Weinstock said.

Defense counsel, including trial counsel Howard S. Stevens of Gross McGinley in Allentown, and appellate counsel from Hangley Aronchick Segal Pudlin & Schiller, did not respond to requests for comment.

Bernstein distinguished the Nicholson-Upsey case from the Superior Court’s 2012 decision in Saylor v. Skutches because the Saylor plaintiff had died and no future medical expenses had to be paid.

Bernstein also said there was an issue of first impression regarding delay damages owed on future medical bills under MCARE.

It was appropriate to award $2.5 million in delay damages under Pennsylvania Rule of Civil Procedure 238, Bernstein said.

While MCARE does not address delay damages, Bernstein said it could be assumed that the General Assembly was aware of civil procedural rules allowing for delay damages because "in ascertaining legislative intent, courts should assume the legislature" considers former law.

Further, future damages must be reduced to present value in order to award delay damages under Rule 238, Bernstein said.

Defendant obstetrician Dr. Charles Touey declared Nicholson-Upsey dead, the opinion said. But Touey testified at the beginning of the trial that he was certain the baby had died and that was why he did not perceive the heart beating when he did an ultrasound, but that the baby’s heart started again and that was why the ultrasound technician found a heartbeat, The Legal previously reported.

The key theory against the defendants was regarding the adequacy of the ultrasound machine.

Touey ordered a second ultrasound to be performed even though he had told Victoria Upsey, Nicholson-Upsey’s mother, her baby had died. The second ultrasound was not conducted for 75 minutes.

While Touey was adamant that Nicholson-Upsey was a "’miracle baby,’" Touey learned during the course of trial that the equipment provided by the hospital "had been inadequate," Bernstein said.

Even the defense experts testified that the ultrasound equipment provided to Touey was inadequate to pick up Nicholson-Upsey’s weak heart movements, Bernstein said.

Then Touey testified at the end of the trial, recanting his prior testimony entirely, the opinion said.

"In a dramatic courtroom moment, Dr. Touey recanted his prior testimony," Bernstein said. "He no longer claimed that baby Parrys Nicholson-Upsey had miraculously returned from the dead. He abandoned the resurrection defense. … He testified that the machine provided by defendant Pottstown had not been adequate to see Parrys’ heartbeat, which had been there all along."

The jury found Pottstown 100 percent negligent, while absolving Touey and Dr. Robert L. Stavis, who treated Nicholson-Upsey during her transfer from Pottstown to Thomas Jefferson University Hospital.

In another issue, Bernstein said it was appropriate to allow the hospital’s risk manager to testify about the hospital’s failure to produce fetal monitoring strips. Because the strips were late in being produced, each expert has to submit new reports, the judge said.

The plaintiffs expert testified that the fetal monitoring strips showed the baby was alive in the period of time before Touey declared the death of the baby, and the failure of Touey and a treating nurse to mention the strips demonstrated that Touey had not reviewed the strips before declaring Nicholson-Upsey dead, Bernstein wrote.

"Pottstown moved to quash a subpoena for its risk manager to explain this late production on the basis that she had not been listed as a witness in plaintiffs’ pretrial memorandum," Bernstein said. "This hubris cannot be countenanced. At trial, the late-produced fetal monitoring strips became a central focus of the case for both sides."

Scott Vezina was plaintiffs co-counsel.

Amaris Elliott-Engel can be contacted at 215-557-2354 or aelliott-engel@alm.com. Follow her on Twitter @AmarisTLI.

(Copies of the 45-page opinion in Nicholson-Upsey v. Touey, PICS No. 13-1070, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •