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Jun 24, 2016

Texas Supreme Court and Fifth Circuit Issue Flurry of Opinions Addressing Health Care Liability Issues

By: Kyle Burke, Diana Faust, and Michelle Robberson

The Texas Supreme Court has been busy in 2016 issuing opinions on health care liability issues:  analyzing the timing of service of expert reports, whether post-mortem claims are health care liability claims, whether a partnership can be liable for a physician’s acts, and the scope of and exceptions to the medical peer review committee privilege.  The Fifth Circuit Court of Appeals also recently addressed the applicability of Chapter 74’s expert report statute in federal lawsuits.  This article presents a summary of a few of these recent cases involving health care liability claims in Texas.

Texas Supreme Court Blesses Pre-suit Service of Chapter 74 Expert Reports:  Hebner v. Reddy, No. 14-0593, ___ S.W.3d ___, 2016 WL 3172644 (Tex., May 27, 2016).

Section 74.351(a) of the Texas Civil Practice and Remedies Code requires health care liability claimants to timely serve an expert report in support of their claim on the “party” or the “party’s attorney.”  Texas intermediate appellate courts considering the issue had uniformly held that pre-suit service of such an expert report did not comport with the statute.  But on May 27, 2016 the Texas Supreme Court held otherwise in Hebner v. Reddy, No. 14-0593, 2016 WL 3172644 (Tex. May 27, 2016).

In Hebner, the parents of a child who died shortly after birth sent the delivering physician, Dr. Reddy, a pre-suit notice letter and the expert report and curriculum vitae of their expert.  The parents later sued Dr. Reddy and her professional association, and served another report in an attempt to comply with section 74.351 but provided the wrong expert report, one prepared for another suit. After 120 days passed, Dr. Reddy filed a motion to dismiss Hebner's claims for failure to timely serve an expert report. The trial court denied the motion, but the court of appeals reversed, holding that pre-suit service of the first report did not “satisf[y] the relevant statutory requirements” and the second report, which did not implicate Dr. Reddy, did “not constitute [an] expert report[ ] as required” by the Act.

The supreme court reversed the court of appeals, holding that the statute does not forbid pre-suit service of an expert report. While the court acknowledged that that statute requires service on a “party” or “party’s attorney” and its prior holding in Zanchi v. Lane, 408 S.W.3d 373 (Tex. 2013) that “party” means one named in a lawsuit, the court rejected Dr. Reddy’s argument that she could not be served with an expert report because she was not yet a party to a suit when the parents first served it: “We did not mandate that physicians or health-care providers on the receiving end of a healthcare-liability claim must be a ‘party’ to a lawsuit before they could be properly served with an expert report.”  The court stated that such an interpretation comported with the statute’s purpose in identifying and disposing of frivolous claims while preserving those of potential merit.

The court also held that the 21–day period for objecting to an expert report will not begin to run for a defendant upon whom an expert report was served before suit was filed until the defendant has actually been sued and served with process.  By remaining silent until the 120–day deadline expired and then arguing that the parents had filed “no report,” Dr. Reddy waived any objection to the first report.

 

Fifth Circuit Holds that Chapter 74 Threshold Expert Report Requirement Does Not Apply in Federal Court:  Passmore v. Baylor Health Care System, et al., No. 15-10358, ___ F.3d ___, 2016 WL 2956963 (5th Cir., May 19, 2016).

Section 74.351 of the Texas Civil Practice and Remedies Code requires plaintiffs in a health care liability claim to serve an expert report within 120 days after the filing of the defendant’s original answer, or face a mandatory sanction of dismissal with prejudice and defendant’s recovery of reasonable attorney’s fees and costs.  When Passmore failed to serve an expert report in his health care liability claim filed in district court as related to a physician’s bankruptcy, the defendant health care providers filed motions to dismiss asking the district court to apply section 74.351 and to dismiss Passmore’s case with prejudice.  Passmore argued that section 74.351 did not apply to his claim filed in federal court because the section is procedural and the Federal Rules of Civil Procedure 26 and 37 governed the requirements for expert reports and associated sanctions related to them.  The district court applied section 74.351 as the substantive law of Texas and dismissed Passmore’s suit with prejudice.  Passmore appealed.

The Fifth Circuit reversed the dismissal, holding that section 74.351 is a Texas procedural statute that directly collides with Federal Rules 26 and 37 and, therefore, does not apply in health care liability claims filed in federal court.  The Court explained that Rule 26 governs pretrial disclosures, including the disclosure of expert reports, and does not require plaintiffs to serve reports within 120 days of the defendants’ answers, as does section 74.351(a).  The Court also explained that Rule 37 provides the discretionary scheme of consequences of a party’s failure to comply with Rule 26, and includes dismissal of a non-complying party’s action.  Because section 74.351(b) mandates dismissal for noncompliance, the Court held that section 74.351(b) conflicts with Rule 37. 

The Fifth Circuit also rejected the argument that section 74.351 differs from Rules 26 and 37 in purpose and scope.  While section 74.351’s purpose ensures that only meritorious lawsuits proceed, the Federal Rules serve to regulate discovery.  The Court explained that despite this, the relevant rules need not be identical in purpose and scope—the inquiry is whether the scope of the Federal Rule is sufficiently broad to control the issue before the court.  The Court concluded that section 74.351 could not be applied in federal court because it answers the same question as Rules 26 and 37: whether a plaintiff’s failure to serve an expert report within 120 days of the defendant’s answer mandates the dismissal of the action. 

In reaching its holding, the Court examined various subsections of section 74.351, and recognized that: (1) section 74.351 regulates discovery because the report must inform the defendant of the specific conduct called into question—a similar function of Rule 26; (2) sections 74.351(s) and 74.351(u) provide for a mandatory stay on discovery until the plaintiff has served the requisite report, which unambiguously conflicts with the federal rules which tie the opening of discovery to the timing of the Rule 26(f) conference; and (3) section 74.351(t) allows the report to be used freely by the parties once the plaintiff elects to use the report in any substantive way.  As a result, if applied in federal court, section 74.351 would significantly interfere with federal control of discovery, which is governed by the Federal Rules of Civil Procedure. 

Finally, the Fifth Circuit dismissed other Circuits’ holdings that similar certificate of merit and affidavit of merit statutes were substantive law of the forum state that apply in federal court by distinguishing some of those opinions as involving pre-suit requirements for an expert opinion.  It concluded the Federal Rules are constitutionally valid, and, because section 74.351 answers the same question as Rules 26 and 37, a federal court entertaining Texas state law health care liability claims may not apply section 74.351.

 

Post-Mortem Claim Related to Hospital’s Autopsy Services is a Health Care Liability Claim:  Christus Health Gulf Coast d/b/a Christus St. Catherine Hospital v. Carswell, No. 14-0362, ___ S.W.3d ___, 2016 WL 2979718 (Tex., May 20, 2016).

Carswell died at the hospital after being found unresponsive in his bed.  Given the circumstances of his death, the attending physician ordered an autopsy.  Various conversations occurred between the family and hospital staff regarding whether the autopsy would be performed by the county medical examiner’s office or whether it would be a private autopsy.  Ultimately, Carswell’s wife signed a consent form for a private autopsy, which was performed at another Christus hospital (St. Joseph). 

Carswell’s family later sued the hospital and physicians for medical malpractice that caused Carswell’s death.  Roughly three years later, the family amended its petition and asserted, for the first time, claims related to post-mortem conduct—namely, that the hospital fraudulently obtained the wife’s consent for a private autopsy and violated various criminal statutes relating to giving notice of the death to the county medical examiner.  The hospital moved to dismiss these new claims as improperly recast health care liability claims or, alternatively, as barred by limitations.  The trial court denied the motion.

The case proceeded to trial.  The jury found the hospital did not cause Carswell’s death, but it found against the hospital on the post-mortem claims and awarded actual damages and punitive damages.  The hospital re-urged the Chapter 74 and limitations arguments, which the trial court again denied.

On review, the Texas Supreme Court held that the post-mortem claims alleged departures from accepted standards of “professional or administrative services” with which the hospital had the duty to comply or provide to maintain its license.  These included notifying the medical examiner of the death, not moving the body without the medical examiner’s permission, and fraudulently obtaining the consent to the private autopsy. 

The court next held that the post-mortem claims were “directly related to health care.”  The statute did not require the person to be a patient during the relevant time period (or even to be alive, an issue the court declined to address).  Further, the common meaning of the phrase “directly related to” was “an uninterrupted, close relationship or link between the things being considered.”  The family’s claim was that, immediately following the death, the hospital took actions to cover up the deficient health care provided to Carswell.  Given these circumstances, the family’s claim was directly related to acts or treatments they alleged were improperly performed or furnished, or that should have been performed or furnished, to Carswell during his treatment and confinement.  Therefore, the fraud claim was a health care liability claim.

The court next addressed whether the post-mortem claim was barred by the Chapter 74 statute of limitations.  The court rejected the family’s argument that, if the post-mortem claim was a health care liability claim, it related back to the original filing and was not barred by limitations.  The court held that the post-mortem claim was based on separate and distinct transactions or occurrences from the pre-mortem medical malpractice claim and, thus, the post-mortem claim did not relate back.  Thus, because it was filed more than two years and 75 days after it accrued, it was barred by limitations.

 

Partnership in Business of Operating Hospitals Cannot be Vicariously Liable for Physician Partner’s Medical Malpractice:  Doctors Hosp. v. Andrade, No. 15-0563, ___ S.W.3d ___, 2016 WL 3157535 (Tex., May 27, 2016).

Under Texas partnership law, a partnership can be held liable for injury caused by a partner if the partner was acting in the ordinary course of the partnership’s business or with the partnership’s authority.  The issues in this case are:  (a) whether a limited partnership that owns a hospital may be vicariously liable for the alleged professional negligence of a doctor who is a limited partner in the partnership; and (b) if so, whether the general partner of that limited partnership may be liable as well.

The plaintiffs brought a health care liability claim against Dr. Lozano based on alleged negligence during labor and delivery.  They also sued Doctors Hospital at Renaissance, a limited partnership that owned and operated the Hospital, and RGV Med, LLC, which was Renaissance’s general partner.  Dr. Lozano was an independent contractor with admitting privileges at the Hospital, and he also was a limited partner in Renaissance.

The Texas Supreme Court applied the general partnership and limited partnership statutes to the summary judgment evidence, including the partnership agreement.  It concluded that the record conclusively established that the ordinary course of Renaissance’s business did not include the provision of medical care but, rather, was to provide and operate medical facilities.  The court also recognized that the partnership agreement expressly provided that the limited partners could not act with the authority of the partnership unless specifically authorized.  The evidence showed that, when the doctors practiced medicine at the Hospital, they were acting under their admitting privileges, not with the authority of the partnership.

Therefore, the court held, the ordinary course of the partnership’s business did not include a doctor’s medical treatment of a patient, and the doctor was not acting with the authority of the partnership in treating the patient.  Neither the partnership nor its general partner can be liable for the doctor’s medical negligence.  The court reversed the summary judgment and rendered judgment for Renaissance and RGV.

 

Statutory Exception to Peer Review Privilege Requires In Camera Inspection:  In re Christus Santa Rosa Health Sys., No. 14-1077, ___ S.W.3d ___, 2016 WL 3157558 (Tex. May 27, 2016).

Christus Santa Rosa Health System brought this original proceeding challenging the trial court’s order compelling production of its medical peer review committee’s records pertaining to a surgery performed by Dr. Gerald Marcus Franklin.  Christus contended that the documents were protected from production by the medical peer review committee privilege, provided in section 160.007(a) of the Texas Occupations Code, and that the trial court abused its discretion in ordering Christus to produce the documents to Dr. Franklin.  Dr. Franklin contended that the documents were subject to disclosure under the exception to the medical peer review committee privilege provided in section 160.007(d).  The Texas Supreme Court recognized the section 160.007(d) statutory exception to the medical peer review privilege, but held that the trial court abused its discretion in ordering the documents produced without a proper in camera inspection to determine whether the statutory exception applied.

The lawsuit arises from a March 2012 surgery performed by Dr. Franklin.  Baird had undergone a previous surgery by Dr. Franklin wherein the right lobe of her thyroid was removed and found to be cancerous.  Baird alleged Dr. Franklin was negligent in the March 2012 surgery because he removed thymus gland tissue instead of Plaintiff’s remaining left lobe of her thyroid gland.  Baird contended that, during the March 2012 surgery, Dr. Franklin encountered significant inflammation and fibrosis making dissection of her remaining left lobe extremely difficult and tissue planes difficult to define.  Dr. Franklin dissected out what appeared to be a small and scarred left lobe thyroid gland, and as was customary, he sought to get a definitive diagnosis of the tissue by sending it to the pathology department for cryostat diagnosis.  Dr. Baird intended that once diagnosed, he would remove the rest of the lobe if necessary.  However, the cryostat machine was unavailable, so Dr. Franklin could not complete the procedure.  After the March 2012 surgery, Christus convened a medical peer review committee to review Dr. Franklin’s performance in the surgery, and ultimately did not recommend discipline or take any other action.

After Baird sued Dr. Franklin, he filed a motion to designate Christus as a responsible third party, contending that the hospital was responsible for the surgery’s failure because it failed to inform him the cryostat machine was unavailable prior to Baird’s surgery.  He contended that because the cryostat was unavailable, he could not complete the surgery and had to end the procedure without removing the left lobe.  Baird then named Christus as a defendant. 

Dr. Franklin served requests for production on Christus, seeking documents from Christus’ medical peer review file.  Christus objected, filed a motion for protective order and privilege log listing the documents being withheld based on the medical peer review privilege found in section 160.007(a).  Dr. Franklin sought to compel production, contending a statutory exception to the privilege—found at section 160.007(d)—applied.  

Section 160.007(d) provides

If a medical peer review committee takes action that could result in censure, suspension, restriction, limitation, revocation, or denial of membership or privileges in a health care entity, the affected physician shall be provided a written copy of the recommendation of the medical peer review committee and a copy of the final decision, including a statement of the basis for the decision.

Dr. Franklin argued that the committee did take action in convening and reviewing the surgery, despite that it recommended no discipline or took no other action.  Christus tendered the documents to the trial court for in camera inspection.  The trial court conducted a hearing and ordered the documents produced.  Christus sought, but was denied, relief in the court of appeals and filed its petition for mandamus in the Texas Supreme Court.

The supreme court concluded that, because Christus presented a prima facie case for application of the privilege (through affidavit of its director of quality and patient safety, the Medical Staff Bylaws, and a privilege log) and tendered the allegedly privileged documents for an in camera inspection, the trial court was obligated to review them to determine whether they fell within the exception to the privilege.  The Court concluded that an in camera inspection was important because of the meaning of section 160.007(d).  The Court examined the provision, emphasizing that it provides for disclosure only of the “recommendation” and “final decision” of the medical peer review committee, and this connotes a completion of medical peer review and more than simply convening a meeting.  The Court concluded the provision applies where “some consequence—the disciplinary measures listed in the statute—must be possible from the medical peer review committee’s voluntary act of will.”  The Court explained that disclosure of the recommendation and decision to the affected physician under the exception does not constitute a waiver of the confidentiality requirements established under the statute.

The supreme court held that, on the mandamus record before it, it could not determine whether the medical peer review committee took any action that could have resulted in discipline, which would authorize disclosure of the final medical peer review report and recommendation to Dr. Franklin under section 160.007(d).  Because the record showed the trial court did not examine the documents to determine whether the Committee took action as required under the statute, the Court conditionally granted the mandamus, vacated the order compelling production of the committee documents, and ordered the trial court to conduct a further examination of the documents and determine whether the exception to the privilege applies in this case.