United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit June 7, 2005
Charles R. Fulbruge III
Clerk
No. 04-30591
LOUISIANA PATIENTS’ COMPENSATION FUND OVERSIGHT BOARD,
Plaintiff-Appellee,
VERSUS
ST PAUL FIRE & MARINE INSURANCE CO.,
Defendant-Appellant.
Appeal from the United States District Court
For the Western District of Louisiana
Before DAVIS, SMITH, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
A panel of this Court granted leave to appeal from an
interlocutory order of the district court denying summary judgment
to Defendant-Appellant St. Paul Fire & Marine Insurance Company
(“St. Paul”) on the claims filed by the Louisiana Patients’
Compensation Fund Oversight Board (the “Board”). The complaint
alleged St. Paul violated the insurer’s duty of good faith and
reasonable care under the Louisiana Medical Malpractice Act, LA.
REV. STAT. ANN. § 40:1299.44C(7) (West 2005). Concluding that the
statute provides no such cause of action, we reverse the decision
of the district court, render judgment for St. Paul, and remand for
proceedings consistent with this opinion.
I.
The Louisiana Medical Malpractice Act, LA. REV. STAT. ANN. §
40:1299.41, et seq. (the “LMMA”), created the Patients’
Compensation Fund (the “Fund”) as a budgetary instrument of the
state to hold monies in trust for the “use, benefit, and
protection” of medical malpractice claimants and private health
care provider members. LA. REV. STAT. ANN. § 40:1299.44A(1). The
Fund’s purpose is specific and limited: the satisfaction of “excess
judgments against health care providers qualified under the
[LMMA].” United Med. Corp. of Louisiana v. Johns, 798 So. 2d 1161,
1165 (La. Ct. App. 2001). The LMMA also created the Board,
Plaintiff-Appellee in this cause, established in the office of the
Governor. LA. REV. STAT. ANN. § 40:1299.44D(1)(a). The Board is
responsible for the Fund and has “full authority under law, for the
management, administration, operation and defense” of the Fund.
Id. § 40:1299.44D(2)(a).
The Board filed suit against St. Paul in district court on the
basis of diversity jurisdiction on August 1, 2000, alleging a
continuing scheme of fraud in the adjustment and settlement of
medical malpractice cases as well as a breach of duties under the
LMMA. See id. § 40:1299.44C(7). The Board complained St. Paul
convinced medical malpractice plaintiffs, who were contemplating
settlement in the underlying malpractice actions, to accept a
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reduced settlement from St. Paul, in exchange for establishing
liability against the Fund, thereby depriving the Fund of credits
and defenses grounded on the issue of liability. The Board claimed
this fraud involved secret agreements and the concealment of
information owed to the Fund under the LMMA. The Board sought
damages based upon known underlying malpractice cases, as well as
underlying cases unidentified prior to discovery. The Board prayed
for declaratory relief, that is, in all cases where the Fund
suffered a loss because of St. Paul’s fraud or ill practices, St.
Paul must indemnify the malpractice claimant for all sums recovered
and that St. Paul is not entitled to the benefit of the medical
malpractice cap on general damages established by the LMMA. Also,
the Board requested monetary damages, including loss of credits for
providers involved in the malpractice and loss of funds resulting
from adverse judgments and settlements due to the fraud and ill
practices of St. Paul.
Discovery proceeded, initially limited to seven
representative, underlying medical malpractice claims. St. Paul
moved for summary judgment on the basis of that discovery, arguing:
(1) it owed no duty to the Fund, but rather only to its insureds;
and (2) the Board’s claims sought only and impermissibly to
collaterally challenge valid settlements reached between
plaintiffs, insured health care providers, the insurers, and the
Fund. St. Paul also raised the procedural bar of prescription.
In December 2002, the district court denied St. Paul’s motion
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for summary judgment, concluding that St. Paul breached its duties
under the LMMA and relevant Louisiana regulations by failing to
give the Fund ten days’ written notice of proposed compromises or
settlements. See LA. ADMIN. CODE tit. 37, Part III, § 1101(C). The
district court ruled, in relevant part, that St. Paul owed a duty
to the Fund of “good faith and reasonable care both in evaluating
the underlying plaintiffs’ claim and in considering and acting upon
settlement thereof.” See LA. REV. STAT. ANN. § 40:1299.44C(7).
The district court granted supplemental discovery on an
additional 39 underlying malpractice claims related to the Board’s
allegations, and after completion of this discovery, St. Paul filed
motions for partial summary judgment: to dismiss two of the 46
underlying malpractice claims, McNairn v. Roux and Lagars v.
Andicare, because they were prescribed and because St. Paul did not
breach any duty to the Fund. The district court denied the
motions.
St. Paul moved for reconsideration or in the alternative for
leave to file an interlocutory appeal, and the district court
denied reconsideration but granted St. Paul’s request for
interlocutory appeal. By written order, the district court
supplemented the prior denial of summary judgment with citation to
some evidence presented and a clarification that the denial was a
determination that the Board’s evidence was sufficient to survive
summary judgment under Rule 56, not a ruling that St. Paul breached
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its duty under the LMMA as a matter of law. In granting the motion
for interlocutory appeal, the district identified as material under
28 U.S.C. § 1292(b) the legal question of the interpretation of St.
Paul’s duties to the Fund under the LMMA.
II.
We review the denial of a motion for summary judgment de novo,
applying the same standard used by the trial court. Terrebonne
Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 877 (5th Cir.
2002). However, in this interlocutory appeal permitted under 28
U.S.C. § 1292(b), our review is limited. See Malbrough v. Crown
Equip. Corp., 392 F.3d 135, 136 (5th Cir. 2004). Our appellate
jurisdiction under § 1292(b) extends only to interlocutory orders
involving a “controlling question of law.” 28 U.S.C. § 1292(b);
Malbrough, 392 F.3d at 136. Therefore, we do not review whether
the Board presented sufficient evidence to raise a genuine issue of
material fact to preclude summary judgment for St. Paul. See
Malbrough, 392 F.3d at 136 (citing Fed. R. Civ. P. 56(c); Ahrenholz
v. Bd. of Trs. of Univ. of Ill., 219 F.3d 674, 676-77 (7th Cir.
2000)). Instead, we review only whether the district court erred
in concluding that the LMMA provides a cause of action to the
Board, on behalf of the Fund, against an insurer for a breach of §
40:1299.44(C)(7)’s duty of “good faith and reasonable care.” See
id. We review the district court’s interpretation of the LMMA de
novo, interpreting the statute as would the highest court of
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Louisiana. See Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co.,
953 F.2d 985, 987-88 (5th Cir. 1992).
St. Paul raises primarily three challenges to the denial of
summary judgment in its favor: (1) the LMMA does not provide the
Board with a cause of action against St. Paul; (2) even if the LMMA
does create a cause of action for damages, St. Paul did not breach
a duty owed to the Fund because St. Paul’s fiduciary duty to its
insureds must prevail over any general good faith and reasonable
care duty to the Fund; and (3) claims arising out of two underlying
cases, McNairn and Lagars, are prescribed by Louisiana law. Given
our limited appellate jurisdiction under § 1292(b), we reach only
the first challenge, as the latter two involve review beyond the
“controlling question of law.”
III.
Under the LMMA, a qualified health care provider “is not
liable for an amount in excess of one hundred thousand dollars plus
interest . . . for all malpractice claims because of injuries to or
death of any one patient.” LA. REV. STAT. ANN. § 40:1299.42B(2). All
“damages in excess of the total liability of all liable health care
providers, up to $500,000, are to be paid by the Fund.” Stuka v.
Fleming, 561 So. 2d 1371, 1373 (La. 1990); see also LA. REV. STAT.
ANN. § 40:1299.42B(3).
Thus, in the case of a malpractice action against multiple
health care provider defendants, the Fund’s potential liability is
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triggered as soon as any one health care provider settles with the
plaintiff for $100,000, even if that settlement’s terms include the
release of all other potentially liable defendants. See Stuka, 561
So. 2d at 1374-75.
The Medical Malpractice Act therefore contemplates that
the issue of liability is generally to be determined
between the malpractice victim and the health care
provider, either by settlement or by trial, and that the
Fund is primarily concerned with the issue of the amount
of damages. Payment by one health care provider of the
maximum amount of his liability statutorily establishes
that the plaintiff is a victim of that health care
provider's malpractice. Once payment by one health care
provider has triggered the statutory admission of
liability, the Fund cannot contest that admission. The
only issue between the victim and the Fund thereafter is
the amount of damages sustained by the victim as a result
of the admitted malpractice.
Id. at 1374 (internal footnote omitted).
Thus, the Louisiana Supreme Court held that, where a single
health care provider’s insurance settled with the malpractice
victim and the victim released all other defendants, the Fund is
precluded from contesting the liability of the settling health care
provider and the Fund is liable for excess damages. Id. at 1374-
75. In so holding, the Louisiana Supreme Court relied upon the
language of § 1299.44C, indicating that the Fund’s duties of excess
damage payment are triggered by the settlement of only one
underlying defendant. Id. at 1373 (noting the statutory language
providing “the insurer of a health care provider . . . has agreed
to settle its liability”).
The necessary result of the LMMA’s provisions is that the Fund
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enjoys fewer “rights . . . when claims against multiple health care
providers are settled than when such claims are tried.” Id. at
1374. Trial against multiple defendants permits the Fund to
attempt to apportion fault, causation, and damages among more
defendant providers, thereby reducing the ultimate burden it must
bear in payment to the malpractice victim.
In Mumphrey v. Gessner, 581 So. 2d 357 (La. Ct. App. 4th Cir.
1991), writ denied, 587 So. 2d 694 (La. 1991), the underlying
plaintiff sued multiple provider defendants and then settled on the
terms that one provider paid the statutory limit of $100,000 and
the others were released. The settlement was approved, but the
Fund challenged it via a third-party action against the dismissed
provider defendants. Id. at 358-59. Relying in part on Stuka, the
court held that the Fund, tethered to the language of the LMMA,
could not seek contribution from the settling defendants through
the collateral challenge. Id. at 359-60.
This Circuit has previously relied upon Stuka and Mumphrey in
holding that the Fund lacks “authority under the statute to
apportion fault amongst providers and reduce its liability by the
non-qualified provider’s share.” Castillo v. Montelepre, Inc., 999
F.2d 931, 937-39 (5th Cir. 1993). Castillo addressed the Fund’s
attempt to challenge the underlying settlement and rejected the
Fund’s policy arguments in support of that attempted challenge.
Id. at 934-35. In so doing, Castillo relied upon the duty owed by
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insurers to the Fund under the language of the LMMA. Id. at 936-
37. “For the benefit of both the insured and the [Fund], the
insurer of the health provider shall exercise good faith and
reasonable care both in evaluating the plaintiff’s claim and in
considering and acting upon settlement thereof.” LA. REV. STAT. ANN.
§ 40:1299.44C(7). Based upon this statutory duty, Castillo
offered: “Why would the legislature have imposed upon the insurer,
for the benefit of the Fund, a duty of good faith and reasonable
care in its decision to settle a claim if the Fund has the greater
right to challenge any settlement that would lock it into
liability?” Castillo, 999 F.2d at 935-36. This query formed the
basis of the district court’s decision in this case to permit the
Board’s claims to survive summary judgment.
St. Paul argues that these cases limiting the Board’s ability
to challenge underlying settlements require the dismissal of the
Board’s claims here because they are simply a recharacterization of
the Board’s prior unsuccessful attempts to litigate liability in
order to reduce the financial exposure of the Fund after a
malpractice plaintiff has settled with a qualified defendant for
$100,000. The Board responds that its claims do not challenge the
underlying settlements and do not seek to relitigate the underlying
liability and damages. Instead, the Board argues it seeks damages
for St. Paul’s fraudulent conduct, based upon the injury caused to
the Fund in the underlying settlements.
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We agree with St. Paul. Here, the Fund attempts to
collaterally challenge the complete and effected settlements in
underlying malpractice actions by claiming against one of the
health care provider insurers, as opposed to the health care
provider. See Stuka, 561 So. 2d at 1374; see also Turner v.
Southwest La. Hosp. Ass’n., 856 So. 2d 1237, 1240-41 (La. Ct. App.
3d Cir. 2003), writ denied, 876 So. 2d 89 (La. 2004) (approving
Stuka). The Board’s complaint so illustrates: “Further, The [Fund]
through the [Board] prays for declaratory judgment, [requiring] in
all cases where the Fund has suffered a loss or has or may be
adversely affected because of the fraud and ill practices of St.
Paul, that St. Paul, rather than the Fund, must indemnify the
malpractice claimant for all sums recovered thereby and that St.
Paul is not entitled to the benefit of the medical malpractice cap
on general damages established by the Act.”
The LMMA and the Louisiana Supreme Court’s interpretation of
that Act make clear that the Louisiana legislature did not provide
the Fund with the cause of action it seeks to create here. Nowhere
in the LMMA is the Fund, or the Board on the Fund’s behalf, given
the authority to challenge prior malpractice settlements by
instituting fraud claims against the insurer of a health care
provider. Rather, the LMMA provides a regulatory structure through
which the Board manages the Fund and administers the system created
in Louisiana within which both insurers and health care providers
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work. See LA. REV. STAT. ANN. § 40:1299.44D(2)-(3). Under the
Administrative Code, an insurer that fails to comply with
requirements may be terminated from enrollment with the Fund. See
LA. ADMIN. CODE tit. 37, Part III, § 519. And, in the event that an
insurer fails to meet its duty to timely remit the surcharge to the
Fund, then the Fund may assess a penalty or a revocation or
suspension of the insurer’s certificate of authority. LA. REV. STAT.
ANN. § 40:1299.44A(3)-(4).
Similarly, St. Paul suggests that with respect to the
insurer’s duty of good faith and reasonable care, the Louisiana
legislature’s failure to provide an express enforcement action
leaves available to the Fund only administrative remedies. In the
absence of a legislative directive to the contrary and in the face
of Stuka and Mumphrey, interpreting the LMMA to preclude the Board
from litigating liability of the underlying malpractice claims, we
agree. The Board argues that its ability to bring a fraud or tort
claim, on behalf of the Fund, against St. Paul stems from the
LMMA’s provision for defense of the Fund. See LA. REV. STAT. ANN. §
40:1299.44D(2). Subsection (D)(2) of § 40:1299 enumerates the
Board’s powers related to management, administration, operation,
and defense, of the Fund “[i]n addition to such other powers and
authority elsewhere expressly or impliedly conferred on the board
by this Part” and “to the extent not inconsistent with the
provisions of this Part.” Id. § 40:1299D(2)(b). The LMMA empowers
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the Board to defend the Fund from claims and to obtain indemnity
and reimbursement to the Fund. Id. § 40:1299D(2)(b)(x)-(xi). The
Board asks this Court to read these provisions, in combination with
the duty of good faith and reasonable care owed by insurers to the
Fund under § 40:1299.44C(7), to create the cause of action here
presented. In the absence of the Louisiana legislature’s express
language so providing and in light of the Louisiana Supreme Court’s
interpretation of the LMMA in Stuka and Mumphrey, we decline to do
so. The cause of action alleged by the Board is not expressly
granted by the governing statute, and, to the extent the Board
seeks additional enforcement powers on behalf of the Fund under the
LMMA, its pleas must be addressed to the Louisiana legislature.
IV.
Having concluded that the LMMA and Louisiana law do not
provide the Board with the cause of action stated here against St.
Paul, we need not, and under § 1292(b)’s limited appellate
jurisdiction cannot, reach St. Paul’s additional challenges to the
district court’s denial of summary judgment. After review of the
record on appeal, the briefs and oral arguments of the parties, and
for the foregoing reasons, we REVERSE the district court’s denial
of summary judgment, RENDER judgment to St. Paul on the claims
alleged by the Board, and REMAND for such further proceedings as
may be necessary in light of this opinion.
REVERSED; RENDERED; and REMANDED.
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