Harold v. Cendo

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DARLENE HAROLD AND LUTHER
HAROLD, parents and next friend and
DEANA HAROLD,
Plaintiffs-Appellants,

v. No. 97-1077

ROBERT CENDO, M.D.; MEMORIAL
HOSPITAL AND MEDICAL CENTER OF
CUMBERLAND, INCORPORATED,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-96-440-AMD)

Argued: October 29, 1997

Decided: November 26, 1997

Before WILKINS and MOTZ, Circuit Judges, and CAMPBELL,
Senior Circuit Judge of the United States Court of Appeals
for the First Circuit, sitting by designation.

_________________________________________________________________

Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Edward Greensfelder, Jr., Washington, D.C., for Appel-
lants. Frederick William Goundry, III, VARNER & KASLICK, P.C.,
Frederick, Maryland; Jeffrey Schuyler Getty, GEPPERT, MCMUL-
LEN, PAYE & GETTY, Cumberland, Maryland, for Appellees. ON
BRIEF: Conrad W. Varner, VARNER & KASLICK, P.C., Frederick,
Maryland, for Appellee Cendo; Robert S. Paye, GEPPERT,
MCMULLEN, PAYE & GETTY, Cumberland, Maryland, for Appel-
lee Hospital.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

On Friday, August 9, 1991, the car in which Deana Harold traveled
ran off the road in a remote area of West Virginia and collided with
a tree. Severely injured, Deana and the driver were removed from the
wreckage and rushed to Grant Memorial Hospital in Grant County,
West Virginia.

Because Deana's injuries required attention from an orthopedic
surgeon and neurosurgeon, she was transferred to Memorial Hospital
and Medical Center of Cumberland, Incorporated (Memorial Hospital
or the Hospital), in Cumberland, Maryland. The Hospital is desig-
nated an area-wide trauma center by the Maryland Institute for Emer-
gency Medical Services Systems (MIEMSS), an organization
established by the Maryland General Assembly to coordinate a state-
wide system of emergency services. At Memorial Hospital, a team of
the Hospital's trauma surgeons treated Deana, namely, Dr. Beck
(emergency medicine), Dr. Miltenberger (general surgery), Dr. Robert
Cendo, (orthopedic surgery), Dr. Figueroa (neurosurgery), and Dr.
Sagin (pulmonary medicine). The Hospital directly employed the
emergency room physician; the others were private, on-call physi-
cians. Dr. Cendo became Deana's physician -- in charge of admitting
Deana and treating her orthopedic injuries.

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An examination performed in the Hospital's emergency room
revealed that Deana was hypoxic, comatose, and suffering from
numerous fractures to her tibia, fibula and femur in her left leg.
According to Dr. Cendo, he then consulted with Dr. Figueroa, who
advised him that Deana's head injury made her too unstable to
undergo surgery. Rather than surgically repairing Deana's leg, Dr.
Cendo opted to perform a closed reduction procedure on Deana's leg,
which required the placement of skeletal pins and traction. Dr. Figue-
roa believed Deana's head injuries warranted a CT Scan, but because
the Hospital's CT Scan machine was broken, Deana's CT Scan had
to wait until Monday, August 12.

During the evening of Sunday, August 11, Deana developed com-
plications, and by early Monday morning she was suffering respira-
tory distress. Hospital personnel intubated Deana and placed her on
a mechanical ventilator. A carotid angiogram and CT Scan were then
performed. Deana remained comatose at Memorial Hospital for the
following six to eight weeks. The medical treatment that she received
allegedly caused her serious permanent injuries, pain, and emotional
suffering that she would not otherwise have suffered, and medical
expenses and the loss of earnings that she would not otherwise have
incurred.

On March 9, 1993, her parents, Darlene and Luther Harold, on
behalf of Deana, who had not yet reached majority, settled Deana's
claims against the driver of the car, the owner of the car, and the
owner's insurance company. The Harolds also signed a written
release discharging the driver and "all other persons, firms and corpo-
rations" from liability arising out of the accident. In May 1994, the
Harolds filed a "Statement of Claim," which they amended in July
1994, against Dr. Cendo and Memorial Hospital in the Health Claims
Arbitration Office of Maryland (HCAO). They asserted that Cendo
and Memorial Hospital had committed medical malpractice in their
care of Deana. The parties agreed to waive arbitration pursuant to the
Health Care Malpractice Claims Arbitration Act, (the Arbitration
Act). See Md. Code Ann., Cts. & Jud. Proc.§ 3-2A-06A (1995 and
Supp. 1996). Thereafter, as permitted by § 3-2A-06A(c) of the Arbi-
tration Act, the Harolds brought this diversity action against Dr.
Cendo and Memorial Hospital in the United States District Court for
the District of Maryland.

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On January 8, 1997, scheduled as the first day of a three-week trial,
the district court granted summary judgment to the defendants, rea-
soning that in releasing the driver and owner of the car, the Harolds
had also released Dr. Cendo and the Hospital. Alternatively, the dis-
trict court granted the Hospital judgment as to some allegations in the
complaint, holding that those allegations involved issues for which
the Harolds had filed no arbitration claim. The court also denied the
Harolds' motion to amend the complaint to add a cause of action for
lack of informed consent. Finally, the court resolved two evidentiary
questions against the Harolds.

The Harolds appeal all of the above rulings. We affirm in part,
reverse in part, and remand for further proceedings consistent with
this opinion.

I.

We review a grant of summary judgment de novo . Summary judg-
ment is appropriate when no genuine issues of material fact exist, and
a party is entitled to judgment as a matter of law. See Bowling v. Well-
more Coal Corp., 114 F.3d 458 (4th Cir. 1997).

The district court held that the liability release between the Harolds
and the driver of the other car had the effect of releasing Dr. Cendo
and the Hospital. The release states in pertinent part that, in consider-
ation of the payment of $25,000, the Harolds released the driver and
the owner of the car, and

any and all other persons, firms and corporations, whether
herein named or referred to or not, of and from any and all
past, present and future actions, causes of action, claims,
demands, damages, costs, loss of services, expenses, com-
pensation, third party actions, suits at law or in equity,
including claims or suits for contribution and/or indemnity,
of whatever nature, and all consequential damage on
account of, or in any way growing out of any and all known
and unknown personal injuries, death and/or property dam-
age resulting or to result from an accident that occurred
on or about the 9th day of Aug. 1991, at or near Franklin,
W. Va.

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At the time they executed the release the Harolds and the driver
and owner of the car resided in Virginia and entered into the release
in that state. Accordingly, the parties agree that Virginia law controls
interpretation of the release. See Continental Cablevision of New
England, Inc. v. United Broadcasting Co., 873 F.2d 717, 720-21 (4th
Cir. 1989) (federal court sitting in diversity applies choice of law
rules of forum state; for contracts, Maryland follows the lex loci
contractus rule).

In finding the release reached Dr. Cendo and the Hospital, the dis-
trict court relied on State Farm Mut. Ins. Co. v. Reynolds, 676 F.
Supp. 106 (W.D. Va. 1987) (applying Virginia law). The Reynolds
court held that a broad release, like that at issue here, released all non-
named tortfeasors, despite the existence of a Virginia statute that pro-
vided a release by one joint tortfeasor does not necessarily discharge
the remaining ones. See id. at 107. The Reynolds court emphasized
that it decided the case based on the literal language of the release
because "neither side ha[d] presented, nor suggested, the existence of
any evidence pertaining to the intent of the parties." Id.

Lemke v. Sears, Roebuck & Co., 853 F.2d 253 (4th Cir. 1988)
(applying Virginia law), a case decided after Reynolds, severely
undermines the applicability of the Reynolds rationale to the case at
hand. In Lemke, which the parties never cited to the district court, we
held that a release almost identical to the one at issue here did not,
as a matter of law, release other potential joint tortfeasors. The Vir-
ginia legislature only in modern times abrogated the well-established
common law rule that releasing one tortfeasor acts as a release of all,
and so we reasoned that the intent of the parties was critical to deter-
mining whether the plaintiff had also released the defendants from lia-
bility. See id. at 255. Thus, we found that whether parties to a release
intended for it to apply to unnamed tortfeasors ("strangers" to the
release) presented a question of fact reserved for the fact finder, and
not appropriate for resolution on summary judgment. See id.

In accordance with Lemke, we can only conclude that the district
court erred in holding that, as a matter of law, the Harolds' release of
the car driver and owner also released Dr. Cendo and the Hospital.
This is especially so because, unlike Reynolds, the Harolds have

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pointed to extensive testimony regarding their intent not to release Dr.
Cendo or the Hospital when releasing the driver.

Dr. Cendo and the Hospital argue that even under Lemke they are
entitled to summary judgment because they were intended third-party
beneficiaries of the release. They rely on the suggestion in Lemke that
if parties not named in a release are third-party beneficiaries of it, and
thus not "strangers" to it, they are entitled to enforce the benefits of
the release without exploring the parties' intent. See id. n.4. To qual-
ify as a third-party beneficiary, however, a party must show that "the
contracting parties clearly intended to directly benefit him." Id. (quot-
ing Radosevic v. Virginia Intermont College, 651 F. Supp. 1037, 1038
(W.D. Va. 1987)) (internal quotation marks omitted). The facts as to
the defendants' status as third-party beneficiaries, vel non, like the
facts as to whether the Harolds intended to release them, are heavily
disputed. On one hand, the defendants assert that their reduction of
Deana's medical bills to effectuate the settlement between Deana and
the other driver demonstrates their third-party status. On the other, the
Harolds offer testimony that they never intended to release the defen-
dants from liability and point to the fact that the settlement amount
-- $25,000 -- was totally inadequate to redress Deana's extensive
injuries. Thus, a genuine issue of material fact exists as to the third-
party beneficiary status of Dr. Cendo and the Hospital.

Accordingly, because material issues of fact remain as to the intent
of the parties to the release and the status of Dr. Cendo and the Hospi-
tal as third-party beneficiaries, the district court erred in ruling, as a
matter of law, that the release between the Harolds and the driver of
the car necessarily also released Dr. Cendo and the Hospital.

II.

The district court granted Memorial Hospital judgment on the
pleadings with respect to certain malpractice allegations in the Har-
olds' complaint on the theory that the Harolds had not filed a claim
with the HCAO as to those allegations. We review the district court's
grant of judgment on the pleadings de novo. See Gutierrez v. Peters,
111 F.3d 1364, 1368 (7th Cir. 1997).

The Arbitration Act requires that a medical malpractice claim be
submitted to arbitration as a condition precedent to the filing of a judi-

6
cial action for malpractice. See Oxtoby v. McGowan, 447 A.2d 860,
865 (Md. 1982). Thus, although the parties may ultimately agree to
waive arbitration, as they did here, a plaintiff must initially file a mal-
practice claim with the HCAO in order to file a later civil action seek-
ing recovery for that malpractice. This much is clear. What is unclear
is whether the Harolds, in their complaint, attempted to pursue mal-
practice claims for which they never filed a claim with the HCAO,
and if so, what those additional claims were.

In May 1994, the Harolds filed an initial "Statement of Claim"
against Dr. Cendo and Memorial Hospital with the HCAO. In July
1994, they filed an "Amended Statement of Claim." The amended
statement asserts, inter alia, that:

Cendo deviated from the standards of orthopaedic and medi-
cal care by, inter alia, failing to perform prompt[,] aggres-
sive and early operative internal fixation of Claimant's left
femoral, tibial and fibular fractures or failing to advise her
of alternative methods of treatment and the risks associated
with not transferring her or reducing her fractures . . . [and
Memorial Hospital] deviated from standards of medical care
in, inter alia, failing to obtain for Claimant early internal
fixation of Claimant's fractures; or, absent the wherewithal
to do so, to immediately transfer Claimant to a higher level
medical center . . . or failing to advise her of alternative
methods of treatment and the risks associated with not trans-
ferring her or reducing her fractures.

A "Certificate of a Qualified Expert," executed by orthopedic surgeon
Randy Davis, accompanied the original Statement of Claim. Dr.
Davis certified that the acts alleged in the statement "constituted
departure from the standards of care ordinarily exercised by similar
orthopaedic surgeons and hospitals in the treatment of their patients
under similar circumstances." Subsequently, the parties agreed to
waive arbitration of the "claims now pending."

Thereafter, the Harolds brought this action. In the second count of
their two count complaint, they alleged:

Pursuant to the Defendant Hospital's designation by
MIEMSS as an Areawide Trauma Center, the Defendant

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Hospital directed and authorized Defendant Cendo and Drs.
Miltenberger, Figueroa and Sagin actual authority to provide
[all required medical care for Deana]. In their care and treat-
ment of Plaintiff's leg and head injuries, Defendant Cendo
and Drs. Miltenberger, Figueroa and Sagin were acting as
agents of and on behalf of Defendant Hospital.

By accepting the designation by MIEMSS as an Area-
wide Trauma Center and by its establishment of its Trauma
Center Protocols and its Trauma Team . . . the Defendant
Hospital held out its aforesaid Trauma Team as agents with
apparent authority to provide all of the medical care and
treatment required by Plaintiff.

. . . Plaintiff's mother and father relied upon the Defen-
dant Hospital's being a trauma center that was qualified to
provide . . . medical care and services required by Plaintiff
....

. . . Defendant Hospital's Trauma Team failed to abide by
its written Trauma Center Protocols governing the care and
treatment of trauma patients having a suspected head injury
that it had represented to MIEMSS and surrounding medical
care providers that it would provide.

The Defendant Hospital deviated from standards of medi-
cal care in failing to provide Plaintiff with the medical treat-
ment and care reasonably required by a trauma patient at a
MIEMSS designated Areawide Trauma Center, including
(1) the failure to comply with the MIEMSS "Fly-By-
Policy," adopted by the Defendant Hospital, to notify Civil
Defense and SYSCOM immediately upon the breakdown of
its CT Scan machine that it was operating at a limited capac-
ity due to the need to repair the CT Scan machine; (2) the
failure, irrespective of its failure to comply with the afore-
said MIEMSS "Fly-By-Policy," to have promptly informed
its Emergency Department, its Trauma Team and Dr. Beck
of the breakdown of its CT Scan machine, or, alternatively,
having so notified its Emergency Department, its Trauma
Team and/or Dr. Beck, their having accepted Plaintiff as a

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 trauma patient knowing that Defendant Hospital's CT Scan
machine was broken and in need of repair; (3) Dr. Figueroa
having recommended to Defendant Cendo that he wait to
perform internal fixation of Plaintiff's fractures because of
Plaintiff's head injuries, the failure of Defendant Hospital's
Trauma Team to obtain an anesthesiology consultation to
determine the feasibility of performing the fixation of Plain-
tiff's leg fractures under general anesthesia; . . . .

The Hospital moved "for Judgment on Pleadings or, alternatively,
Partial Summary Judgment" as to this count, asserting:

Count II of the Complaint fails to state a claim upon which
relief may be granted against Hospital with respect to liabil-
ity for the alleged acts of the neurosurgeon, Dr. Figueroa,
and for liability for the alleged acts of a collective trauma
team, and any such claims should be dismissed . . . .

The district court orally granted the Hospital's motion "with respect
to any claim other than the claims specifically alleged and set out as
a part of the health claims arbitration proceedings." Specifically, the
court ruled that the Harolds could not pursue any claim "on the basis
of so-called team negligence or trauma-team deviation from the stan-
dard of care" or any "claim arising against the hospital in any way
based on the neurological decisions and recommendations that were
made by Dr. Fugueroa." A few days later, the court entered a written
order stating simply that the motion of the Hospital"for judgment on
the pleadings is granted."

The Harolds read this order as dismissing Count II in its entirety
as to the Hospital and, thus, since that is the only count containing
claims against the Hospital, eliminating the Hospital as defendant in
the case. The Hospital, however, straightforwardly recognizes that
Maryland decisions have permitted recovery based on apparent
authority in certain limited instances. See Mehlman v. Powell, 378
A.2d 1121 (Md. 1977). The Hospital maintains that"[t]he District
Court's ruling leaves intact [the Harolds'] claim against the hospital
for the acts of the orthopedist/attending physician as apparent agent,"
but insists that the district court's order precludes claims against the

9
Hospital "based upon the neurosurgical decisions and claims based
upon alleged team negligence."

The unity of the Harolds' claims, however, poses difficulty for the
Hospital's argument. The Harolds seek through their federal com-
plaint, as they did in their arbitration statement, to assert that physi-
cians (Drs. Miltenberger, Figueroa, Sagin, and Cendo) and other staff
at the Hospital, acting with the apparent authority of the Hospital,
committed malpractice in failing to properly fixate Deana's leg frac-
tures and, in view of the breakdown of its CT Scan machine, in
accepting Deana as a trauma patient. These allegations state a cause
of action against the Hospital under Maryland law. See Mehlman, 378
A.2d at 1124 (holding that when a hospital vests its staff with appar-
ent authority and causes a plaintiff "to rely on the[ir] skill," the hospi-
tal "is consequently liable to the [plaintiff] as if the . . . staff were its
employees.")

To be sure, the Harolds' federal complaint is more detailed than its
arbitration Statement of Claim. Indeed, the complaint could be read
to assert "team negligence" or even a malpractice claim against Dr.
Figueroa. But the Harolds specifically disavow such claims. They can
and should be held to such disavowals. However, their basic claim
against the Hospital in the complaint parallels the claim set forth,
albeit with less particularity, in their Statement of Claim filed with the
HCAO -- i.e., the Hospital, through its agents, committed malprac-
tice in negligently failing to treat Deana's injuries and in accepting
her as a trauma patient when its CT Scan machine was broken. The
Harolds are entitled to pursue that claim in this action, and to attempt
to prove it by use of state protocols for trauma centers and testimony
as to the activities of Drs. Miltenberger, Figueroa, and Sagin, as well
as Dr. Cendo. The district court's contrary ruling must be reversed.

III.

On December 16, 1996 -- ten months after filing their complaint
initiating this action and three weeks prior to the scheduled trial --
the Harolds moved to amend their complaint to assert a separate cause
of action for malpractice resulting from failure to obtain Deana's
informed consent. The district court denied the motion, finding "pal-
pable prejudice" would result to the defendants if it permitted the

10
amendment because "nothing in the record . . . support[s] the conclu-
sion that [defendants were] put on adequate notice" of this claim.

We review the district court's denial of the Harolds' motion to
amend its complaint under an abuse of discretion standard, see Davis
v. Piper Aircraft Corp., 615 F.2d 606, 612-13 (4th Cir. 1980), but in
light of the strong policy favoring amendment. See Allwaste, Inc. v.
Hecht, 65 F.3d 1523, 1530 (9th Cir. 1995). An appellate court "will
find abuse based on a showing that the district court made an error
in judgment or clearly erroneous findings." 3 Moore's Federal
Practice, § 15.14[2] (Matthew Bender 3d ed.) [hereinafter Moore's].

Rule 15(a) of the Federal Rules of Civil Procedure permits amend-
ment of a complaint over the adverse party's objection after a respon-
sive pleading has been filed only by leave of court, but "leave shall
be freely given when justice so requires." Fed. R. Civ. P. 15(a). In
Foman v. Davis, 371 U.S. 178, 182 (1962), the Supreme Court "clari-
fied the factors that a district judge may use to deny leave to amend."
Moore's, § 15.15[1]. These are "undue delay, bad faith, or dilatory
motive on the part of the movant, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the opposing
party, and futility of the amendment." Id.

The district court relied on only one of these grounds -- prejudice
to the defendants. In concluding that the defendants would be preju-
diced by the proposed amendment, we believe the district court
abused its discretion. The court based its ruling on a clearly erroneous
factual finding, namely, nothing in the record supported the conclu-
sion that, prior to the motion to amend, the defendants had been put
on notice of the informed consent claim. In fact, in the Harolds'
Amended Statement of Claim filed with the HCAO on July 5, 1994
-- a year and a half before this suit was filed-- the Harolds put the
defendants on express notice of an informed consent claim, alleging
in a separate count titled "Lack of Informed Consent" that the defen-
dants "failed to obtain Claimants' informed consent not to transfer
Claimant timely to another hospital for CAT scan and appropriate
early operative internal fixation." In addition, defense counsel posed
numerous questions to the Harolds at deposition regarding the conver-
sations they had with the physicians caring for Deana, ostensibly to
determine whether the defendants had failed to obtain the Harolds'

11
informed consent. We note that our sister circuits have similarly con-
cluded that when there has been no undue delay, bad faith, or dilatori-
ness, a district court's denial of a motion to amend based on a finding
of prejudice that is not supported by the record constitutes an abuse
of discretion. See, e.g., Security Ins. Co. of Hartford v. Tucker &
Assocs., Inc., 64 F.3d 1001, 1009 (6th Cir. 1995); United States v.
Continental Ill. Nat'l. Bank & Trust Co., 889 F.2d 1248, 1255 (2d
Cir. 1989); Buder v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 644
F.2d 690, 694-95 (8th Cir. 1981).

IV.

The Harolds also challenge two evidentiary rulings of the district
court. Our review convinces us that the district court acted well within
its discretion in both matters.

First, the district court denied the Harolds' motion in limine to
exclude Dr. Figueroa's testimony as to his custom of advising ortho-
pedic surgeons not to operate on orthopedic injuries when the patient
has a head injury. In deposition, Dr. Figueroa testified that he could
not remember so advising Dr. Cendo with regard to Deana, but that
this was his invariable practice. Dr. Cendo confirmed that when treat-
ing Deana he had been given this advice by Dr. Figueroa. The district
court did not abuse its discretion in holding that this evidence consti-
tuted a proper basis to permit testimony as to Dr. Figueroa's habit.
See Fed. R. Evid. 406.

The Harolds' challenge to the district court's other pre-trial eviden-
tiary ruling also lacks merit. The district court granted the defendants'
motion in limine to exclude the expert testimony of a neurosurgeon,
Dr. Aldrich. Although the Harolds designated a number of experts
pursuant to Federal Rule of Civil Procedure 26(a), they failed to des-
ignate any neurosurgical expert. In the Pretrial Order, filed two
months prior to trial, the Harolds listed Dr. Aldrich as a witness, but
did not designate him as an expert. The district court concluded that
permitting Dr. Aldrich to testify at trial, when he had never been
deposed and was only disclosed as an expert on the eve of trial, had
the "clear potential for great prejudice to the defendants." The court
did not abuse its discretion in so ruling.

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V.

To summarize, we reverse (1) the grant of summary judgment to
Dr. Cendo and the Hospital on the basis of the release between the
Harolds and the driver of the car, (2) the grant of judgment on the
pleadings to the Hospital, and (3) the refusal to permit the Harolds
to amend their complaint to include a separate count as to informed
consent; however, we affirm the district court's evidentiary rulings
permitting Dr. Figueroa's habit testimony and excluding Dr. Aldrich's
expert testimony. We remand for further proceedings consistent with
this opinion.

AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED FOR FURTHER PROCEEDINGS

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