C.A. Rebuffs Friedman’s Attack on MICRA Attorney-Fee Limits

Tuesday, January 23, 2018

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C.A. Rebuffs Friedman’s Attack on MICRA Attorney-Fee Limits

By a MetNews Staff Writer

Veteran health care malpractice attorney Nathaniel J. Friedman has failed to persuade the Court of Appeal for this district that the Medical Injury Compensation Reform Act of 1975—enacted in the wake of walkouts by doctors as their insurance premiums soared based on huge recoveries in tort actions—is an anachronism that should be struck down.

Although the California Supreme Court upheld MICRA in the 1985 case of Roa v. Lodi Medical Group, Inc., Friedman argued that passage by voters of Proposition 103 in 1988 created “changed circumstances” by barring the insurance commissioner from approving rates that are “excessive” or “unfairly discriminatory.” This, he asserted, guards against the eruption of a medical malpractice crisis in the future, “real or manufactured.”

Acting Justice Natalie Stone, a Los Angeles Superior Court judge serving on assignment to the appeals court, rejected Friedman’s contention in an unpublished opinion for Div. Three.

Attorney Fee Controversy

Whether MICRA is outmoded and void was raised in the later stages of the appellate court proceeding. Friedman was appealing as too low fees that Los Angeles Superior Court Judge Holly Fujie’s set in connection with the compromise of a minor’s claim (which requires court approval), that did not take MICRA fee limits into consideration.

Friedman wanted $833,333, pursuant to a contingency fee contract under which he was to receive a one-third recovery; Fujie limited him to one-fourth, the standard percentage, amounting to $625,000.

The judge apparently accepted Friedman’s theory that MICRA—which would prescribe lower fees—did not apply given that doctors were sued for “misconduct” as well as malpractice. Fujie confined her attention to what would be a “reasonable fee,” under standards set by California Rules of Court, rule 7.955, for services to a minor.

In her June 30, 2016 order, Fujie said:

“The Court has reviewed the Petition and finds the requested attorney’s fees to be fair and reasonable. Counsel asserts that a total of 175 hours were spent throughout the 18 months of litigation in this action. Nothing in Counsel’s declaration suggests that the action involved any particularly novel or difficult questions or extraordinary skill and time. Even at the 25% fee, Counsel will receive an hourly rate of over $3,500.00.”

CA Raises Issue

The Court of Appeal raised the question, in a letter to counsel, as to whether MICRA does, in fact, apply, and Friedman put forth his theory, publicly expressed by him in the past, that MICRA is a relic of a crisis staged by the medical profession more than four decades ago and should be judicially discarded.

If MICRA does apply, Friedman would be limited under Business and Professions Code section 6146 to “(1) Forty percent of the first fifty thousand dollars ($50,000) recovered. [¶] (2) Thirty-three and one-third percent of the next fifty thousand dollars ($50,000) recovered. [¶] (3) Twenty-five percent of the next five hundred thousand dollars ($500,000) recovered. [¶] (4) Fifteen percent of any amount on which the recovery exceeds six hundred thousand dollars ($600,000).”

Overall, that would be less of a share of the $2.5 million settlement which Friedman secured for his client than Fujie was willing to award him.

In Friday’s opinion, the appeals court left it to Fujie to determine if MICRA applies, while hinting broadly that it does.

Stone’s Opinion

Friedman’s contention that the state Supreme Court’s decision in Roa upholding MICRA is abrogated by Proposition 103 “fails in the first instance because it does not negate every rational basis identified by the Supreme Court in Roa, nor ‘every conceivable basis’ that could plausibly justify section 6146’s limits,” Stone wrote.

Opponents of MICRA argued in that case that it violated equal protection because it limited what plaintiffs attorneys could obtain only in malpractice actions. The 5-4 majority said:

“The Legislature may reasonably have concluded that a limitation on contingency fees in this field was an ‘appropriate means of protecting the already diminished compensation’ of such plaintiffs from further reduction by high contingency fees.”

Stone observed:

“The regulatory proscriptions on excessive insurance rates imposed by Proposition 103 in no way affect this rationale underlying section 6146.”

2015 Opinion

The jurist also pointed to the Court of Appeal’s post-Proposition 103 decision in Chan v. Curran, decided by the First District in 2015. That case dealt with a different aspect of MICRA: the limitation on noneconomic damages to $250,000.

Stone said that “as the court explained in Chan, even after the passage of Proposition 103, the Legislature still could rationally conclude that MICRA’s restrictions are necessary to ensure medical malpractice rates stay in check.”

The court in Chan pointed out:

“While Proposition 103 may prevent insurers from unilaterally raising rates without administrative oversight, it does not prohibit rate increases that are fairly related to costs….Proposition 103, then, is concerned with actual costs, but there is nothing in the proposition, itself, that is a check on such costs. Accordingly, the measure provides no assurance medical malpractice rates would stay in check should MICRA’s noneconomic damages cap be removed.”

Stone declared that “we conclude Roa remains the controlling authority regarding the constitutional validity of MICRA’s limits on attorney contingency fees in medical malpractice cases, and reject Friedman’s equal protection challenge to section 6146.”

Uncertainty Expressed

Div. Three’s pro tem left Friedman with a slight chance of being allowed to hold onto the chunk of the settlement Fujie decided he could receive, while raising the prospect of being compelled to restore part of what he got.

The case was brought on behalf of a 9-year-old who was born prematurely—by six or seven weeks—and was diagnosed within six months as being afflicted with cerebral palsy. The suit alleges, with respect to willful misconduct, that physicians at a Kaiser hospital “were aware of the possibility of severe neurological damage to Plaintiff if she were not delivered promptly,” and that “notwithstanding this knowledge,” none of them “took any steps to expedite a ‘crash’ [caesarean] section and allowed Plaintiff to linger in utero, developing hypoxic ischemic encephalopathy to the point it became irreversible.”

Stone said that under “any fair and reasonable interpretation of the complaint’s allegations, the alleged failure to expedite a crash cesarean section” boiled down to an allegation of medical malpractice. She continued, however:

“Although we conclude the “Wilful Misconduct” claim, as pled, did not exempt the resulting recovery from the contingency fee limits of section 6146, we cannot determine on this record whether later developments might have supported an amended pleading to add a genuine non-MICRA claim that would have had a material effect on the settlement….Nor can we determine on this record whether Friedman obtained the requisite consent from his client before settling a non-MICRA claim (assuming such a claim was viable at the time of settlement).”

Must Hold Hearing

The opinion orders that a hearing be held to resolve these matters. It declares:

“The order awarding attorney fees is conditionally reversed and vacated and the trial court is directed on remand to determine, consistent with the principles set forth in this opinion, whether MICRA applies to this case. If the court determines MICRA does not apply and that Friedman obtained the requisite informed consent to settle a non-MICRA claim, the court shall reinstate the order awarding Friedman $625,000 in attorney fees. If the court determines MICRA does apply, the court shall vacate the prior order, enter a new order awarding attorney fees consistent with MICRA’s limitations, and order disgorgement of the fees paid to Friedman in excess of the statutory limit.”

The case is Romero v. Kaiser Foundation Health Plan, B277499.

Friedman represented himself. No brief was filed on behalf of the child, Bianca Romero, but her mother, Luz Romero, was permitted to address the panel at oral argument and spoke of the need for as much of the settlement as possible to be devoted to Bianca’s medical care.

Consistent Critic

For years, Friedman has been a vocal opponent of MICRA. An opinion piece by him, “Medical Malpractice Crisis No Longer Exists—Neither Should MICRA,” appears in the Nov. 20, 2014 issue of the MetNews.

In a Sept. 15, 2014 unpublished opinion, the Fourth District’s Div. Two upheld a trial court order reducing Friedman’s fees to conform to MICRA limits, saying:

“Friedman argues that the purpose in enacting MICRA was to address the medical malpractice crisis and protect California’s health care delivery system by reducing the cost of medical malpractice insurance. Citing a 2007 Los Angeles Times article, Friedman maintains that there is no longer a medical malpractice crisis in California and therefore no remaining justification for relying on Roa’s holding that section 6146 is constitutional. However, Friedman has not established there is no longer a rational basis for adhering to section 6146. Even assuming medical malpractice litigation has decreased since enactment of MICRA in 1975, this does not necessarily establish that the need for MICRA no longer exists. Any decrease can also be viewed as supporting the proposition that MICRA has been an effective deterrent to medical malpractice litigation and suggests that, if MICRA provisions, such as section 6146, were eliminated, medical malpractice litigation would increase.”

The appeals court affirmed an order that Friedman disgorge to a minor $58,583.33 in fees he collected in excess of MICRA limits, and eventually he complied.

State Bar Discipline

His refusal to obey the trial court order in the case, his nonpayment of a $1,500 sanction imposed upon him, and failure to report the sanction to the State Bar resulted in the State Bar Court on Nov. 27, 2015 suspending him from practice for 60 days and placing him on two years’ probation.

A July 21, 2011 published Court of Appeal opinion by this district’s Div. One, in Gonzales v. Chen, was concerned with Friedman invoking, rather than disputing, the fee amounts set forth in §6146. The case involved the compromise of a minor’s claim.

Friedman argued that he should have been awarded the full amount contained in the schedule. Then-Presiding Justice Robert M. Mallano (now retired) wrote:

“We reject Friedman’s assertion that he is automatically entitled to the maximum contingency percentages allowed under MICRA, assuming he used them in his retainer agreement…MICRA establishes caps on a recovery, not guarantees.”

Mallano went on to say:

“To be blunt, a victory for Friedman would come at the expense of the minor.”

Although Stone cited Chen for the proposition that state rule 7.955, setting forth factors to be considered in approving compromises of minors’ claims, prevails over a local rule, she did not discuss the implications of Mallano’s edict that “the trial court must redetermine the award of attorney fees under California Rules of Court, rule 7.955, not a local rule or MICRA.”

There is no indication in the opinion as to whether Fujie relied upon Chen for the proposition that, in determining the reasonableness of the compromise of a minor’s claim, MICRA is to be ignored.