Opinion
CIVIL ACTION NO. 02-2365 SECTION: "R" (5)
March 5, 2004
ORDER AND REASONS
Before the Court is the motion of defendant Louisiana Patient Compensation Fund to dismiss. For the following reasons, the Court denies defendant's motion.
I. Background
Plaintiff Todd Siegrist filed a complaint with the Louisiana Patient's Compensation Fund alleging that Drs. Claudio Guillermo and Thomas Kleinpeter committed malpractice in the treatment of his ulcerative colitis condition, increasing the chance that he would ultimately need a colectomy. A medical review panel unanimously held that (1) defendants did not breach the appropriate standard of care and (2) any delay in the scheduling of plaintiff's colonoscopy did not cause the medical problem that ultimately led to the removal of the patient's colon. Plaintiff filed suit in this Court. In an Order and Reasons dated May 30, 2003, the Court granted summary judgment in favor of Dr. Guillermo and denied Dr. Kleinpeter's motion for summary judgment.
Under the Louisia a Medical Malpractice Act (the "MMA"), LA.R.S. § 1299.41 et seq., a qualified health care provider's liability is limited to $100,000. LA.R.S. § 1299.42(B)(2). Any judgment or settlement that exceeds the total liability of all liable health care providers is paid from the Patient's Compensation Fund ("PCF" or "Fund"), up to a limit of $500,000 plus interest and cost, exclusive of future medical costs. LA.R.S. § 1299.42(B)(1), (B)(3)(a). The procedure for such payment is described in La.Rev.Stat. 40:1299.44(C). If the insurer of a health care provider or a self-insured health care provider "has agreed to settle its liability on a claim against its insured and claimant is demanding an amount in excess thereof from the patient's compensation fund for a complete and final release," then the procedures described in La.Rev.Stat. 40:1299.44(C) must be followed. See LA.R.S. § 40.1299.44(C). Under La.Rev.Stat. 40:1299.44(0(1), the claimant must file a petition that seeks approval of the agreed settlement and demands payment of damages from the PCF with the court in which the action is pending against the health care provider.
In this case, plaintiff filed his claim against Dr. Kleinpeter in this Court based on diversity jurisdiction. Dr. Kleinpeter agreed to settle his liability on plaintiff's claim. As required by La.Rev.Stat. 40:1299.44(0(1), plaintiff filed a petition with this Court that sought approval of the settlement and demanded payment of damages from the PCF. The Court approved the settlement. The PCF now moves to dismiss the claims against it under Federal Rule of Civil Procedure 12(b)(1). The PCF contends that the Court lacks jurisdiction over the fund because the PCF is an instrumentality of the State of Louisiana and is therefore immune from suit in federal court under the Eleventh Amendment.
Rec. Doc. 44, Joint Petition for Court Approval of the Settlement of a Medical Malpractice Claim.
Rec. Doc. 48, Judgment.
II. Discussion
The United States Fifth Circuit Court of Appeals has held:
The Eleventh Amendment bars a state's citizens from filing suit against the state or its agencies in federal courts. When a state agency is the named defendant, the Eleventh Amendment bars suits for both money damages and injunctive relief unless the state has waived its immunity. By statute, Louisiana has refused any such waiver of its Eleventh Amendment sovereign immunity regarding suits in federal courts. See La.Rev.Stat.Ann. § 13:5106(A).Cozzo v. Tangipahoa Parish Council-President Government, 279 F.3d 273, 280-81 (5th Cir. 2002) (citations omitted). The PCF asserts that it is an arm of the State of Louisiana for purposes of sovereign immunity and is therefore immune from suit in federal court. The Fifth Circuit uses a six factor test to determine whether the state is the real, substantial party in interest:
1. Whether the state statutes and case law view the agency as an arm of the state;
2. The source of the entity's funding;
3. The entity's degree of local autonomy;
4. Whether the entity is concerned primarily with local as opposed to statewide problems;
5. Whether the entity has the authority to sue and be sued in its own name; and
6. Whether the entity has the right to hold and use property.Id. at 281 (quoting Hudson v. City of New Orleans, 174 F.3d 677, 681 (5th Cir. 1999)). As the Cozzo Court noted, "the second factor is most important because a fundamental goal of the Eleventh Amendment is to protect state treasuries." Id. The last two factors, on the other hand, carry significantly less weight in the six factor balance. Id.
The PCF argues that the funds in the PCF are public funds, which is relevant to the second factor. In support, the PCF relies on an opinion by the Louisiana Attorney General, Opinion 89-578. The attorney general issued the opinion in response to an inquiry about whether the state and its officers are liable for unpaid claims against the PCF. The opinion states:
The [Patient's Compensation Fund] itself is created by LSA-R.S. 40:1299.44. It is funded by a yearly surcharge upon all health care providers who have qualified under the [MMA]. In exchange, the individual liability of the health care providers is statutorily limited to $100,000, and the total damages which may be recovered in any malpractice claim is $500,000.00. The difference between the required insurance coverage for the first level of liability and the excess damages recoverable is paid by the Fund, from the sums accumulated from the surcharge payments paid by the qualified health care providers. R.S. 40:1299.44A(2)(a).
R.S. 40:1299.44 A. (1) provides this legislative declaration: "The state recognizes and acknowledges that the fund and any income from it are not public monies, but rather are private monies which shall be held in trust as a custodial fund by the state for the use, benefit, protection of medical malpractice claimants and the fund's private health care providers and all of such funds and income earned from investing the private monies comprising the corpus of this fund shall be subject to use and disposition only as provided by this Section."
Essentially this is a legislative statement that the Patients' Compensation Fund consists of private funds. It is contradicted by other constitutional and legislative provisions. The fund is clearly public money.
The Fund is placed in the custody of the 'Treasurer. The treasurer is authorized to act as custodian only of "public funds of the state". La.Const. Art. IV § 9 (1974).
Art. VII, § 9 provides that all money received by the State are public funds which must be deposited in the state treasury. Deposit in the state treasury, therefore, renders this money public funds.
R.S. 40:1299.44(5)(g) provides that the "fund shall be a budget unit of this state." This requires that the balance of the Patient Compensation Fund be appropriated every year by the legislature for the purpose of the fund.
The legislature's power of appropriation characterizes the Fund as public funds. Appropriation is the power to authorize the withdrawal of public funds from the state treasury and expend them for a designated public purpose.
However, the fact that the Patients' Compensation Fund is comprised of public funds does not establish liability for the state if the cumulative contributions of health care providers are insufficient to pay all valid claims made within a certain fiscal year. The enabling statute provides for pro-rata payment of all claims with full payment in the next period.
The statute authorizes no liability against the state for medical malpractice of private health care providers, only the right to payment of claims in a certain amount from the fund. Accordingly, the unpaid claims of the Fund is not a contingency/liability required to be reported for the State of Louisiana. The Louisiana Supreme Court has upheld the constitutionality of this limitation of liability. Williams v. Kushner, 549 So.2d 294 (La. 1989).
The only exception to this conclusion would be a breach of fiduciary duty on the part of the State or its officers. If the Legislature appropriated all or part of the fund for another purpose, thereby depleting the fund and causing claims to go unpaid, or if the individual state officers (Treasurer, Attorney General, Commissioner of Insurance) breached their fiduciary duty and caused the depletion of the Fund, then the State would be liable for those acts, but not by virtue simply of the State's custody of the Fund itself.
Louisiana Attorney General Opinion 89-578, 1991 WL 575045, at *1-2. The PCF argues that any monetary judgment in this case will be satisfied with public funds from the state treasury, and thus sovereign immunity applies to protect those funds. See Delahoussaye v. City of New Iberia, 937 F.2d 144, 147-48 (5th Cir. 1991).
The PCF's argument fails on its face. The PCF relies on the Louisiana Attorney General Opinion to support its argument that any monetary judgment in this case would be paid from the state treasury. The opinion specifically states, however, that the state is not liable for medical malpractice claims of private health care providers. The Attorney General noted that the PCF would pay claims only from monies collected through the surcharge payments paid by the qualified health care providers. Even if the amounts in the fund are insufficient to pay all of the outstanding claims, the state will not be liable for the deficiency. As such, the "important goal" of the Eleventh Amendment to protect state treasuries is not implicated here. See Delahoussaye, 937 F.2d at 147 (citing McDonald v. Board of Miss. Levee Comm'rs, 832 F.2d 901, 907 (5th Cir. 1987)).
Furthermore, the monies in the PCF are provided through a surcharge levied on all qualified health care providers. See LA.R.S. § 40:1299.44(A)(1), (2)(a). The statute that creates the fund specifically states that "[t]he state recognizes and acknowledges that the fund and any income from it are not public monies, but rather are private monies[.]" LA.R.S. § 40:1299.44(A)(1). Also, the Fund's expenses are paid from the fund, and thus the administration of the PCF is not financed with state-provided funds. See LA.R.S. § 40:1299.44(A)(5)(a), (d). Although the Louisiana Attorney General opines that the fund is public money based on other, contradictory constitutional and legislative provisions, the Court is not bound by the Attorney General's conclusion.
The Cozzo Court applied a two-part inquiry when it analyzed the source of funding of the defendants, who were Louisiana sheriffs. See Cozzo, 279 F.3d at 282. First, the Court considered the state's liability for any judgment against the defendants and then considered Louisiana's liability for the sheriff department's general debts and obligations. Id. Here, as noted above, the state is not liable for any claims against the PCF because the claims are limited to funds available in the PCF, which is funded through surcharges levied on qualified health care providers. Also, the MMA establishes that the PCF's general expenses are also paid from the fund. In light of this two-part inquiry, the Court finds that the most important factor of the test weighs strongly in favor of a determination that Louisiana is not the real party in interest in this case.
The PCF cites a Louisiana Fourth Circuit Court of Appeals case in which the court concluded that the PCF is "akin" to a state agency and found the PCF to be an "instrumentality of the state," and the court's conclusion is relevant to the first factor. United Medical Corp. of La. v. Johns, 2000-1226, 798 So.2d 1161, 1165 (La.App. 4 Cir. 10/3/01). The Johns court concluded, however, only that the PCF was "akin" to a state agency for the purposes of notice required by Louisiana Code of Civil Procedure art. 1704, not that it was a state agency. As noted above, the relevant factor is whether case law views the agency as an arm of the state, Cozzo, 279 F.3d at 281, not whether it views the agency as "akin" to state agencies for purposes of notice. Defendant also cites La.Rev.Stat. 13:4581 in support of its argument. La.Rev.Stat. 13:4581 lists entities that are exempt from posting appeal bonds. See LA.R.S. § 13:4581 ("The state, state agencies, political subdivision, parish, and municipal board or commissions exercising public power and functions, sheriffs, sheriff's departments, and law enforcement districts, and the Patient's Compensation Fund, or any officer or employee thereof, shall not be required to furnish and appeal bond[.]") The statute lists the PCF as a separate entity, distinct from the "state, state agencies . . . exercising public power and functions." Thus, rather than supporting its argument, La.Rev.Stat. 13:4581 supports the conclusion that Louisiana statutes do not view the PCF as a state agency. Accordingly, the first factor also weighs against the conclusion that the state is the real party in interest in this case.
The Court next considers the last four factors. The MMA created a Patient Compensation Fund Oversight Board and established the Board in the office of the governor. See LA.R.S. § 40:1299.44(D)(1)(a). The Board is "responsible, and [has] full authority under law, for the management, administration, operation, and defense of the fund." See LA.R.S. § 40:I299.44(D)(2)(a). The governor appoints the members of the Board, subject to Senate confirmation. See LA.R.S. § 40:1299.44(D)(1)(a). Although the Board is established in the office of the governor, the MMA does not provide for direct state oversight of the Board or involvement in administration of the Fund. Thus, the third factor generally weighs against Eleventh Amendment immunity. The fourth factor, on the other hand, weighs in favor of such immunity because the Fund is concerned with paying medical malpractice claims on a statewide level. The MMA does not specifically state whether the PCF can sue and be sued in its own name, but it requires the Patient's Compensation Oversight Board to appoint legal counsel for the Fund, which implies that the Fund may sue and be sued. Also, the Board is responsible for the defense of the Fund, which again implies that the Fund may be sued. See LA.R.S. § 40:1299.44(D)(2)(a). As such, the fifth factor points to a finding of no immunity. Lastly, the PCF may hold and use property. See LA.R.S. § 40:1299.44 (A)(5)(g) ("Any purchases from the fund of furniture, fixtures, equipment, or other property shall be specifically designated . . . as property of the fund"). As such, the six factor counsels against Eleventh Amendment immunity.
Balancing these six factors, the Court rejects defendant's argument that it is immune from liability in this Court under the Eleventh Amendment.
In concluding that this Court may impose liability on the PCF, the Court joins several other federal courts that have imposed liability on the PCF. See, e.g., Labiche v. Legal Security Life Ins. Co., 31 F.3d 350, 351 (describing district court's approval of the settlement in which plaintiff's recovered $400,000 plus $252, 224.76 in medical expenses from PCF); Castillo v. Montelepre, Inc., 999 F.2d 931, 934 (5th Cir. 1993) (affirming judgment against PCF); Ruff v. Bossier Medical Center, 952 F.2d 139, 139 (noting that the PCF settled with plaintiff's after it was added as a defendant in suit in federal court); Barnes v. Quinlan, 2002 WL 31375606, at *1 (E.D.La.) (granting summary judgment against the PCF).
III. Conclusion
For the foregoing reasons, the Court denies defendant's motion to dismiss.