Late et al v. United States of America

Filing 67

MEMORANDUM re the U.S's MOTION to Limit Pltfs' Future Medical Expense Claim to No More Than $100,000 61 (Order to follow as separate docket entry) Signed by Honorable Sylvia H. Rambo on 3/3/15. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CHRISTINA LATE AND NATHAN
ARMOLT, AS PARENTS AND
NATURAL GUARDIANS OF D.A.,
A MINOR AND IN THEIR OWN
RIGHT,
Plaintiffs,
v.
UNITED STATES OF AMERICA
Defendant

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Civil No. 1:13-CV-0756

Judge Sylvia H. Rambo

MEMORANDUM
In this medical malpractice action brought by the minor child’s parents
against the United States pursuant to the Federal Tort Claims Act (“FTCA”), the
United States has moved to limit Plaintiffs’ future medical expenses claim to no
more than $100,000.00, or alternatively, to be treated like a private litigant under
Pennsylvania law. (Doc. 62.) The principle issue raised herein is whether this court
has jurisdiction to order the United States to provide funding for the periodic
payments of a future medical expenses award in excess of $100,000.00 “by means of
an annuity contract, trust, or other qualified funding plan,” as mandated by
Pennsylvania’s periodic payment statute. See 40 P.S. § 1303.509(b)(6). For the
following reasons, the court holds that it may order the parties to place an award into
an annuity contract, trust, or other qualified funding plan. Accordingly, the court
will grant the motion to the extent the United States seeks to be treated like a private
litigant under Pennsylvania law and deny the motion to the extent the United States
seeks to limit Plaintiffs’ future medical expenses claim to no more than $100,000.00.

I.

Background
Plaintiffs, Christina Late and Nathan Armolt, filed this action on behalf

of their minor son, D.A., alleging that he suffers from severe and permanent physical
and neurological injuries as a result of negligent obstetrical care rendered by Dr.
Thomas Orndorf on February 21, 2012, at Chambersburg Hospital, a federally
supported hospital located within the Middle District of Pennsylvania. (Doc. 1.)
Plaintiffs seek, inter alia, future medical expenses in excess of $15,000,000.00.
(Doc. 62, p. 8 of 26.)
This matter was initially scheduled for trial on September 15, 2014.
However, on August 29, 2014, the parties filed a joint motion to continue trial,
namely on the basis that D.A.’s potential future medical expenses are highly
contested due to the difficulty in ascertaining the full extent of brain injury in a child
under the age of four. (Doc. 52.) The parties represented that a continuance of two
years would provide D.A. with the opportunity to receive additional medical care and
participate in physical, occupational, and speech therapy, and that his progress, or
lack thereof, would place the medical experts and treating physicians in a better
position to opine as to his prognoses and future care needs. (Id.) The court granted
the motion on September 8, 2014. (Doc. 53.)
On November, 24, 2014, the United States filed the instant motion and
supporting brief seeking to limit Plaintiffs’ future medical expenses claim to no more
than $100,000.00 or, alternatively, to treat the United States like a private litigant
under Pennsylvania law (Docs. 61 & 62), to which Plaintiffs responded on December
29, 2014 (Doc. 65). The United States replied on January 12, 2015. (Doc. 66.)
Thus, the matter is ripe for disposition.
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II.

Legal Standard
The United States has brought the instant motion pursuant to Federal

Rule of Procedure 12(b)(1), which allows a court to dismiss a claim for lack of
subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The motion amounts to a
factual attack on the court’s jurisdiction because it challenges not merely an alleged
pleading deficiency, but rather the actual failure of Plaintiffs’ future damages claim
to comport with the jurisdictional prerequisites of the FTCA. United States ex rel.
Atkinson v. Pennsylvania Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007). As
such, no presumptive truthfulness attaches to the allegations in the complaint, and the
court may consider and weigh evidence outside the pleadings to determine if it has
jurisdiction. Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000);
Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977).
III.

Discussion
The FTCA waives the federal government’s sovereign immunity in tort

actions and makes the United States liable “in the same manner and to the same
extent as a private individual under like circumstances,” depending upon the law of
the state where the tort occurred. 28 U.S.C. § 2674; Cibula v. United States, 664
F.3d 428, 430 (4th Cir. 2012) (citing 28 U.S.C. § 1346(b)(1)) (stating that courts
determine the United States’s liability “in accordance with the law of the place where
the [negligent] act or omission occurred”). Pennsylvania law controls the manner
and extent of the United States’s liability in this case.
The Pennsylvania Medical Care Availability and Reduction of Error Act
(“MCARE Act”) provides a comprehensive scheme for the method by which a
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judgment for future medical expenses must be satisfied in medical malpractice
actions. As is relevant to the present case, the MCARE Act provides that a judgment
for future medical and other related expenses in excess of $100,000.00 “shall be paid
as periodic payments.” 40 P.S. § 1303.509(b)(1). The trier of fact is required to
make a specific finding as to the amount of future damages “by year,” id. at §
1303.509(a)(2)(i), and “may vary the amount . . . from year to year for the expected
life of the claimant to account for different annual expenditure requirements,” id. at §
1303.509(b)(1). The trier of fact may also “incorporate into any future medical
expense award adjustments to account for reasonably anticipated inflation and
medical care improvements.” Id. at § 1303.509(b)(2). The future damages must then
“be paid in the years that the trier of fact finds they will accrue.” Id. at §
1303.509(b)(3). The statute further provides that “[e]ach party liable for all or a
portion of the judgment shall provide funding for the awarded periodic payments . . .
by means of an annuity contract, trust[,] or other qualified funding plan which is
approved by the court.” Id. at § 1303.509(b)(6). Upon the death of the claimant, the
periodic payments terminate for all medical expenses not yet due. Id. at §
1303.509(b)(5).
Pursuant to the “like circumstances” requirement of the FTCA, see 28
U.S.C. § 2674, it would appear that, under Pennsylvania law, the United States
should provide funding for periodic payments of a future medical expenses award in
excess of $100,000.00 by means of an annuity contract, trust, or other qualified
funding plan. However, relying almost exclusively on Frankel v. Heym, 466 F.2d
1226 (3d Cir. 1982), the United States argues that the court is precluded from
imposing future medical damages against the United States in any form except a
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lump-sum money judgment and, therefore, the court would exceed its jurisdiction if
it ordered the United States to comply with Pennsylvania’s periodic payment
scheme. The United States contends that the court must instead limit Plaintiffs’
claims for future medical damages to the statute’s $100,000.00 threshold for lumpsum payments. See 40 P.S. § 1303.509(b)(8) (stating that future damages for
medical expenses will not be awarded in periodic payments “if the claimant objects
and stipulates that the total amount [of the award], without reduction to present
value, does not exceed $100,000.”). The United States’s argument is unavailing.
Even assuming that funding the periodic payments by an annuity contract, trust, or
other qualified funding plan involves something other than a lump-sum payment, the
court finds that it is authorized to craft a judgment in excess of $100,000.00 against
the United States in order to comply with the MCARE Act.
In Frankel, the Third Circuit denied the United States’s proposal to have
an award for future medical damages take the form of a reversionary trust for the
benefit of the permanently disabled plaintiff. Frankel, 466 F.2d at 1228. Under the
trust agreement, the United States would have been required to supplement the trust
as needed throughout the plaintiff’s life, and any trust funds remaining at the time of
the plaintiff’s death would revert to the United States. Id. After examining the
relevant jurisdictional statute for suits brought under the FTCA, which, among other
things, “authorizes district courts to entertain ‘civil actions on claims against the
United States, for money damages,”1 see 28 U.S.C. § 1346 (emphasis supplied), the
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The statute provides, in pertinent part, as follows:

[D]istrict courts . . . shall have exclusive jurisdiction of civil actions on claims
against the United States, for money damages . . . for injury or loss of property,
(continued...)
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Third Circuit concluded that “district court[s] should not make other than lump-sum
money judgments” in FTCA cases. Frankel, 466 F.2d at 1228-29. The court
reasoned that the federal waiver of sovereign immunity incorporates the traditional
common law rule that damages must be awarded in lump-sum judgments, and that
lump-sum money judgments are preferable to judgments that would impose a
continuing burden upon the judiciary to supervise the award. Id. The court added
that, “[i]f novel awards are to be permitted against the government, Congress should
affirmatively authorize them.” Id. at 1229.
Although the Third Circuit’s decision in Frankel may initially appear to
foreclose the application of Pennsylvania’s periodic payment scheme to the United
States, Frankel is distinguishable from the matter sub judice. Unlike the proposed
reversionary trust in Frankel, Pennsylvania’s periodic payment scheme would not
subject the United States to ongoing obligations in violation of the FTCA. See, e.g.,
Lee v. United States, 765 F.3d 521, 529 (5th Cir. 2014) (“[A]wards constituting
continuing obligations on the United States are not appropriate under the FTCA.”);
Hull v. United States, 971 F.2d 1499, 1505 (10th Cir. 1992) (“[C]ourts cannot
subject the government to ongoing obligations like the continuing payments
proposed in Frankel.”). To the contrary, the MCARE Act requires the trier of fact to
determine the specific dollar amount due for each year future medical expenses are

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(...continued)
or personal injury or death caused by the negligent or wrongful act or omission
of any employee of the Government while acting within the scope of his office
or employment, under circumstances where the United States, if a private
person, would be liable to the claimant in accordance with the law of the place
where the act or omission occurred.
28 U.S.C. § 1346.
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awarded. Thereafter, the sum total of the future damages award is calculated from
the annual allocations, and the liable party must provide funding for the awarded
payments by means of an annuity contract, trust, or other qualified funding plan.
Because the total amount of the future payments is known, the liable party’s
obligation ceases when it pays an immediate lump-sum to fund the future periodic
payments. Such a scheme thereby complies with the FTCA and alleviates any
concern for imposing an administrative burden on the court.
Moreover, the Third Circuit’s decision in Frankel preceded
Pennsylvania’s passage of the MCARE Act and, therefore, there was no authority
mandating that the award be structured as the United States requested. As it stands
today, however, the MCARE Act mandates that future medical expenses must be
paid periodically in Pennsylvania. See 40 P.S. § 1303.509 (“[F]uture damages for
medical and other related expenses shall be paid as periodic payments.” (emphasis
supplied)). Thus, Frankel’s holding is at odds with the FTCA’s requirement that the
United States be treated like a private defendant under the law of the state where the
tort occurred.
When presented with statutes similar to Pennsylvania’s periodic
payment scheme, other circuits have unanimously held that the FTCA permits
district courts to craft awards to comply with state periodic payment statutes
provided that the United States satisfies its obligation in one lump-sum. See Lee v.
United States, 765 F.3d 521 (5th Cir. 2014); Cibula v. United States, 664 F.3d 428
(4th Cir. 2012); Dutra v. United States, 478 F.3d 1090 (9th Cir. 2007); Hill v. United
States, 81 F.3d 118 (10th Cir. 1996). For instance, in Lee, the Fifth Circuit reversed
the district court’s decision not to apply the Texas periodic payment scheme to an
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award for future medical damages against the United States. Lee, 765 F.3d at 526.
The Texas statute at issue provided that, “[a]t the request of a defendant physician or
health care provider or claimant, the court shall order that” medical damages “be
paid in whole or in part in periodic payments rather than by a lump-sum payment.”
Id. at 524 (citing Tex. Civ. Prac. & Rem. Code § 74.503(a)). In an award issued
pursuant to that statute, the district court is required to “make a specific finding” as
to, inter alia, the dollar amount of each periodic payment to satisfy the judgment, id.
at 524, 529 (citing Tex. Civ. Prac. & Rem. Code § 74.503(c), (d)), and the defendant
is required to fund the payments by an annuity contract, bond, treasury note,
insurance contract, or other satisfactory form of funding approved by the court, see
Tex. Civ. Prac. & Rem. Code § 74.505. Upon the death of the payee, the periodic
payments terminate for all damages aside from loss of earnings and “any security
given reverts to the defendant.” Lee, 765 F.3d at 524-25 (citing Tex. Civ. Prac. &
Rem. Code § 74.506(b), (d)).
After examining the statute, the Fifth Circuit held that the district court
should have structured the damage award in a manner resembling the Texas periodic
payment scheme. Id. at 527. In distinguishing Vanhoy v. United States, 514 F.3d
447 (5th Cir. 2008), a case wherein the Fifth Circuit had denied the United States’s
request to impose a reversionary trust for which the plaintiff’s future medical care
needs would be distributed as needed, the court focused on the ability of the court to
order the United States to make a lump sum payment to fund the award.

Lee, 765

F.3d at 528 (citing Vanhoy, 514 F.3d at 451). The Lee Court approved of the Texas
scheme because it did not require the United States to incur continuing obligations.

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Similarly, in Cibula, the Fourth Circuit held that the district court erred
by failing to fashion a reversionary trust that would approximate California’s
periodic payment scheme. Cibula, 664 F.3d at 433. Under California law, a private
defendant in a medical malpractice action may elect to pay out a future medical
damages award periodically rather than in an immediate lump-sum. Id. at 432-33
(citing Cal. Civ. Proc. Code. § 667.7). Recognizing that the FTCA prohibits ongoing
obligations against the United States, both parties urged the district court to fashion a
reversionary trust that, in their respective views, would approximate the periodic
payments contemplated by the California statute. Id. at 433-34. The United States
proposed funding the corpus of the trust with the present value of the future care
award, while the plaintiffs argued that the corpus of the trust must consist of the
gross future care costs. Id. at 434. The Fourth Circuit sided with the United States,
concluding that the United States’s retention of a reversionary interest in the present
value judgment sufficiently approximated the California statute. Id. at 435.
The Ninth and Tenth Circuits have also approved the funding of
periodic payments for future medical expenses in FTCA actions. In Dutra, the
plaintiffs argued that state law was incompatible with federal law because the FTCA
prohibits the United States from making periodic payments. The relevant
Washington statute required the court, at the request of a party, to enter a judgment
that provides for the periodic payment of future economic damages as determined by
the court. Id. at 1091. The court rejected the plaintiffs’ argument, explaining that
“nothing in the FTCA prevents district courts from ordering the United States to
provide periodic payments in the form of a reversionary trust” in order to
“approximate the results contemplated by state statutes.” Dutra, 478 F.3d at 1092.
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Likewise, in Hill, the United States argued that the district court should have placed
the plaintiff’s future damages in a reversionary trust. Hill, 81 F.3d at 120. Under
Colorado law, the trier of fact was required to make a lump-sum award in favor of
the victim, which sum is then paid out in equal installments until the time of the
victim’s death. Id.; see Vanhoy, 514 F.3d at 453 n.28 (distinguishing Colorado and
Louisiana statutes). The Tenth Circuit held that, although the United States “may not
be ordered to make periodic payments in the manner in which the [statute] provides,”
the United States is entitled to a reversionary trust for future medical expenses
similar to that envisioned under the statute. Id.; see also Hull, 971 F.2d at 1505
(holding that district courts have the “inherent authority to structure awards or to
impose trusts or reverter conditions to ensure that the damage recovery is in the best
interest of the victim” so long as the United States’s obligation ceases when it pays a
fixed lump-sum to fund the trust).
Upon consideration of the foregoing, the court rejects the United
States’s argument that Pennsylvania’s periodic payment scheme contemplated by the
MCARE Act is incompatible with the FTCA and that the court must therefore limit
Plaintiff’s future medical expenses to $100,000.00. In all of the above-cited cases,
the courts sought to treat the United States “in the same manner and to the same
extent as a private individual” under the law of the state. See 28 U.S.C. § 2674.
Consequently, the effect of the decisions was to place the United States and the tort
victim in exactly the same position that would have resulted had the victim been
injured by any other similarly situated tortfeasor. None of these cases—including
Frankel—offers support for the proposition that the United States should benefit
from an inequitable application of a mandatory state statute at the expense of the tort
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victim insofar as it would limit a claim for future damages to $100,000.00. Such a
result is clearly not contemplated by the MCARE Act and would not result in “like
treatment under like circumstances” as mandated by the FTCA. See Hill, 81 F.3d at
121. The United States’s argument that Congress must expressly provide for a
periodic payment structure also fails to appreciate the FTCA’s like circumstances
requirement. See Lee, 765 F.3d at 529.
Provided that the United States satisfies its obligation in a lump-sum,
the court concludes that it is not prohibited from ordering the United States to
provide funding for periodic payments of future medical damages by means of an
annuity contract, trust, or other qualified funding plan in compliance with
Pennsylvania’s periodic payment scheme. Assuming, arguendo, that D.A.’s future
medical damages exceed $100,000.00, the court will craft a judgment in compliance
with the MCARE Act in a manner that is consistent with the FTCA’s requirement
that the United States not be subjected to ongoing obligations. An annuity coupled
with a reversionary trust, as proposed by the United States, is one possible
mechanism to effectuate the periodic payments, but it is not the exclusive
mechanism. A hearing will be held following any award of future medical care to
provide a basis for the court to determine the appropriate type of funding plan and
method of administration.

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IV.

Conclusion
Because the MCARE Act does not require the liable party to make

payments to the plaintiff on an as-incurred basis, the court finds that it is not
prohibited from ordering the United States to make a one-time payment to provide
funding for the periodic payment of a future medical expenses award by means of an
annuity contract, trust, or other qualified funding plan in accordance with
Pennsylvania law. Thus, the motion is granted to the extent the United States seeks
to have the court treat it like a private litigant under Pennsylvania law. The motion is
denied to the extent it seeks to have Plaintiffs’ future medical expense claim limited
to no more than $100,000.00.
In the event that this court awards damages to Plaintiffs for future
medical damages in excess of $100,00.00, a hearing will be held prior to the entry of
judgment to determine the appropriate means for satisfying the award in compliance
with both the FTCA and the MCARE Act.
An appropriate order will issue.
s/Sylvia H. Rambo
United States District Judge
Dated: March 3, 2015.

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