The Court didn’t waste time getting to a controversial matter, the applications for stays of the Occupational Safety and Health Administration’s (“OSHA’s”) COVID-19 mandate concerning alternatives of mandatory testing, masking, or vaccination directed at employers and the Department of Health & Human Services (“DHHS”) mandate directed at health care facilities and their workers.
The Court has resumed issuing opinions with its holding in Babcock v. Kijakazi, Acting Commissioner of Social Security. This case of statutory interpretation is of particular interest to the relatively small set of individuals who claim retirement benefits based on simultaneous service in two federal pension systems. The Court’s opinion, written by Justice Barrett, was joined by all of the other Justices, save for Justice Gorsuch, who, somewhat self-consciously, dissented.
Readers of SCOTUS Today, especially employers, might appreciate seeing an article that I co-wrote concerning the Supreme Court’s rejection of a petition to enjoin New York State’s vaccine mandate applicable to health care workers: “Supreme Court Lets New York’s Vaccine Mandate for Health Care Workers Stand.”
This action is consequential on its face because while future litigation by health care workers and others is certain, no fewer than six Justices have indicated support for a major mandate that allows for very limited exemptions. This marks the second time that the Court has rejected such a petition.
No case in recent months has created more news than the Mississippi abortion case, Dobbs v. Jackson Women’s Health Organization, as to which the Supreme Court recently heard oral argument.
Commentators on all sides of the inherently controversial issue of abortion have, often with great self-importance, opined how, at least in their views, each of the Justices will decide the case and how that decision will affect the Court’s two major opinions in the area: Roe v. Wade and Planned Parenthood of Southeastern Pa. v. Casey. We likely will have to wait months to know the outcome of Dobbs, in which the state argues that the trimester-based regime of Roe must be overruled.
We recently participated in what the New Jersey Law Journal called the “first complex civil jury trial to be conducted in person since the COVID-19 pandemic.” Although the case settled shortly after opening statements, this experience taught us that New Jersey courts are ready to try complex civil cases safely and responsibly with new COVID protocols that may force trial attorneys to depart from their usual practices. We published an article in the New Jersey Law Journal about this experience that may be of interest to our readers.
While this post is not going to be of profound interest to most practitioners, it serves at least two purposes. First, it marks the new flow of formal opinions of the Court for the current term, and second, it is a reminder that there is a small category of cases that proceed to the Court in its original jurisdiction—one that includes suits between states.
Article III, section 2, of the Constitution provides that “In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.”
Today’s case is that of Mississippi v. Tennessee, an original action brought by Mississippi, seeking damages related to the pumping of groundwater by the City of Memphis from a source known as the Middle Claiborne Aquifer. Mississippi claimed an exclusive right to the water at issue, notwithstanding the facts that the aquifer lies below no fewer than eight states and the wells from which Memphis was pumping are all in Tennessee.
Applying the doctrine of equitable apportionment—which aims to produce a fair allocation of a shared water resource between two or more states, based on the principle that states have an equal right to reasonable use of shared water resources—the Court held in favor of Tennessee and dismissed Mississippi’s claim with prejudice.
One suggests that as the nation has begun to experience the effects of climate change and population shifts, disputes like this are going to increase. In thinking about equitable apportionment of a resource among the states, Ben Franklin’s famous statement, uttered in an entirely different context—that “we must, indeed, all hang together …”—comes to mind.
When hospitals and doctors treat patients who are injured in car accidents, the health care providers reasonably expect that their rights to be compensated for the care they provide will not be conditioned upon their willingness to participate in their patients’ personal injury lawsuits against allegedly negligent drivers. A common pleas Court in Ohio applied this sensible reasoning in a recent decision, dismissing a car-accident plaintiff’s attempts to force the hospital that treated her to participate in her lawsuit against the driver who allegedly caused the injuries that led her to seek care at the hospital.
In Cheadle, et al., v. Goode, et al., Franklin County Court of Common Pleas Case No. 21 CV 003794, Marietta Memorial Hospital (“MMH”) treated a patient for injuries following a motor vehicle accident. That patient and her husband later sued the driver for negligence. They included a claim against MMH, alleging that it should “assert, prosecute and pursue any subrogation, reimbursement, collections, lien and/or other claim they might have, or be deemed to have waived any such claims.” (Complaint at ¶ 19.)
In granting MMH’s motion to dismiss, the court held that it was “not a necessary party under Civ.R. 19 because its presence in th[e] case has no bearing on Plaintiff’s tort claim, and complete relief can be accorded in MMH’s absence as a party in th[e] case.” (Decision at 3.) Further, the Court held that MMH was not a permissive party under Civ.R. 20 to its patient’s lawsuit against the driver because “any claim that MMH may have for reimbursement arises from a separate transaction or occurrence than the incident at issue and involves separate questions of law and fact.” (Id. at 4.)
The court relied on decisions from several other jurisdictions that have reached the same result. Most notably, the West Virginia Supreme Court has held that:
[A] hospital’s claim for payment of services arises from a debtor-creditor relationship and not subrogation. Accordingly, we hold, . . . a medical provider’s right to be compensated by a patient is not dependent upon the patient’s ability to obtain a recovery for such medical expenses from a tortfeasor. Instead, a medical provider’s claim generally rests upon a debtor-creditor relationship, and such a claim cannot be extinguished or bared by the doctrine of subrogation.
Porter v. McPherson, 198 W.Va. 158, 164–165 (1996).
The court further relied on decisions from Montana, Illinois, and California that reach the same conclusion:
- Sisters of Charity of Providence v. Nichols, 157 Mont. 106, 112, 483 P.2d 279 (1971) (“[T]he hospital’s claim and lien is based upon a debt owed the hospital by its patient in whose shoes it does not stand for any purpose, the debt being owed to it by its patient irrespective of the patient’s rights against a third party wrongdoer.”).
- Maynard v. Parker, 54 Ill.App.3d 141, 145, 369 N.E.2d 352, 355 (Ill.App.1977) (“[T]he hospital’s right to payment of its claim is not dependent upon plaintiff’s recovery against a third party but rather involves an ordinary debtor-creditor relationship.”).
- City & Cty. of San Francisco v. Sweet, 12 Cal.4th 105, 117, 906 P.2d 1196, 1203 (1995) (“The plaintiff’s creditors do not have an interest in the recovery in common with the plaintiff. That the creditors may benefit from any recovery is an incidental, not an intended, benefit of the litigation.”)
Referring to these other states’ decisions, the Ohio court agreed: a medical provider’s right to reimbursement does not arise from, or turn upon, the success or failure of the provider’s patient’s entirely separate lawsuit against an alleged tortfeasor. Moreover, because health care providers in these instances have not paid their patient’s debts, they are not subrogated parties, and—contrary to the plaintiff’s suggestion in Cheadle—the doctrine of subrogation is not implicated just because a hospital expects to be paid for the care that it provides to a patient, if a different negligent party caused the patient’s injuries.
Plaintiffs’ attempts to haul healthcare providers into personal injury actions have been on the rise recently. Although plaintiffs may choose to name their medical providers as defendants for various reasons, one reason is to renegotiate any debts the plaintiffs owe their providers for services rendered. This practice has deeply troubling policy implications for medical providers, because a provider’s right to reimbursement for services provided to their patients does not hinge on that patient’s potential recovery for their injuries in a tort action. Moreover, the costs of participating in a patient’s personal injury action could erode the amount of compensation the provider might reasonably expect to receive for the care it provided to the patient.
The court’s decision provides helpful clarity that should help arm hospitals and other healthcare providers seeking to resist efforts by personal injury plaintiffs to compel healthcare providers to risk losing reimbursement if they elect not to join in their patients’ tort suits.
As we previously reported, Judge Bough of the U.S. District Court for the Western District of Missouri denied an insurance carrier’s motion for summary judgment in K.C. Hopps Ltd. v. The Cincinnati Ins. Co. Inc., No. 20-cv-00437-SRB (W.D. Mo. Sept. 21, 2021) and sent the case to trial.
On October 28, after a three day trial, the jury returned a verdict in favor of the insurer. The case involved claims by a group of restaurants under their insurance policies’ business income (and extra expense) coverage form. Under that coverage, the insurer is obligated to pay for the insured’s actual loss of business income when it must suspend operations due to physical loss or damage to the insured’s property. Of note, the Court previously ruled that “proof of physical contamination is sufficient to meet the Policy’s requirement for physical loss or damage.”
At the close of the case, the insurer made a motion for a judgment as a matter of law on the grounds that the policyholder had failed to show its properties were physically damaged by COVID-19 and needed to be restored before operations could resume. Although the Court denied the motion, it provides a window into some of the key testimony that may have swayed the jury.
According to the motion, plaintiff admitted that it never tried to determine whether COVID-19 was on its premises and one of its experts, a molecular epidemiologist, testified that there was no testing for the presence of COVID-19 at any of the policyholder’s nine restaurant locations. Similarly, a chemical enzymology expert, testified that COVID-19 can be removed and inactivated by cleaning, and also can decay on its own, the insurer said. As a result, the insurer argued that the policyholder did not present any evidence that COVID-19 was present on its premises and thus could not establish physical contamination.
Additionally, the restaurant group’s owner testified that the restaurants did not shut down in February despite knowledge of COVID-19. Instead, the restaurants only closed after government orders required it to do so, and reopened once the orders became less restrictive. Accordingly, the insurer argued in its motion that “[e]ven if plaintiff’s evidence showed physical contamination at any of its properties, which it does not, the evidence introduced by plaintiff demonstrates that its alleged loss was not caused by any physical loss, physical damage or physical contamination caused by the virus, but was instead caused solely and completely by plaintiff’s compliance with governmental orders that impacted its operation of its premises.”
The verdict form did not indicate the reason for the verdict so we do not know whether one or both of the insurer’s arguments were persuasive. But, the trial again highlights the evidence that policyholders will need to develop – at a minimum, proof of physical contamination of the property by COVID-19 – in order to establish coverage for business interruption from COVID-19.
Last week, the U.S. Department of Justice’s Deputy Attorney General Lisa Monaco announced plans to increase its enforcement of white collar crimes against individuals and corporations. Monaco made the announcement speaking at the American Bar Association’s While Collar Crime Conference. She made clear to “those of you who are counselors and voices in the C-Suite and Boardroom” that DOJ “will not hesitate to take action when necessary to combat corporate wrongdoing.”
Monaco, DOJ’s second in command, is no stranger to prosecuting corporate crimes having participated in the Enron investigation. Unveiling an ambitious plan for prosecutors to hold accountable those who engage in criminal conduct, Monaco noted that, going forward, federal prosecutors will have a mandate to “enforce the criminal laws that govern corporations, executives, officers and others, in order to protect jobs, guard savings and maintain our collective faith in the economic engine that fuels this country.”
Additionally, Monaco informed the audience that Attorney General Merrick Garland “has made clear it is unambiguously this department’s first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance.” This directive comes on top of DOJ’s continued and public focus on criminal and civil investigations on COVID-19 related enforcement.
According to Monaco, the impetus for this new focus on corporate wrongdoing arose from the changing nature of corporate crime: corporate crimes increasingly have a national security implication; investigators are able to use more sophisticated data analytics to track criminal conduct; and emerging technological and financial industries, such as cryptocurrency, are leading to new frontiers in criminal schemes.
Monaco acknowledged that cases against corporate executives are “some of the most difficult” that DOJ brings, but she pledged that prosecutors will not be deterred by the prospect of losing cases. She urged prosecutors to be “bold” in bringing cases against executives in order to hold accountable those who committed crimes. And, significantly, Monaco noted that DOJ intends to provide substantial resources for its prosecutors to initiate these kinds of enforcement actions.
Specifically, Monaco detailed three new DOJ initiatives that will guide federal prosecutors—though she cautioned these policies would just be a “first step” in ramped up DOJ investigations into corporate crimes. These initiatives come on the heels of DOJ’s 2020 release of its revisions to the “Evaluation of Corporate Programs” guidance, which focused on more individualized evaluations for corporations caught in DOJ’s crosshairs.
- First, DOJ will mandate more disclosures from corporations regarding misconduct. “It will no longer be sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct.” Instead, in a restoration of prior principles detailed in the Yates memo, to receive credit for cooperation with prosecutors, corporations must disclose “all non-privileged information about individual wrongdoing.” This puts federal prosecutors—and not corporations and executives themselves—in the position to assess the relevance and culpability of any individuals involved with the misconduct.
- Second, when evaluating resolutions, DOJ will now not just consider a corporation’s past similar misconduct, but, instead, DOJ will take into account the entirety of a corporation’s past misconduct. Currently, for example, in a tax matter, DOJ would only consider the corporation’s prior tax misconduct (if any) in reaching a resolution to that tax matter. Now, going forward, DOJ will consider any prior misconduct, whether related to violations of the tax code, the Foreign Corrupt Practices Act, the anti-money laundering provisions, False Claims Act, or any other federal or state Of note, Monaco made it clear that federal prosecutors will not ignore a corporation’s past state-based misconduct. Monaco directed prosecutors “to start by assuming all prior misconduct is potentially relevant.” Monaco questioned whether pre-trial diversion, such as non-prosecution or deferred prosecution agreements, is appropriate for recidivist corporations.
- Third, DOJ will seek to impose independent monitors to oversee a corporation’s compliance and disclosure obligations. This last initiative marks a distinct break from recent years, when independent monitors were the exception and not the rule and a return to prior DOJ policies.
Additionally, Monaco also announced the formation of Corporate Crime Advisory Group. This new group will propose new policies and procedures for corporate crime enforcement within DOJ. The group will consider issues such as repeated corporate offenders, non-compliance with deferred prosecution agreements, selection of monitors, and resource allocation for investigating corporate crimes, and also develop benchmarks by which a corporation’s cooperation can be measured.
Echoing recent statements regarding the importance of compliance, Monaco closed by cautioning companies “to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.”
Corporations should heed this advice. Indeed, when it comes to avoiding government investigations, there are substantial benefits for corporations to be proactive about reviewing and updating their compliance programs and procedures. The applicability of Benjamin Franklin’s old adage— an ounce of prevention is worth a pound of cure—cannot be overstated. Corporations will be better served by conducting an assessment of their actions today, rather than have DOJ investigate their actions tomorrow in the wake of a planned increase in white collar investigations and prosecutions.
We recently wrote about the pros and cons of the virtual deposition, a mechanism which saw its use burgeon during the pandemic. Epstein Becker & Green’s Managing Director, James P. Flynn, has taken the virtual experience to the next level having recently participated in a virtual bench trial. I asked Jim about his experience, and also received some of his big-picture thoughts on this medium.
Q: Were any aspects of the trial easier, or more streamlined, because it was being conducted virtually?
A: Dealing with individual documents, and going from one document to the next, is very efficient, especially where parties have the foresight to cooperate. We split the cost for a third party document custodian who acted like combined court clerk and trial tech. The tech simply called up noted documents, and could enlarge and highlight on command. This worked well in letting counsel, witnesses, and the court follow along and focus. On the other hand, objections were harder to handle, as we did not have or use a breakout room function. This meant that we did not have any sort of sidebar to resolve objections, and unlike an in-person trial, witnesses could hear our colloquies with the judge.
Q: Even in bench trials, many trial attorneys thrive by being on their feet, actively engaging with the witness they are questioning. That obviously is not an option during a virtual trial. Does the lack of “showmanship” in a virtual trial take away from an attorney’s overall effectiveness?
A: Good trial attorneys adapt to their setting, and find ways to be effective. I don’t think the medium reduces a good attorney’s effectiveness, but I do think that the virtual trial eliminates certain opportunities that trial attorneys have to distinguish themselves from litigators who may not be as experienced, skilled or confident in the trial setting. But, in end, I believe that is a minor, marginal matter. Like in-person trials, the best way to put on a good show is to ask the right question at the right time, especially in a bench trial where you’re going to do a written post trial brief with record citations. In a virtual trial, because you don’t necessarily have to rely on the jurors’ recall of some moment, you can weave your proofs more subtly, and in some sense, the virtual bench trial may let you score points that other side doesn’t realize are going up on scoreboard until it’s too late.
Q: One of the concerns we voiced in our blog about virtual depositions was the inability for a questioner to accurately gauge a witness’s credibility and overall body language from a broadcast over a computer monitor. Is this concern in any way minimized during a virtual bench trial since it is the judge who is making such determinations rather than a jury?
A: You are right on point: In many ways, this is the biggest downside of the virtual trial. This is especially so during examinations when you also have documents on screen—at that point, even the witness’s face is pretty small. On the other hand, in a virtual trial, everybody is right in front of you, and you see everybody’s face simultaneously—the judge, opposing counsel, witness, other side’s client representative. In a court room, the best trial lawyers find ways to have that 360⁰ vision, but in the virtual trial you don’t need those eyes in the back of your head, the head swivel, or that sixth sense because everybody is always in front of you, unlike the courtroom where they are sometimes beside or behind you.
Q: Depending on the nature and complexity of the circumstances at issue, bench trials can be spread out over multiple, non-contiguous sessions, separated by weeks, if not months. Will virtual bench trials in any way promote a more efficient conclusion to the presentation of evidence?
A: For the most part, virtual bench trials are more efficient. There’s no need to physically pass exhibits to a witness, an adversary, and the judge, or to cart them in and out of your car in boxes. And, when there is no need for you or witnesses to travel, you can make trial days or half days easier to schedule despite conflicting and overlapping commitments, so the virtual trial can help shorten the intervening gaps. Yet, the benefit of that efficiency isn’t worth the tradeoffs, as I much prefer to conduct in-person trials. You just can’t replace that emotion and adrenalin that you get in an in-person trial for anybody involved. I once sat in the third row as James Earl Jones played the lead in Othello, and, sorry, but there is no way me, anybody else in the audience, him, the other actors, the director, or the crew would have felt that we had the same experience if we were each in separate boxes for a livestream/Zoom.
Q: Do you see any circumstances where virtual bench trials could be a useful addition to the post-pandemic practice of law?
A: I do. There are some cases, especially those involving commercial contracts, where the issues are narrow but they probably technically present issues of fact precluding summary judgment. When courts and parties only need limited factual testimony, virtual bench trials may just be more efficient on cost, travel, and time basis. As a result, we will learn to live with them—just like we occasionally watch great plays on PBS or Netflix. Those broadcasts don’t replace live theater; rather, they complement it, and sometimes partially sate the desire to experience it until our next chance to sit in a theater for a live performance. During the pandemic, we found ways to experience theater remotely, but everybody is very happy that Broadway has reopened. I feel exactly the same way about trial courts.