Simms Ex Rel. C.J. v. United States ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-2161
MISTY SIMMS, next friend of C.J., an infant, and
individually,
Plaintiffs - Appellees,
v.
UNITED STATES OF AMERICA,
Defendant - Appellant,
and
RICHARD BOOTH, M.D.; VALLEY HEALTH SYSTEMS, INC.; UNITED
STATES DEPARTMENT OF HEALTH & HUMAN SERVICES,
Defendants.
Appeal from the United States District Court for the Southern
District of West Virginia, at Huntington. Robert C. Chambers,
Chief District Judge. (3:11-cv-00932)
Argued: January 27, 2016 Decided: October 7, 2016
Before WYNN and HARRIS, Circuit Judges, and Loretta C. BIGGS,
United States District Judge for the Middle District of North
Carolina, sitting by designation.
Affirmed in part, vacated in part, and remanded by published
opinion. Judge Wynn wrote the opinion, in which Judge Harris
and Judge Biggs joined.
ARGUED: Edward Himmelfarb, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellant. Mark Davis Moreland, MORELAND
& MORELAND, Lewisburg, West Virginia, for Appellees. ON BRIEF:
Benjamin C. Mizer, Principal Deputy Assistant Attorney General,
Mark B. Stern, Civil Division, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C.; R. Booth Goodwin II, United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Charleston, West
Virginia, for Appellant. Rachel Hanna, LAW OFFICE OF RACHEL
HANNA, Lewisburg, West Virginia, for Appellees.
2
WYNN, Circuit Judge:
Plaintiff Misty Simms brought this “wrongful birth” action
against the United States under the Federal Tort Claims Act
(“FTCA”) after her prenatal care provider--a federally-supported
health center--failed to timely inform her that her child would
be born with severe congenital abnormalities. Following a bench
trial, the district court found in favor of Simms and awarded
her over $12 million in economic and noneconomic damages.
The government appeals the award of damages for past and
future medical expenses and the district court’s decision not to
order the creation of a reversionary trust for future medical
expenses. After careful review, we conclude that the district
court properly awarded Simms damages attributable to her child’s
past medical expenses. We further conclude that the district
court correctly measured Simms’ damages using the amount medical
providers billed for her child’s care, rather than the amount
the West Virginia Medicaid program paid those providers. But
the district court erred in failing to hold a post-verdict,
prejudgment collateral source hearing. Accordingly, we affirm
in part, vacate in part, and remand for further proceedings
consistent with this opinion.
3
I.
A.
Simms received prenatal care at Valley Health Systems, Inc.
(“Valley Health”), a federally-supported health care center
located in West Virginia. On February 25, 2008, when Simms was
eighteen weeks pregnant, her Valley Health physician detected
potential fetal abnormalities during a routine ultrasound. But
due to errors on its part, Valley Health did not inform Simms of
the abnormalities until May 2008, three months later. In a
series of follow-up appointments, Simms learned that the fetus’s
brain was extremely underdeveloped, and, if not stillborn, her
child would never walk or talk and would be severely mentally
disabled. Because at that point Simms was well into her third
trimester, the laws of West Virginia and nearby states barred
Simms from terminating her pregnancy.
On June 18, 2008, Simms gave birth to her son, C.J. C.J.
survived birth but, as expected, suffered severe brain
malformation and multiple other related developmental and
muscular conditions. As a result, C.J. lives in what his
physicians refer to as a “vegetative state.” And although C.J.
is able to live at home with Simms, he requires twenty-four-hour
care and monitoring. To date, the extraordinary medical bills
4
resulting from the requisite care provided for C.J. have been
paid by West Virginia’s Medicaid and Medicaid Waiver programs. 1
B.
On November 21, 2011, Simms filed this wrongful birth
action individually, and on behalf of her son, C.J., in the
United States District Court for the Southern District of West
Virginia. Because Valley Health is a federally-supported health
center, Simms sought relief under the FTCA. See 42 U.S.C. §
233(g).
Because this case arises under the FTCA, the law of West
Virginia—-the state where Valley Health’s negligent act took
place—-governs. See 28 U.S.C. § 1346(b)(1); Starns v. United
States, 923 F.2d 34, 37 (4th Cir. 1991); see also 28 U.S.C.
§ 2674 (providing that “[t]he United States shall be liable
. . . in the same manner and to the same extent as a private
individual under like circumstances”). We therefore apply the
law of West Virginia in evaluating the government’s claims. See
Myrick v. United States, 723 F.2d 1158, 1159 (4th Cir. 1983).
To the extent we are faced with an unsettled issue of West
Virginia law, our task is “to predict how [the state’s highest]
court would rule if presented with the issue.” Ellis v. La.-
1 In this opinion, we refer to West Virginia’s Medicaid and
Medicaid Waiver programs collectively as the “West Virginia
Medicaid program” or “Medicaid.”
5
Pac. Corp., 699 F.3d 778, 782–83 (4th Cir. 2012) (internal
quotation omitted); see Midwest Knitting Mills, Inc. v. United
States, 950 F.2d 1295, 1298 (7th Cir. 1991).
In West Virginia, “[t]he failure of a [healthcare provider]
to discover a birth defect and to advise the parents of its
consequences will give rise to a cause of action” for “wrongful
birth.” James G. v. Caserta, 332 S.E.2d 872, 882 (W. Va. 1985).
The theory underlying a wrongful birth action is that the
provider’s failure to advise of the birth defect caused the
parents to lose the opportunity make an informed decision as to
whether to terminate the pregnancy. Id. at 879.
After a bench trial, the district court issued a memorandum
opinion and order finding the government liable. Simms v.
United States, 107 F. Supp. 3d 561, 563–64 (S.D.W. Va. 2015).
The court held that Valley Health’s failure to provide follow-up
care after the February 25, 2008, ultrasound “proximately caused
[Simms] to be deprived of essential information” regarding the
fetus’s condition and thereby “prevent[ed] [Simms] from
exercising her right to terminate [the] pregnancy.” Id. at 567.
The court entered judgment in favor of Simms individually and
dismissed the claim brought by Simms on C.J.’s behalf, holding
that C.J. did not have a cause of action for wrongful birth
under West Virginia law. Id. at 563 n.1.
6
The district court awarded Simms a total of $12,222,743 in
damages, distributed as follows: (1) $2,722,447 for past billed
medical expenses, (2) $8,683,196 for future medical expenses—the
present value of the projected future medical costs for C.J.’s
care over a twenty-one-year life expectancy, (3) $175,526 for
lost income, and (4) $641,544 in noneconomic damages. 2 The
government timely appealed.
II.
On appeal to this Court, the government does not challenge
the district court’s liability determination. Rather, the
government disputes the district court’s award of damages
attributable to C.J.’s past and future medical expenses. 3
We review the district court’s conclusions of law,
including those regarding the availability and calculation of
damages, de novo. See Rice v. Cmty. Health Ass’n, 203 F.3d 283,
287 (4th Cir. 2000). We review factual findings relating to the
calculation of damages for clear error. United States ex rel.
2The district court’s memorandum opinion and order
indicates a different damages award. See Simms, 107 F. Supp. 3d
at 579–80. Following initial entry of judgment, the district
court entered an amended judgment order revising the damages
award to account for a clerical error in the damages
calculation.
3Shortly after oral argument, in response to Simms’s
unopposed motion, we entered an order partially affirming the
district court’s judgment with respect to the undisputed portion
of the damages award for lost income and noneconomic damages.
7
Maddux Supply Co. v. St. Paul Fire & Marine Ins. Co., 86 F.3d
332, 334 (4th Cir. 1996) (per curiam).
A.
In its appeal, the government challenges the district
court’s award of damages for past and future medical expenses on
a number of grounds, each relating to the West Virginia Medicaid
program’s payment of C.J.’s medical expenses. The government
first contends that Simms does not have a right to recover past
medical expenses because, in light of C.J.’s Medicaid coverage,
Simms has not, to date, paid out-of-pocket for C.J.’s medical
care. According to the government, awarding Simms damages
related to medical care costs she did not incur would contravene
the basic tort principle that damages must compensate only for
actual loss. We disagree.
Under West Virginia law, a parent who successfully brings a
wrongful birth suit against a healthcare provider is entitled to
recover the “extraordinary costs for rearing a child with birth
defects.” Caserta, 332 S.E.2d at 882; see id. at 878 n.12
(“[T]he rule is that the . . . costs of extraordinary child care
arising from the defects are recoverable in a wrongful birth
action.”). These damages include “the medical or educational
costs attributable to the birth defect during the child’s
minority” as well as medical and support costs “after the child
reaches the age of majority if the child is unable to support
8
himself.” Id. at 882–83. The entitlement to such recovery
stems from parents’ legal duty to support their children. Id.;
see State ex rel. Packard v. Perry, 655 S.E.2d 548, 554 (W. Va.
2007) (“[P]arents ha[ve] a duty to support their child, and in
turn [are] therefore obligated to pay for their child's medical
expenses.”); see also 67A C.J.S. Parent and Child § 167 (2016)
(“Each parent has a duty to support his or her minor
children.”).
Here, the fact that Simms has not had to pay out-of-pocket
for C.J.’s past medical care does not obviate her injury. Simms
has a legal obligation to support her child and the weight of
that obligation increased as a result of Valley Health’s
negligence. And the fact that Medicaid has, to date, paid
C.J.’s medical costs does not change this analysis.
West Virginia has long recognized the common law
“collateral source rule,” which is “an exception to the general
rule that in a tort action, the measure of damages is that that
will compensate and make the plaintiff whole.” 25 C.J.S.
Damages § 189 (2016); see Kenney v. Liston, 760 S.E.2d 434, 440
(W. Va. 2014). “The collateral source rule protects payments
made to or benefits conferred upon an injured party from sources
other than the tortfeasor by denying the tortfeasor any
corresponding offset or credit against the injured party’s
damages.” Kenney, 760 S.E.2d at 440. The rationale underlying
9
the collateral source rule is that “it is better for injured
plaintiffs to receive the benefit of collateral sources in
addition to actual damages than for defendants to be able to
limit their liability for damages merely by the fortuitous
presence of these sources.” Id. at 445 (citation omitted)
(internal quotation marks omitted); see also Ilosky v. Michelin
Tire Corp., 307 S.E.2d 603, 615 (W. Va. 1983) (“The purpose of
the collateral source doctrine is to prevent reduction in the
damage liability of defendants simply because the victim had the
good fortune to be insured or have other means of
compensation.”).
The collateral source rule protects Medicaid payments.
Kenney, 760 S.E.2d at 433–34. Accordingly, under the collateral
source rule, the government is not entitled to a credit or
offset against Simms’ damages based on Medicaid’s payment of
C.J.’s medical expenses. We therefore reject the government’s
argument that common law tort principles preclude Simms from
recovering damages related to C.J.’s past medical expenses.
B.
The government further contends that, even if the
collateral source rule applies and Simms is entitled to recover
damages attributable to C.J.’s past medical expenses, the
district court erred in calculating those damages because the
10
court used the amount C.J.’s medical providers billed for his
care, rather than the amount the Medicaid program actually paid.
Under West Virginia law, the “proper measure of damages
[for medical expenses] is not simply the expenses or liability
incurred, or that which may be incurred in the future, but
rather the [r]easonable value of medical services made
[n]ecessary because of the injury.” Jordan v. Bero, 210 S.E.2d
618, 637 (W. Va. 1974); see also Delong v. Kermit Lumber &
Pressure Treating Co., 332 S.E.2d 256, 258 (W. Va. 1985) (“The
proper measure of damages for future medical expenses is ‘the
reasonable value of medical services as will probably be
necessary by reason of the permanent effects of a party’s
injuries.’” (citation omitted)). Thus, when a tortfeasor causes
a plaintiff an injury requiring medical services, the plaintiff
is entitled to recover the reasonable value of those services,
regardless of the amount actually paid or whether the services
were rendered gratuitously. Kenney, 760 S.E.2d at 445-46.
In Kenney, the West Virginia Supreme Court of Appeals
addressed the application of the collateral source rule in
situations in which a healthcare provider discounts or writes
off a portion of a medical bill pursuant to an agreement with a
plaintiff’s health insurer. Id. at 439-40. The court held
that, under the collateral source rule, a plaintiff is entitled
to “the total amount billed by his medical providers absent his
11
health insurance coverage,” and therefore, that “[t]he
tortfeasor is not entitled to receive the benefit of the
reduced, discounted or written-off amount.” Id. at 446.
The government principally attempts to distinguish Kenney
on grounds that Kenney dealt with discounts obtained by a
private insurer, whereas the West Virginia Medicaid program
reimbursed C.J.’s medical costs. But the Kenney Court drew no
such distinction between benefits conferred by private and
governmental entities. To the contrary, Kenney held that
benefits rendered by “social legislation” “are not [to be]
subtracted from a plaintiff’s recovery.” Id. at 445–46; see
also id. at 446 (“[T]he law does not differentiate between the
nature of . . . collateral source benefits . . . .”). And
Kenney identified benefits conferred by numerous specific
governmental entities and programs--including Medicaid--as
falling within the collateral source rule. Id. at 628-632
(identifying as collateral sources “veteran’s and military
hospitals,” “government pension programs such as Social
Security,” “other government programs like Medicare and
Medicaid,” and “social services,” among others). Accordingly,
Kenney provides no basis to distinguish between benefits
conferred by public and private payers.
The government also suggests that the difference between
the amount billed by C.J.’s medical providers and the amount
12
paid by Medicaid does not constitute a “benefit” for purposes of
the collateral source rule because C.J.’s providers were
required by federal law to accept the amount paid by Medicaid as
payment in full. But Kenney expressly refused to restrict the
universe of benefits protected by the collateral source rule to
“payments” made to a plaintiff or on a plaintiff’s behalf,
explaining that “the collateral source rule applies to any
benefit received by a plaintiff from any source in line with the
plaintiff’s interests.” Id. at 445; see also id. at 440 (“The
collateral source rule protects payments made to or benefits
conferred upon an injured party from sources other than the
tortfeasor . . . .” (emphasis added)). And the Kenney court
specifically identified discounted rates negotiated by payers as
one type of “benefit” subject to the collateral source rule.
Id. at 445-46 (“The damage is sustained when the plaintiff
incurs the liability, and the method by which that liability is
later discharged has no effect on the measure of damages.”
(internal quotation omitted)). That C.J.’s medical providers
accepted the discounted reimbursement rates as condition of
participation in the Medicaid program rather than a private
insurance plan does not change the analysis because, as
explained above, the West Virginia collateral source rule does
not distinguish between benefits conferred by public and private
entities.
13
Accordingly, we conclude that, as a matter of West Virginia
law, regardless of whether a provider decides to discount a
medical bill by agreement with a private health insurer or by
virtue of voluntary participation in the Medicaid program, proof
of the original medical bill remains “prima facie evidence the
expense was necessary and reasonable.” Id. at 438. The district
court, therefore, did not err in calculating Simms’ damages
award using the amount C.J.’s medical providers billed the
Medicaid program.
C.
Finally, we address the government’s argument that the
district court erred in refusing to reduce the damages award
under the provisions of West Virginia’s Medical Professional
Liability Act (the “Professional Liability Act”).
The Professional Liability Act modifies the common law
collateral source rule in the context of medical professional
liability actions, like the instant case. Manor Care, Inc. v.
Douglas, 763 S.E.2d 73, 87 (W. Va. 2014); see W. Va. Code § 55-
7B-9a. The statute entitles a defendant to a post-verdict,
prejudgment hearing regarding payments received by the plaintiff
from collateral sources. W. Va. Code § 55-7B-9a(a) (“[A]
defendant who has been found liable to the plaintiff for damages
for medical care, rehabilitation services, lost earnings or
other economic losses may present to the court, after the trier
14
of fact has rendered a verdict, but before entry of judgment,
evidence of payments the plaintiff has received for the same
injury from collateral sources.”). At the hearing, if the court
finds that certain statutory preconditions are met, the
defendant may also “present evidence of future payments from
collateral sources.” Id. § 55-7B-9a(b) (emphasis added). After
making findings based on the evidence, the court then reduces
the economic damages award by the “net amount of collateral
source payments received or to be received by the plaintiff”
before entering judgment. Id. § 55-7B-9a(f). The court may not
reduce the award, however, with respect to any amounts “which
the collateral source has a right to recover from the plaintiff
through subrogation, lien, or reimbursement.” Id. § 55-7B-
9a(g)(1). Medicaid payments qualify as collateral source
payments under the Professional Liability Act. See id. § 55-7B-
2(b) (defining the term “[c]ollateral source” to include “[a]ny
federal or state act, public program or insurance which provides
payments for medical expenses”).
Here, the district court did not hold a collateral source
hearing before it entered judgment. Instead, the district court
ruled that, as a matter of law, the Professional Liability Act
did not entitle the government to any damages reduction because
“the West Virginia state Medicaid program has a subrogation lien
against any verdict in Plaintiffs’ favor.” Simms v. United
15
States, No. CIV.A. 3:11-0932, 2015 WL 128101, at *3 (S.D.W. Va.
Jan. 8, 2015).
The district court did not explain its basis for concluding
that the Medicaid program holds a subrogation lien against
Simms’ judgment. And the parties disagree as to whether the
Medicaid program holds such a lien. In particular, Simms
asserts that the Medicaid program holds a subrogation lien by
virtue of Section 9-5-11(b), which provides that when a Medicaid
“recipient” recovers damages from a third party related to
medical expenses previously paid by the Medicaid program, the
state Medicaid agency holds a “priority right to be paid first”
out of the recovery. W. Va. Code § 9-5-11(b)(6). To that end,
the West Virginia Medicaid program “shall be legally subrogated
to the rights of the recipient.” Id. § 9-5-11(b)(5). By
contrast, the government argues that Section 9-5-11 does not
apply because C.J.--not Simms--is the Medicaid “recipient” for
purposes of the subrogation provision. See id. § 9-5-11(a)(3)
(defining “[r]ecipient,” “unless the context otherwise
requires,” as “a person who applies for and receives assistance
under the Medicaid Program”).
Because the district court did not squarely address the
government’s argument that Simms does not qualify as a
16
“recipient” under W. Va. Code § 9-5-11, 4 we believe the district
court should have held a collateral source hearing before
entering judgment in Simms’ favor. Accordingly, remand is
warranted so the district court can determine, in the first
instance, whether Simms, in her individual capacity, qualifies
as a “recipient” under W. Va. Code § 9-5-11. See Am. Foreign
Serv. Ass’n v. Garfinkel, 490 U.S. 153, 160 (1989) (“[B]ecause
appellants’ argument raises a question of statutory
interpretation not touched upon by the [d]istrict [c]ourt, we
leave these matters for that court to decide in the first
instance.”).
A collateral source hearing is necessary for several
additional reasons. First, even if the state Medicaid program
does not hold a subrogation lien by virtue of Section 9-5-11(b),
the state of West Virginia may have “a right to recover” the
amount it has paid for C.J.’s medical care by some other means
that would bar the district court from reducing Simms’ award. To
that end, Simms contends that the Medicaid application she
4
The district court never addressed whether Medicaid held a
subrogation lien against Simms because, before trial, the court
ruled that Medicaid had a subrogation lien against C.J., who was
still a party to the action at that point. Simms, 2015 WL
128101, at *3. Neither party appears to have disputed that
ruling. After trial, the district court dismissed C.J. as a
plaintiff, see Simms, 107 F. Supp. 3d at 563 n.1, making it
necessary for the court to determine whether Medicaid’s lien
against any recovery by C.J. extends to recoveries by Simms.
17
completed and signed on C.J.’s behalf gives the Medicaid program
a right to seek reimbursement related to any damages she
recovers. The record, however, does not include a copy of
Simms’ Medicaid application so we are in no position to evaluate
that argument. Complicating matters further, the government
asserts that there are “lien letters” demonstrating that any
lien asserted by the state of West Virginia runs only against a
damages award for C.J., not Simms. Reply Br. at 8. Again, we
can find nothing in the record establishing the existence of
such letters, let alone their contents. We believe a collateral
source hearing is the proper vehicle for the parties to present
such evidence for consideration by the district court in the
first instance.
Finally, regardless of whether West Virginia has a right to
reimbursement with respect to the damages awarded for past
medical expenses, such a right would not resolve whether the
Professional Liability Act requires a reduction in the damages
award for future medical expenses. See W. Va. Code § 9-5-
11(g)(3) (indicating that the amount the West Virginia Medicaid
program may recoup shall “not exceed the amount of past medical
expenses paid”). Under the statute, a liable defendant “may
present evidence of future payments from collateral sources” and
receive a damages reduction on account thereof, if the court
finds that:
18
(1) There is a preexisting contractual or statutory
obligation on the collateral source to pay the
benefits;
(2) The benefits, to a reasonable degree of
certainty, will be paid to the plaintiff for
expenses the trier of fact has determined the
plaintiff will incur in the future; and
(3) The amount of the future expenses is readily
reducible to a sum certain.
Id. § 55-7B-9a(b). The district court did not make any
findings—-one way or the other—-as to these three statutory
preconditions before it entered judgment.
Accordingly, we vacate the district court’s judgment
solely with respect to damages awarded for past and future
medical expenses and remand the case to the district court so
that it may hold a collateral source hearing. At the hearing,
the court should accept evidence from the parties, hear
argument, and decide whether, and to what extent, the
Professional Liability Act entitles the government to a damages
reduction. Among other issues, the court should address
whether, in light of C.J.’s dismissal, West Virginia’s Medicaid
program may recover from Simms “through subrogation, lien or
reimbursement,” W. Va. Code § 55-7B-9a(g)(1), some or all of the
damages awarded for past medical expenses. The district court
also should determine whether Medicaid has any other “right to
recover” against Simms. In addition, the district court should
make findings relevant to the issue of future collateral source
19
payments, including whether there is a “reasonable degree of
certainty” that C.J.’s medical care will continue to be covered
by West Virginia’s Medicaid program. 5 Id. § 55-7B-9a(b)(2).
III.
For the foregoing reasons, we vacate the district court’s
judgment solely with respect to damages award for past and
future medical expenses and remand to the district court for
further proceedings consistent with this opinion.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
5 Because we remand for a collateral source hearing under
the Professional Liability Act, we need not--and thus do not--
address Defendant’s alternative argument that there should be a
damages setoff to account for the financial contribution the
federal government made to the West Virginia Medicaid program.
Additionally, on remand, the district court may consider anew,
if the issue arises, whether it is an appropriate exercise of
its discretion to order the creation of a reversionary trust.
20