Laureen Olson v. Kenneth Schnauder ( 2020 )

Case: 20-30232 Document: 00515661002 Page: 1 Date Filed: 12/04/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 4, 2020
No. 20-30232
Lyle W. Cayce
Clerk
Laureen Olson,
Plaintiff—Appellant,
versus
Kenneth Schnauder; Kurt Loup; Patrick C. Breaux; Luis
M. Alvarado; Christopher M. Foret; Kent C. Guidry;
Corey J. Hebert; Marcus C. Naquin; Robert E. Ruel, III;
Gregory L. Waddell; Louisiana Patients Compensation
Fund; Jennifer Decuir; Oversight Board of Louisiana
Patients Compensation Fund,
Defendants—Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 6:19-CV-645
Before Clement, Ho, and Duncan, Circuit Judges.
Per Curiam:*
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-30232 Document: 00515661002 Page: 2 Date Filed: 12/04/2020
Laureen Olson sued the Louisiana Patient’s Compensation Fund, the
Fund’s Board, the Board’s members, and two officers of the Fund
(collectively “defendants”), in federal district court. She asserted a claim for
excess damages under Louisiana’s Medical Malpractice Act (“MMA”),
along with related claims, all arising from her malpractice action against
Dr. Paul Toce. Applying Louisiana law, the district court dismissed her suit
with prejudice for failure to state a claim. We AFFIRM.
I.
One instance of medical malpractice has spawned multiple suits by
Olson, including this one. A brief timeline will set the stage.
On February 14, 2011, Olson sued Dr. Paul M. Toce, Jr., M.D.
(“Toce”); Dr. Paul M. Toce, Jr., A Professional Medical Corporation
(“Toce APMC”); and “ABC Insurance Company” (Toce’s insurer, later
identified as the Louisiana Medical Mutual Insurance Company
(“LAMMICO”)) in Louisiana’s Fifteenth Judicial District Court. She
alleged breaches of the standard of care under the MMA and intentional
tortious acts “outside the provisions” of the MMA. Olson alleged the
malpractice occurred from March 2010 to June 2010. That same day, Olson
submitted a damages petition and request for a Medical Review Panel to the
Louisiana Commissioner of Administration, asserting the same claims. On
December 12, 2012, the Medical Review Panel issued an opinion, finding that
Toce and Toce APMC “failed to meet the applicable standard of care as
charged in the complaint.” On April 9, 2013, Olson filed a second lawsuit
against the same defendants, in the same court, re-alleging the same claims,
but with additional allegations regarding the Medical Review Panel’s findings
and Toce’s insurance coverage.
The two lawsuits were consolidated, and Olson eventually settled her
claims for $140,000, reserving her rights and claims against the state
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Patient’s Compensation Fund (“the Fund” or “PCF”) for damages in
excess of $100,000, future medical payments, and litigation expenses. On
September 26, 2016, Olson filed a Petition for Approval of Settlement. The
PCF objected to the settlement, arguing it did not assign dollar values
distinguishing medical malpractice from non-malpractice claims. The trial
court sustained the PCF’s objections in November 2016, but the Louisiana
Third Circuit Court of Appeal reversed and approved the settlement. See
Olson v. Toce, 2017-36 (La. App. 3 Cir. 6/7/17), 222 So. 3d 775.
Back in the trial court, Olson filed a Motion to Dismiss with
Reservation of Rights. On January 22, 2018, the trial court dismissed the
claims against Toce, Toce APMC, and LAMMICO with prejudice, retaining
them as nominal defendants “to the extent required by law.” Ordinarily, this
would allow Olson to extinguish her claims against those defendants while
continuing to pursue damages from the PCF as intervenor. After moving
unsuccessfully to recuse the presiding judge, however, Olson filed a motion
to dismiss the consolidated cases without prejudice. On January 17, 2019, the
court granted the motion. 1
On May 20, 2019, Olson filed the instant case in the Western District
of Louisiana against the PCF, alleging the same malpractice claim and also
claiming the PCF, as well as its Board members and two other officers,
violated their duties to her under the MMA by failing to promptly and fairly
settle her malpractice claims. 2 Because Olson had moved to Tennessee, she
1
Later in 2020, Olson filed another suit in the same court.
2
Olson also filed another state court lawsuit, in Louisiana’s Nineteenth Judicial
District Court, with similar allegations and claims for relief. In this case, the trial court
sustained the PCF’s Exception of Prescription and further found, on its own motion, that
it lacked subject matter jurisdiction over Olson’s malpractice claim as a result of her failure
to follow the mandatory procedures set forth in the MMA. Judgment was entered on May
17, 2019. Olson has appealed this ruling to Louisiana’s First Circuit Court of Appeals.
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invoked the district court’s diversity jurisdiction. Adopting the magistrate
judge’s report, the district court concluded Olson failed to state a claim under
Rule 12(b)(6) because she had not complied with the MMA’s requirements
for seeking excess compensation from the PCF. The court therefore
dismissed Olson’s case with prejudice. Olson timely appealed.
II.
We review de novo a district court’s dismissal for failure to state a
claim. Cicalese v. Univ. of Tex. Med. Branch, 924 F.3d 762, 765 (5th Cir. 2019).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter which, when taken as true, states ‘a claim to relief that is plausible on
its face.’” Innova Hosp. San Antonio, Ltd. P’ship v. Blue Cross & Blue Shield of
Ga., Inc., 892 F.3d 719, 726 (5th Cir. 2018) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
III.
Olson’s complaint alleges seven causes of action, five under the MMA
itself, and two alleging violations of “general tort law” concerning fiduciary
duties. We separately address these two sets of claims.
A.
Olson claims the PCF is liable under the MMA for excess general
damages, past and future medical expenses, litigation costs, and judicial
interest, all arising out of her malpractice claim against Dr. Toce. The district
court concluded Olson failed to state a claim because she had not followed
mandatory claim requirements under the MMA. On appeal, Olson claims
this was error. To assess whether she is correct, we must decide two
questions: (1) whether Olson disobeyed the MMA’s rules for bringing excess
damages claims against the PCF, and (2) if so, whether that Louisiana law
framework applies in a federal diversity action.
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Louisiana has enacted an elaborate system to redress claims of medical
malpractice. Health care providers’ malpractice liability is capped at
$100,000 per patient. La. Stat. Ann. 40:1231.2(B)(2). A patient may seek
further damages—up to the total statutory maximum of $500,000, id.
at 40:1231.2(B)(1)—only from the PCF. Id. at 40:1231.2(B)(3)(a). Sometimes
a plaintiff settles a case with a provider or her insurer without settling with
the PCF; in such a case, that “partial settlement . . . shall not bar the
continuation of the action against the [PCF] for excess sums.” Id.
at 40:1231.2(D)(5). That plaintiff would move to dismiss the case “with
reservation of rights,” retaining the original defendants as merely nominal
parties, and pursue her claims against the PCF. See, e.g., Posey v. Singletary,
2003-37425, p. 12 (La. App. 2 Cir. 9/24/03), 855 So. 2d 853, 860.
[T]he MMA neither contemplates the PCF as a party
defendant, nor gives the PCF status as a co-obligor or insurer
of the health care provider. Rather, the PCF is a statutory
intervenor “who has an interest in the proceedings between the
claimant and the health care provider because any damages in
excess of one hundred thousand dollars are payable by the
Fund.”
Khammash v. Clark, 2013-1564, p. 9–10 (La. 5/7/14), 145 So. 3d 246, 254
(quoting Felix v. St. Paul Fire & Marine Ins. Co., 477 So. 2d 676, 680–81 (La.
1985)) (internal citations omitted); see also Williams ex rel. Williams v.
Kushner, 449 So. 2d 455, 457 (La. 1984). After settling, a plaintiff who wishes
to seek excess damages from the PCF must petition “the court in which [her]
action is pending against the health care provider, if none is pending in the
parish where plaintiff or defendant is domiciled, . . . [to] demand[] payment
of damages from the . . . fund.” La. Stat. Ann. 40:1231.4(C)(1). The
plaintiff may then litigate against the PCF according to a bevy of enumerated
rules, which “must be followed” to recover excess damages. See id.
at 40:1231.4(C).
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We first conclude, as did the district court, that Olson’s action against
the PCF failed to follow this framework. According to the MMA’s rules, she
was required to litigate the PCF’s liability in her original lawsuit, with the
PCF as an intervenor. See Williams, 449 So. 2d at 457. Instead, Olson
dismissed that suit and filed a new one, in federal court, directly against the
PCF, in the absence of the original defendants. By doing so, Olson
circumvented Louisiana’s requirements for proceeding against the PCF.
After settling with LAMMICO, Olson was required to seek “an amount in
excess thereof from the [PCF] for a complete and final release,” La. Stat.
Ann. 40:1231.4(C), a proceeding statutorily mandated to occur in the
Louisiana trial court where she had originally sued. She did not do so. Under
Louisiana law, then, Olson’s failure to follow the MMA’s rules warrants
dismissal of her claim. See Horil v. Scheinhorn, 95-0967, p. 6 (La. 11/27/95),
663 So. 2d 697, 700 (“In instances where the claimant expects to ultimately
recover from the Fund despite his settlement of the provider’s liability, [La.
Stat. Ann. 40:1231.4(C) 3] mandates the procedure that the claimant must
closely follow.”); see also Howard v. Mamou Health Res., 2012-820, p. 5–6 (La.
App. 3 Cir. 3/6/13), 129 So. 3d 72, 75, writ denied, 2013-0614 (La. 4/19/13),
112 So. 3d 227 (describing 40:1231.4(C)(1) as mandatory for claims against
the PCF).
We next conclude, again agreeing with the district court, that
Louisiana’s framework applies in a diversity action in federal court. “Under
the Erie doctrine, federal courts sitting in diversity apply state substantive
law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518
U.S. 415, 427 (1996); see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
We must therefore apply 40:1231.4(C)’s requirements if they are
3
This provision has been re-codified without substantive alteration since Horil.
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substantive. “Classification of a law as ‘substantive’ or ‘procedural’
for Erie purposes is sometimes a challenging endeavor.” Gasperini, 518 U.S.
at 427. To do so, we employ an “outcome-determination” test, under which
the outcome of a case brought under diversity jurisdiction “should be
substantially the same, so far as legal rules determine the outcome of a
litigation, as it would be if tried in a State court.” Id. at 427–28 (quoting
Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945)). Application of this test
“must be guided by ‘the twin aims of the Erie rule: discouragement of forum-
shopping and avoidance of inequitable administration of the laws.’” Id. at
428 (quoting Hanna v. Plumer, 380 U.S. 460, 468 (1965)).
Louisiana’s framework for bringing claims against the PCF is
substantive for Erie purposes. The rules are embedded in Louisiana’s
intricate legislative scheme governing medical malpractice liability. In an
analogous case, we have held that even “arguably procedural” aspects of
state law are substantive for Erie purposes when they “are plainly ‘bound up’
with ‘state-created rights and obligations’—that is, the State’s underlying
scheme of allocating . . . rights.” All Plaintiffs v. All Defendants, 645 F.3d 329,
337 (5th Cir. 2011) (quoting Byrd v. Blue Ridge Rural Elec. Coop., 356 U.S. 525,
535 (1958)). In All Plaintiffs, we explained we could not “disregard the
procedural aspects of the [state] Act without also destroying the rights and
obligations that the Act creates.” Id. The same holds true here. 4 A plaintiff
cannot circumvent the MMA’s rules by suing in a federal forum. As the
4
Buttressing our conclusion are federal district court decisions treating the
“arguably procedural” requirements of 40:1231.4(C) as binding in diversity cases. See, e.g.,
Flowers v. Striplin, No. CIV.A. 01-1765, 2002 WL 1610960, at *2 (E.D. La. July 18, 2002)
(reading Horil to supply the rule of decision for application of 40:1231.4(C)(2) and to
require dismissal); see also Siegrist v. Kleinpeter, No. CIV.A.02-2365, 2004 WL 797723, at
*1 (E.D. La. Apr. 13, 2004) (treating procedures described in MMA as binding); Mitchell v.
St. Paul Fire & Marine Ins. Co., No. CIV.A. 98-1898, 1999 WL 721950, at *6 (E.D. La. Sept.
15, 1999), aff’d 212 F.3d 594 (5th Cir. 2000) (unpublished) (same).
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district court correctly held, Olson’s failure to observe those state law
requirements defeats her claim for relief.
B.
Olson’s claims outside the scope of the MMA allege breaches of
fiduciary duties owed her by the PCF and its Board Members, Executive
Director, and Claims Manager. She claims that the MMA imposes on
defendants a “fiduciary responsibility to medical malpractice claimants,”
like Olson, which they breached by failing to compensate her fairly and
promptly for her damages.
These claims fail because the MMA imposes no such duties on the
Fund, its Board, or its other officers.
The statute creating the Board charges the Board with the
defense of the Fund, and specifically provides procedures for
the Board to defend the Fund against a claim at trial. Thus, the
plaintiff can have no cause of action against the Board for its
actions in defending the Fund against a claim.
Patin v. La. Patient’s Comp. Fund Oversight Bd., 2007-2394, p. 5 (La. App. 1
Cir. 6/6/08), 991 So. 2d 1135, 1138, writ denied, 2008-1415 (La. 10/10/08),
993 So. 2d 1284 (capitalization altered). Like the claimant in Patin, Olson
“has no claim against the [B]oard for failing to comply with a duty it did not
statutorily owe.” Id.; see also Khammash, 145 So. 3d at 256 (“Clearly, when
the PCF and claimant dispute the remaining amount due, the PCF is entitled
to full discovery and a trial at which, under the statutory provisions and in
accord with our jurisprudence, the claimant must prove his damages, if any,
attributable to the malpractice in excess of the amount already paid by the
defendant physician.”).
Although the MMA provides that the PCF “shall be held in trust . . .
by the board for the use, benefit, and protection of medical malpractice
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claimants,” La. Stat. Ann. 40:1231.4(A)(1)(a), it does not follow that the
Board owes Olson a duty which it breaches by litigating its alleged liability to
her. To the contrary, the MMA itself guarantees the Board “an adequate
opportunity to conduct discovery, identify and retain expert witnesses, and
prepare a defense,” id. at 40:1231.4(C)(5)(a), when it does not agree with a
claimant regarding its liability. The district court therefore correctly
dismissed these claims with prejudice.
***
The judgment of the district court is AFFIRMED.
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