Published Opinion Upholding the Constitutionality of MICRA Cap on Non-economic Damages

On Thursday, September 1, 2011, California’s Fifth District Court of Appeal issued a published decision upholding the constitutionality of the $250,000 non-economic damage cap in California’s landmark Medical Injury Compensation Reform Act (MICRA) of 1975. The case is Stinnett v. Tam. The California Medical Association, through it Amicus Curiae Committee, joined in this case by the Litigation Center of the AMA and State Medical Societies, filed a friend-of-the-court amicus brief and participated in oral argument before the court.

Plaintiff and appellant Holly Stinnett sued various healthcare providers for the wrongful death of her husband due to professional negligence. The jury awarded Stinnett $1.39 million in damages for past and future economic losses and $6 million in non-economic damages. Defendants moved to reduce the amount of non-economic damages to $250,000 pursuant to MICRA. Stinnett opposed the motion, arguing that MICRA’s non-economic damage cap is unconstitutional because it violates federal and state constitutional guarantees of equal protection of the laws and the right to a jury trial. Stinnett argued that although the California Supreme Court previously upheld the constitutionality of MICRA’s cap on non-economic damages in Fein v Permanente Medical Group (1985) 38 Cal.3d 137, the cap is now unconstitutional because the classification incorporated in the MICRA cap has lost its rationality as the medical malpractice insurance crisis that precipitated the adoption of the MICRA cap in 1975 has long since ceased to exist and because the cap operates more harshly than in 1975 since it does not adjust for inflation.

In support of her argument, Stinnett submitted a declaration from Missouri lawyer Jay Angoff, who has “been particularly heavily involved with the medical malpractice insurance industry” and co-authored Proposition 103, the insurance reform initiative California voters enacted in 1988. According to Angoff, medical malpractice rates are now declining, many insurers are writing coverage, claims payments have been decreasing, insurers profits have been excessive for at least a decade, profits would remain adequate if the cap were removed and insurers would remain viable as demonstrated by their prosperity in states that have not limited non-economic damages. Stinnett also submitted the declaration of economist Phillip H. Allman, who stated that inflation had eroded the value of $250,000 in 1975 to a present value in 2008 of approximately $58,857. In their reply, defendants argued that MICRA’s cap on non-economic damages is constitutional and filed objections to Angoff’s declaration. The trial found that MICRA is not unconstitutional and reduced the non-economic damage award. Stinnett appealed, contending that the reduction of her non-economic damages violated her constitutional rights to due process of the laws and to a jury trial. In a 2 to 1 decision authored by Justice Gene Gomez and joined by Justice Dennis Cornell, the 5th Appellate District Court found Stinnett’s contentions to be without merit and upheld the constitutionality of section 3333.2.

EQUAL PROTECTION

The majority’s well-reasoned 25 page opinion focused primarily on the argument that MICRA’s non-economic damages cap violated the plaintiff’s right to equal protection under the California and United States Constitutions. The plaintiff had argued that there was no longer a rational basis for treating victims of medical malpractice differently than other tort victims because the medical malpractice insurance “crisis” that existed at the time the legislature enacted MICRA no longer existed. The court cited several United States Supreme Court decisions requiring deference to the legislature as to the desirability of statutory discrimination in economic regulation—as opposed to statutes involving fundamental personal rights, race, religion, or alienage which may require a higher level of judicial scrutiny. E.g., City of New Orleans v. Dukes (1976) 427 U.S. 297 (“the judiciary may not sit as superlegislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines.”). The court stated that “modification or repeal of a statute made obsolete by virtue of changed conditions is a legislative, not a judicial, prerogative.”

The court relied heavily on the California Supreme Court’s prior decisions upholding MICRA, noting, “After MICRA’s enactment, judicial challenges to various provisions of MICRA were abundant, but unsuccessful.” The California Supreme Court had already determined that there was a rational basis for MICRA in American Bank & Trust Co. v. Community Hospital (1984) 36 Cal.3d 359 and Fein v. Permanente Medical Group (1985) 38 Cal.3d 137, among other cases. The Stinnett court pointed out that the Fein Court did not find section 3333.2 constitutional based on whether a medical malpractice insurance crisis “actually existed,” but rather based on the Legislature’s power to determine whether a crisis existed and to craft remedies to solve the crisis it found. The court emphasized the Supreme Court’s language in Western Steamship Lines, Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100 indicating that the Legislature enacted MICRA to address a “perceived threat.” Concluding that “it is not the judiciary’s function to determine when constitutionally valid legislation has served its purpose,” the Stinnett court found the “changed circumstances” principle stated in Brown v. Merlo (1973) 8 Cal.3d 855 to be inapplicable.

The court flatly rejected the plaintiff’s challenge to section 3333.2 on the ground that it causes a greater hardship on plaintiffs than the legislature intended because the $250,000 non-economic damages cap has not been adjusted for inflation since it was enacted in 1975: “The fact that Stinnett might prefer a different statute, indexed for inflation, does not render unconstitutional the statute the Legislature enacted.” In her concurring and dissenting opinion, Justice Dawson agreed and joined “in the majority’s rejection of the argument that section 3333.2 violates equal protection because the damages cap is not indexed for inflation. The absence of indexing does not create a distinction for purposes of either federal or state equal protection analysis.”

Justice Dawson disagreed with the majority’s holding with respect to the equal protection analysis, finding that the plaintiff was “denied the opportunity to introduce evidence” in support of her argument that section 3333.2 was unconstitutional. Justice Dawson would have remanded the case and required the trial court to consider evidence in support of the plaintiff’s equal protection challenge rather than ruling on the issue as a matter of law. Justice Dawson pointed out, however, that the “presumption in favor of the statute may well prove to be an insurmountable obstacle to appellant’s attack on section 3333.2.” Justice Dawson was critical of the respondents’ efforts to “convince the court that there is a rational relationship between section 3333.2 and MICRA’s legislative purpose” without submitting such evidence to the trial court. She noted that the majority refrained from stating any conclusion about whether section 3333.2 does or does not remain rationally related to the legislative purpose, and joined in that restraint based on what she considered an inadequate evidentiary record.

The majority stated in a footnote: “While we acknowledge our dissenting colleague’s position, we note that Stinnett did not request a further hearing below, did not ask the trial court to receive live testimony or additional evidence, and did not ask for factual findings.”

The court’s opinion provides good authority for the position that courts should not examine evidence of changed conditions in the context of MICRA challenges, but some ambiguity remains with respect to the admissibility of such evidence. The majority stated, “While parties challenging legislation under the equal protection clause may introduce evidence supporting their claim that the legislation is irrational, they cannot prevail if it is evident that ‘the question is at least debatable.’” The dissent agreed, stating that, “Appellant, of course, cannot prevail on her equal protection claim so long as it is evident from all the considerations presented … that the question of a logical connection between section 3333.2 and the objective of MICRA is at least debatable.” All acknowledge that the California Supreme Court “has already determined the constitutionality of section 3333.2 in Fein, in which it concluded a medical malpractice crisis existed that required legislative intervention to reduce medical malpractice insurance costs, and that section 3333.2 is rationally related to the cost reduction goal.”

Despite the established holding that MICRA is rationally related to its cost reduction goal, the court’s statement that parties challenging legislation under the equal protection clause may introduce evidence to support their claim that the legislation is irrational, along with the dissenting opinion and the majority’s footnote acknowledging the dissent, may be used by plaintiffs to assert the position that trial courts should consider evidence in challenges to MICRA’s constitutionality. There is some indication though that such effort may not be successful. In a footnote, the court denied the plaintiff’s request for judicial notice of documents relating to Proposition 103 and the profitability of malpractice insurance because those documents “are not necessary or relevant to the resolution of this case.” The court’s determination that such evidence is irrelevant is consistent with the view that it is inappropriate for courts to consider evidence for the purpose of reexamining MICRA’s rational basis.

JURY TRIAL

The court further held that MICRA’s non-economic damages cap was not an unconstitutional infringement on the right to a jury trial. The court rejected the plaintiff’s argument that only a jury, not the Legislature, could fix the amount of damages. Citing American Bank and Fein, the court noted that “a plaintiff has no vested right in a particular measure of damages, and…the Legislature possesses broad authority to modify the scope and nature of such damages.” The court adopted the holding and reasoning of the Court of Appeal’s decision in Yates v. Pollack (1987) 194 Cal.App.3d 195, which was also based on American Bank and Fein, and held that section 3333.2 did not violate the plaintiff’s right to a jury trial.

Justice Dawson concurred with the majority’s holding that MICRA’s non-economic damages cap did not violate the right to a jury trial.

IMPLICATIONS

The Stinnett decision is a published opinion and is citable as precedent to oppose plaintiffs’ efforts to introduce evidence with respect to MICRA’s rational basis. The decision also flatly rejects plaintiffs’ arguments that section 3333.2 infringes on their rights to a jury trial or is invalid because it is not indexed for inflation. Defendants should continue to argue that plaintiffs are not entitled to present evidence with respect to MICRA’s established rational basis and object to the introduction of any such evidence yet also be prepared to refute a claim that MICRA has become arbitrary and irrational.