Vanhoy v. United States

REVISED February 8, 2008

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

United States Court of Appeals

Fifth Circuit

FILED

No. 06-31318 January 17, 2008

Charles R. Fulbruge III

Clerk

TEDDY J VANHOY; TAMRA VANHOY

Plaintiffs-Appellees

v.

UNITED STATES OF AMERICA

Defendant-Appellant

Appeal from the United States District Court

for the Eastern District of Louisiana

USDC No. 2:03-CV-1090

Before JONES, Chief Judge, and WIENER and CLEMENT, Circuit Judges.

WIENER, Circuit Judge:

The government appeals the district court’s ruling requiring it to make an

immediate lump-sum payment of future medical care damages to Plaintiff-

Appellee Teddy J. Vanhoy in this Federal Tort Claims Act (“FTCA”) action. The

government reurges its contention that the district court should create a

reversionary trust into which the government could deposit the amount of the

award and from which Mr. Vanhoy’s future medical care damages would be

distributed on an as-incurred basis, with any balance remaining in the trust at

Mr. Vanhoy’s death reverting to the government. Having been referred to no

authority expressly supporting the government’s proposition or requiring the

No. 06-31318

district court to create such a trust (and having found none independently), we

affirm.

I. FACTS AND PROCEEDINGS

On October 4, 1999, Teddy J. Vanhoy, a Navy veteran who had attained

the rank of Master Chief prior to his retirement, underwent coronary artery

bypass surgery, without complications, at the Veterans Affairs Medical Center

in New Orleans. Following surgery, Mr. Vanhoy was taken to the surgical

intensive care unit and placed on a ventilator, which supported his breathing

through an endotracheal tube. Two days after the surgery, while being weaned

from his ventilator support according to hospital protocol, Mr. Vanhoy was left

unattended for several hours by the nursing personnel. During that time, the

endotracheal tube that was supplying Mr. Vanhoy with oxygen became

dislodged, causing him to go into respiratory and cardiac arrest. Medical records

indicate that he was likely extubated for more than twenty-one minutes before

his condition was discovered and attempts were made to reintubate him. While

extubated, Mr. Vanhoy was deprived of normal oxygen flow and suffered anoxic

brain injury, which has left him profoundly and permanently disabled.

Mr. Vanhoy and his wife, Tamra Vanhoy, sued the government for

damages under the FTCA. In its answer, the government pleaded La. R.S. §

40:1299.42 of the Louisiana Medical Malpractice Act (“MMA”) as an affirmative

defense. Section 40:1299.42B(1) specifies that the total amount recoverable in

private malpractice actions for injuries to or death of a patient shall not exceed

$500,000, exclusive of future medical care and related benefits.1 A companion

provision found in § 40:1299.43 of the MMA specifies, in pertinent part, that

private malpractice awards for future medical care expenses are payable, not by

the negligent health care provider but from the Patients’ Compensation Fund

1

LA. REV. STAT. ANN. § 40:1299.42B(1).

2

No. 06-31318

(“PCF”),2 and then only as those charges accrue, with payment ceasing on the

death of the victim.3 The government is not a private health care provider and

thus is not a contributor to or exonerated by the PCF; and the government did

not plead § 40:1299.43 of the MMA as an affirmative defense. The government

did, however, move for partial summary judgment on the issue of future medical

expenses, urging that La. R.S. § 13:5106(B) authorizes the depositing of future

medical expenses awarded in an FTCA action into a reversionary trust.4

The district court denied the government’s partial summary judgment

motion, ruling that § 13:5106 was inapplicable, as it relates only to the liability

of states, state agencies, and political subdivisions. The government then filed

a motion in limine, asserting that, in the event of an award for future medical

expenses, “the government is entitled to be treated in the same manner and to

the same extent as a private health care provider under like circumstances”

pursuant to 28 U.S.C. § 2674 of the FTCA.5 Specifically, the government insisted

that a reversionary trust should be created, as it would most closely approximate

the Louisiana Legislature’s treatment of future medical expenses under §

40:1299.43. After the trial concluded, the district court denied this motion and

ruled that “any future medicals awarded will be in the form of a lump sum

payment.”

The district court entered judgment against the government, ruling that

the hospital nursing staff had breached the applicable standard of care when it

2

The PCF is an insurance fund financed by the state’s health care providers and

administered by the PCF Oversight Board. The Oversight Board has the authority to receive

and evaluate claims, and to pay, settle, or reject them. Claims are paid when they are

approved.

3

LA. REV. STAT. ANN. § 40:1299.43.

4

See LA. REV. STAT. ANN. § 13:5106B(3)(a).

5

28 U.S.C. § 2674.

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No. 06-31318

failed to monitor Mr. Vanhoy’s endotracheal tube and failed to respond

immediately after he began experiencing distress. The Vanhoys were awarded

a total amount of $4,591,300, of which $3,500,000 was awarded to Mr. Vanhoy

for his future medical care and services. The government timely filed a notice

of appeal, challenging the ruling that it is required to make an immediate lump-

sum payment of future medical care damages.6

II. ANALYSIS

A. Waiver

The Vanhoys assert that the government’s claim to a damage limitation

based on § 40:1299.43 is an affirmative defense that the government waived by

failing to introduce supporting evidence at trial. The Vanhoys point out that the

government offered no evidence regarding the availability of a trust mechanism

that would approximate § 40:1299.43's treatment of future medical expenses, nor

any evidence regarding how the trust would be created or operated.

Assuming that the applicability of § 40:1299.43 is an affirmative defense

as the Vanhoys argue, we nevertheless conclude that it was not necessary for the

government to introduce factual evidence pertaining to how the trust would be

fashioned or whether it would afford an equivalent remedy to that provided

under Louisiana law. The applicability of § 40:1299.43, and the question

whether it requires the creation of a reversionary trust, are legal issues that can

be resolved without the need for factual proof.7 The availability of a reversionary

trust mechanism under these circumstances has no bearing on the Vanhoys’s

proof of future medical care damages; instead, it merely concerns how such

6

On appeal, the government does not challenge the district court’s finding of liability

or the amount of damages awarded. It only challenges the requirement that it pay Mr.

Vanhoy’s future medical care damages in one $3,500,000 lump sum.

7

See Lucas v. United States, 807 F.2d 414, 418 (5th Cir. 1986) (noting that the

applicability of the Texas statutory cap on malpractice damages is a legal issue that can be

resolved without the need for factual proof).

4

No. 06-31318

damages may be distributed. Only if the district court had ruled in favor of the

government on its motion in limine would the government have been required

to submit factual evidence pertaining to the details of the reversionary trust

mechanism.

Moreover, the government raised the applicability of § 40:1299.43 in a

timely fashion. Federal Rule of Civil Procedure 8(c) requires an affirmative

defense to be set forth in a defendant’s responsive pleading, with the failure to

comply usually resulting in waiver of the defense.8 “If, however, a defendant

raises the issue at a ‘pragmatically sufficient time,’ and if the plaintiff is not

prejudiced in its ability to respond, there is no waiver of the defense.”9 Here, the

government failed to plead § 40:1299.43 in its answer. It did, however, raise the

applicability of the provision in its motion in limine as well as in the pretrial

order.10 Additionally, the government had filed a motion three months before

trial in which it advocated the use of a reversionary trust as an alternative to a

lump-sum award of future medical damages.11 As the applicability of §

40:1299.43 was raised on multiple occasions prior to trial, and as the Vanhoys

had adequate notice of the government’s intention to claim the benefit of the

provision, the defense was raised at a pragmatically sufficient time and the

Vanhoys were not prejudiced in their ability to respond.12 We hold that the

8

Id. at 417.

9

Simon v. United States, 891 F.2d 1154, 1157 (5th Cir. 1990) (citing Lucas, 807 F.2d

at 418).

10

See McGehee v. Certainteed Corp., 101 F.3d 1078, 1080 (5th Cir. 1996) (“It is a well-

settled rule that a joint pretrial order signed by both parties supersedes all pleadings and

governs the issues and evidence to be presented at trial.”) (internal quotations omitted).

11

Granted, the government cited to the wrong Louisiana statute in support of its

argument in this initial motion; however, the pretrial order and the motion in limine

subsequently clarified the government’s legal basis for its proposition.

12

See Simon, 891 F.2d at 1158-59 (holding that the government had waived its

argument because it had failed to inform the court or the opposing party that it intended to

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No. 06-31318

government did not waive its argument for the creation of a reversionary trust

premised upon § 40:1299.43.

B. Reversionary Trust

The government asserts that it is entitled to be treated in the same fashion

as a private defendant in a Louisiana malpractice action based upon the “like

circumstances” test of the FTCA. Specifically, the government argues that the

district court should create a reversionary trust from which Mr. Vanhoy’s future

medical care damages may be distributed as needed. It maintains that such a

trust mechanism most closely approximates § 40:1299.43's treatment of future

medical expenses by ensuring that the damages are used only for their intended

purpose, viz., compensating Mr. Vanhoy for the expenses he actually incurs

during the remainder of his lifetime. The question whether § 40:1299.43

requires the district court to provide protection to the government in the form

of a reversionary trust, pursuant to 28 U.S.C. § 2674 of the FTCA, is a legal one

requiring interpretation of both Louisiana and federal statutes. We therefore

review the district court's ruling de novo.13

“Louisiana law cannot by its law make the United States liable. The

United States is liable only to the extent it waives sovereign immunity, here by

the Federal Tort Claims Act.”14 Pursuant to 28 U.S.C. § 2674, the United States

is liable in tort claims “in the same manner and to the same extent as a private

individual under like circumstances . . . .”15 Section 40:1299.43 provides that

claim the benefit of the provision until after judgment had been entered); Lucas, 807 F.2d at

418 (holding that the government had not waived its argument because it had raised the

applicability of the provision at trial); Owen v. United States, 935 F.2d 734, 736 (5th Cir. 1991)

(holding that the government had not waived its argument in part because the applicability

of the relevant provision was included in the pretrial order).

13

Exxon Mobil Corp. & Affiliated Cos. v. C.I.R., 484 F.3d 731, 733 (5th Cir. 2007).

14

Owen, 935 F.2d at 736.

15

28 U.S.C. § 2674.

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No. 06-31318

whenever a victim has future medical damages that exceed the $500,000 cap on

malpractice damages under Louisiana law, as is the case with Mr. Vanhoy,

future medical care damages will be paid only as those charges are incurred and

only for as long as care is required.16 When the victim dies, his heirs do not

receive any remainder of the award intended for future medical care.

In support of its argument, the government cites our decision in Owen v.

United States,17 which concerned the question whether the MMA’s $500,000

damages cap on the liability of private malpractice defendants applies to FTCA

claims against the government. The MMA cap, provided in § 40:1299.42,

protects only qualified health care providers, meaning those who have filed proof

of financial responsibility with the state insurance commissioner and have

contributed to the PCF.18 More important to our consideration today, the cap

applies only to basic tort damages and does not apply to future medical care

costs. Despite the fact that the government had neither filed nor contributed,

we held in Owen that the government was in “like circumstances” with private

qualified health care providers for purposes of tort damages and therefore was

entitled to the cap’s protection. We noted there that “the ‘like circumstances’

inquiry is not overly stringent.”19

We conclude that Owen does not require or even support the result that

the government seeks in the instant case, as the reasoning for the dollar cap on

tort damages is inapplicable to either the quantum or the methodology of

16

LA. REV. STAT. ANN. § 40:1299.43.

17

935 F.2d 734 (5th Cir. 1991)..

18

LA. REV. STAT. ANN. § 40:1299.42A.

19

Owen, 935 F.2d at 737 (quoting Roelofs v. United States, 501 F.2d 87, 92 (5th Cir.

1974) (“[The FTCA] is given broad interpretation to effectuate the legislative aim of putting

citizen and national sovereign in tort claim suits on a footing of equality as between private

parties within that state. Nice pieces of casuistry and hypersensitive legalisms are avoided.”)).

7

No. 06-31318

distributing payments for future medicals. In Owen, we held that the

government was in “like circumstances” with private individuals who had

contributed to the fund because the government had met the objectives of §

40:1299.42 by virtue of its “certain and perpetual” solvency.20 And, in reaching

this conclusion, we noted that the liability of state health care providers for basic

tort damages is limited to $500,000, even though, like the U.S. government,

state providers do not contribute to the PCF.21 In that case, the government and

the victim could be placed on a “footing of equality as between private parties”

under Louisiana law: The victim could be assured of receiving the same amount

of damages that he otherwise would, and the government could benefit from the

same limited liability enjoyed by qualified health care providers.

Here, the government’s proposed reversionary trust would not afford the

Vanhoys and the government like treatment for purposes of future medicals, and

nowhere does the FTCA authorize damage awards that require the United

States to perform continuing obligations.22 The government cannot be obligated

to make periodic payments of future medical care damages to Mr. Vanhoy on an

as-incurred basis the way that the PCF does under the MMA scheme.23

Moreover, Mr. Vanhoy cannot be assured of receiving such payments for as long

as necessary and without limit. And, for the purpose of further distinguishing

the tort damages cap from future medical care obligations, it is helpful to

20

Owen, 935 F.2d at 737-38.

21

Id. at 737.

22

See Hill v. United States, 81 F.3d 118, 120 (10th Cir. 1996) (citation omitted); Hull

v. United States, 971 F.2d 1499, 1504-05 (10th Cir. 1992) (citing Frankel v. Heym, 466 F.2d

1226 (3rd Cir. 1993)).

23

Under the MMA framework, a plaintiff’s malpractice judgment may include a finding

by the trier of fact that the plaintiff needs future medical care. If a judgment containing this

finding is entered, the plaintiff then makes his claims for future medical care expenses to the

PCF. Funds are distributed on an as-needed basis, with the court ordinarily having no more

role to play in the process.

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No. 06-31318

observe that the cap is a passive, one-time line drawn in the dust whereas

payment for future care is an active, continuing, and indeterminable obligation

for the lifetime of the victim. Simply put, § 40:1299.43's treatment of future

medicals for private individuals cannot be replicated—by a reversionary trust

or other such mechanism—whereas § 40:1299.42's treatment of basic damages

for professional negligence and its statutory cap thereon are susceptible of

replication.

The government’s argument based on La. R.S. § 13:5106B is similarly

unavailing. Section 13:5106B(3)(a) provides for the establishment of a

reversionary trust for the payment of future medical damages awarded in

ordinary personal injury suits brought against political subdivisions of the

State.24 And, the government concedes that § 13:5106B is not directly

applicable, as the FTCA makes the government liable in the same manner and

to the same extent as a private individual, not a state political subdivision.

Despite the fact that Louisiana law affords to its political subdivisions the

remedy sought by the government, it does not afford such a remedy to a private

individual: Absent like treatment to that afforded to an individual, the

reversionary trust mechanism simply may not be imported and applied as the

government argues.

Finally, the Ninth and Tenth Circuit opinions to which the government

refers for support are distinguishable from the instant case.25 All three cases

concern guardian ad litem situations, and, in Hill v. United States and Hull v.

24

LA. REV. STAT. ANN. § 13:5106B(3)(a). The reversionary trust instrument must

specify that such future medical care damages be paid directly to the provider as the expenses

are incurred. Id. Any funds remaining in the reversionary trust revert to the political

subdivision that established the trust on the death of the claimant. LA. REV. STAT. ANN. §

13:5106B(3)(b).

25

Dutra v. United States, 478 F.3d 1090 (9th Cir. 2007); Hill, 81 F.3d 118; Hull, 971

F.2d 1499.

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No. 06-31318

United States, the Tenth Circuit qualified its authority to create a reversionary

trust, remarking that it could do so only if it were “in the best interests of the

child.”26 Similarly, the Washington provision at issue in Dutra v. United States

requires the court to select the manner of paying future medical care damages

that “best provides for the future needs of the claimant.”27 Here, the Vanhoys

vociferously oppose the creation of a reversionary trust, and the government fails

to advance any argument to support the proposition that the trust would

somehow be in Mr. Vanhoy’s best interest. In addition, in Dutra and Hill, the

state statutes at issue—specifically the manner in which they treat future

medical care damages—are distinguishable from § 40:1299.43.28 We conclude

that these cases do not impose an obligation on the district court creatively to

fashion a remedy out of the whole cloth that approximates the result provided

in § 40:1299.43.

26

Hill, 81 F.3d at 121; Hull, 971 F.2d at 1504-05.

27

478 F.3d at 1091-92; see also WASH. REV. CODE § 4.56.260(2). Pursuant to §

4.56.260(2), the court is required to request that each party submit a proposal for periodic

payment of future economic damages prior to entry of the judgment. WASH. REV. CODE §

4.56.260(2). After each party has submitted a proposal, the court is required to select the

proposal, with any changes it deems proper, which in the discretion of the court and the

interests of justice best provides for the future needs of the claimant. Id.

28

See Dutra, 478 F.3d at 1091-92; Hill, 81 F.3d at 120. Under the relevant Washington

provision, the court must, at the request of a party, enter a judgment that provides for the

periodic payment of future economic damages. With respect to the judgment, the court must

make a specific finding as to the dollar amount of periodic payments intended to compensate

the judgment creditor for the future economic damages. WASH. REV. CODE § 4.56.260(2).

Under the Colorado Health Care Availability Act, the trier of fact is required to make a lump-

sum award in favor of the victim, which sum is then paid out in equal installments on a

periodic basis until the time of the victim’s death. Hill, 81 F.3d at 120. As such, the Colorado

and Washington systems place a similar burden on the court as does the reversionary trust

mechanism proposed by the government. The distinguishing feature, though, is that under

§ 40:1299.43, the trier of fact makes only an unquantified finding that the victim is entitled

to future medical care damages, then the PCF assumes responsibility for the review of claims

and the distribution of funds when and as future care is provided.

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No. 06-31318

We understand the government’s desire to avoid a windfall in favor of Mr.

Vanhoy’s heirs, and we note that the Louisiana Legislature did not provide for

a lump-sum payment of future medical care expenses. The government’s

proposal for the court to be the settlor of a reversionary trust, though, fails to

place the parties on a “footing of equality as between private parties” in

Louisiana. Moreover, the government fails to point to any applicable authority,

in the FTCA or elsewhere, that requires the district court to fashion a remedy

that approximates § 40:1299.43's treatment of future medical care damages.

Rather than direct the district court to create a reversionary trust from scratch,

we shall follow the Third Circuit’s reasoning in Frankel v. Heym,29 an FTCA case

in which the government requested that a damages award take the form of a

judicially established trust for the victim’s benefit. In refusing the government’s

proposal, the Third Circuit stated:

We agree with the district court that in administering the

legislation in question a district court should not make other than

lump-sum money judgments unless and until Congress shall

authorize a different type of award. The relaxation of sovereign

immunity is peculiarly a matter of legislative concern, responsibility

and policy. If novel types of awards are to be permitted against the

government, Congress should affirmatively authorize them.30

We cannot help but observe that Congress has not accepted the Third Circuit’s

invitation in the ensuing 35 years since Heym was handed down.

The First Circuit adopted the Heym position in Reilly v. United States,31

another FTCA case in which the government argued for an even simpler

structured payout of damages—an award payable over time in periodic

installments—rather than in the form of a lump sum. In rejecting the

29

466 F.2d 1226 (3rd Cir. 1972).

30

Id. at 1228-29.

31

863 F.2d 149 (1st Cir. 1988).

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No. 06-31318

government’s proposal, the First Circuit noted that “[w]hen a tortfeasor loses at

trial, then—absent a statute or the parties’ contrary agreement . . .—it must pay

the judgment in one fell swoop.”32 The Reilly court acknowledged that it had the

authority to ensure that the award benefits the victim and to supervise the

investment and use of the funds if the victim is in need of protection; however,

it rejected “the proposition that the wrongdoer has a right to pay in installments

where the plaintiffs are unwilling” and held that the court does not “have a right

to impose a periodic payment paradigm on the parties, over protest, solely to

ease the tortfeasor’s burden or to suit some fancied notion of equality.”33 Reilly

concerned a proposed structured payout rather than the creation of a

reversionary trust; yet the First Circuit’s reasoning is applicable. Like the First

and Third Circuits before us, we refuse to deviate from a conventional lump-sum

award by insisting that, absent particular circumstances34 (none of which are

present here), the district court create a reversionary trust—at least not until

or unless Congress expressly authorizes such an arrangement.

Our unwillingness to fashion a remedy in the absence of any statutory or

precedential requirement is bolstered by consideration for the district court and

the burden it would face were we to remand this case with instructions for it to

create a reversionary trust. The district court would be forced to assume a

substantial amount of responsibility, as well as an administrative role in the

32

Id. at 170. Also, we reject the government’s argument that § 40:1299.43 is a

“controlling statute” justifying a deviation from a lump-sum payment. See id. at 169 n.16.

33

Id. at 170.

34

“Periodic damage awards are permissible in lieu of lump sums in certain situations.

They can be made, for instance, if a controlling statute permits . . . . Such an outcome can also

be achieved by agreement of the parties in interest . . . or whether a trust, annuity, or other

prophylactic arrangement is necessary to ensure that the injured party will in fact receive his

due . . . .” Id. at 169 n.16 (citations omitted).

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No. 06-31318

medical malpractice scheme that the Louisiana Legislature did not provide.35

The court would be confronted with a plethora of decisions relating to the

creation and operation of the trust, including, but not limited to: Who should be

appointed trustee? What are the terms and conditions of the trust? How should

the corpus be invested? What are the terms and conditions for covered services?

How are claims to be submitted? Who is responsible for reviewing them, proving

them, and paying them? In addition to these initial decisions, the district court

would bear the continuing burden of supervision for the indeterminate life of the

trust.36 Absent express statutory authorization for the creation of a reversionary

trust like that found in La. R.S. § 13:5106B, we will not require a district court

to practice trust and estate law.

Inasmuch as (1) a reversionary trust would not place the Vanhoys and the

government on a “footing of equality as between private parties” in Louisiana,

(2) there is no authority requiring the creation of such a trust, and (3) ordering

the district court to create and oversee a reversionary trust would place a

considerable burden on it, we are convinced that the district court properly ruled

that the government is required to pay future medical care damages to Mr.

Vanhoy in the form of a lump sum. As the district court aptly noted, the

imposition of a reversionary trust is neither required nor warranted under the

circumstances of this case.

III. CONCLUSION

The government did not waive its right to assert a claim for a damage

limitation based on § 40:1299.43 of the Louisiana MMA: The applicability of §

40:1299.43, and the question whether it requires the district court to create a

reversionary trust, are legal issues that the government raised in timely fashion.

35

See supra note 26.

36

See Heym, 466 F.2d at 1229 (noting that continuing judicial supervision is another

consideration weighing against the government’s proposal).

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No. 06-31318

As such, it was not necessary for the government to introduce factual evidence

pertaining to how the trust would be fashioned prior to the district court’s ruling

on the issue. For the aforestated reasons, however, we reject the government’s

argument in support of the creation of a reversionary trust. The district court’s

ruling requiring the government to make an immediate lump-sum payment of

future medical care damages to Mr. Vanhoy was proper and, accordingly, it is

AFFIRMED.

14