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Public Nuisance Claim Loses Traction in Oklahoma Opioid Case; Ohio, California Cases Move Forward

The past year saw several attempts to apply new applications of the public nuisance doctrine to the opioid crisis. [See article here.] While in the past, public nuisance claims typically sought recovery for damages in connection with land use in public spaces, pollution of public waterways, or extreme noise levels, litigators sought to expand the definition to areas outside these traditional applications, including public nuisance claims against manufacturers for their alleged role in the opioid epidemic. However, recent developments provide insight as to the narrowing of that possibility.

A Reversal in Oklahoma

In 2019, an Oklahoma state district court extended the public nuisance doctrine to hold opioid manufacturers liable for the opioid epidemic. Judge Thad Balkman ruled that Johnson & Johnson engaged in a deceptive marketing campaign that downplayed the negative side effects of opioids to the Oklahoma public. Specifically, Judge Balkman found that Johnson & Johnson’s misleading advertising campaign led to exponentially high rates of addiction and overdose deaths. Judge Balkman also ruled that Johnson & Johnson was the direct and proximate cause of the public nuisance in Oklahoma. Judge Balkman ordered Johnson & Johnson to fund a number of governmental programs to the tune of $465 million as an equitable abatement of the nuisance in Oklahoma.

After Johnson & Johnson appealed the ruling, the Oklahoma Supreme Court reversed Judge Balkman’s decision to hold the company liable for its role in the state’s opioid crisis and vacated his $465 million award.

In its decision, the Oklahoma Supreme Court held that “the district court’s expansion of public nuisance law went too far” and that “Oklahoma public nuisance law does not extend to the manufacturing, marketing, and selling of prescription opioids.” Instead, the district court erased “traditional limits” on nuisance liability, which left the statute “impermissibly vague.”

Additionally, the Supreme Court found fault in the state of Oklahoma’s failure to identify a public right being infringed, instead seeking a novel application of the public nuisance law to a products liability case. The court also found that there was potential for a slippery slope and stated that if public nuisance law was evoked to hold a company liable for its products, “a manufacturer could be held perpetually liable.”

An Ohio Jury Weighs In

A number of cases brought by municipalities were consolidated in the Northern District of Ohio. A bellwether subset of those cases went to a jury trial on their public nuisance claims in October of 2021.

On November 23, 2021, after a six-week trial and more than five days of deliberation, a federal jury found that three of the largest pharmacy chains—CVS, Walgreens, and Walmart—contributed to the opioid crisis in Lake County and Trumbull County, marking the first time that retailers were held liable in the opioid epidemic. Prior to trial, Rite Aid and Giant Eagle, a regional chain, settled for undisclosed sums.

The lawyers for the counties argued that the pharmacies had ignored a vast number of red flags and suspicious opioid orders for years, both at individual pharmacy locations and at the corporate level.

Under Ohio’s public nuisance law, a nuisance must be continuing. While the number of opioid prescriptions has dropped off in recent years, the counties’ lawyers argued that patients who had become addicted to opioids turned to other forms of opioids: heroin and illegal fentanyl. Further, the counties argued that this was a foreseeable and direct result of the flood of prescription opioid pills that were made available in previous years.

Attorneys for the pharmacy chains responded that their stores represented only a small fraction of the total number of pharmacies, hospitals, and clinics that filled opioid prescriptions in these two counties and, thus, the quantity of pills sold by these pharmacies was also low. In addition, they argued that there were many other factors that led to the opioid epidemic: unused pills in the possession of families, doctors who increasingly ordered larger quantities, and, notably, opioid manufacturers.

Nevertheless, the jury found these pharmacies liable for creating a public nuisance. U.S. District Judge Dan Polster will now preside over a two-week hearing beginning May 9, 2022 to determine how much each of these retailers must pay. The counties have alleged that the cost of remediation will exceed $1 billion in each county.

The pharmacies are expected to appeal the verdict. Both Walgreens and Walmart have issued statements taking issue with the novel application of public nuisance law to the opioid epidemic.

Mixed Results in California

Similarly, the city and county of San Francisco brought a lawsuit against a number of opioid manufacturers, distributors, and retailers alleging a public nuisance. Those claims survived a motion to dismiss in September 2020 and are proceeding through discovery. The San Francisco lawsuit is expected to go to trial in April of 2022.

Another California state court has put a halt to a similar suit. Judge Peter J. Wilson of the Orange County Superior Court ruled on November 1, 2021 that Allergan, Endo, Johnson & Johnson, and Teva cannot be held liable for the state’s opioid epidemic. The counties of Santa Clara, Los Angeles, and Orange, which had brought the suit along with the city of Oakland, had hoped for tens of billions of dollars in compensation to help ease the addiction crisis.

Those municipalities argued that the drug manufacturers used false and misleading marketing to push up the sale of prescription opioids and create a public nuisance. They ultimately sought over $50 billion to cover the costs of abatement.

In his 41-page ruling, issued after a months-long bench trial, Judge Wilson said it was unclear that the drug industry’s marketing efforts directly led to a rise in illegal use of prescription opioid painkillers. Specifically, he found that “plaintiffs have failed to prove an actionable public nuisance for which defendants, or any of them, are legally liable[.]” This failure of proof was more succinctly put: “There is simply no evidence to show that the rise in prescriptions was not the result of the medically appropriate provision of pain medications to patients in need.”

The municipalities are expected to appeal.

Still Waiting on West Virginia

Another opioid lawsuit wrapped up in late July of 2021. Cabell County, West Virginia and the city of Huntington, West Virginia sued McKesson Corp., Amerisource Bergen Corp., and Cardinal Health Inc. in the Southern District of West Virginia. A three-month bench trial in front of U.S. District Judge David Faber ended with closing arguments on July 28, 2021, and the parties are awaiting his verdict. The municipalities alleged that the defendants created a public nuisance by flooding the region with opioids and ignoring the signs that the area was “being ravaged by addiction.”

Conclusion

Aside from the Ohio jury’s verdict, recent decisions have cast doubt on the potential success of plaintiffs’ arguments that manufacturers, distributors, and retailers have created a public nuisance. While the application of public nuisance theory to the opioid epidemic seeks an expansive reading of those laws, and the Oklahoma trial court created anxiety about the possible creation of a new “super tort,” those fears may be unfounded as courts continue to restrict the application. These recent constraining decisions could serve as a simultaneous nudge to municipalities to sign on to larger settlement deals as well as steeling the resolution of defendants to fight even harder.

California bill would hold gunmakers liable for injuries or deaths

The legislation is modeled after a first-in-the-nation New York law that declares such violations a ‘public nuisance’

Some Democratic California lawmakers want to make it easier for people to sue gun companies for liability in shootings that cause injuries or deaths, a move advocates say is aimed at getting around a US law that prevents such lawsuits and allows the industry to act recklessly.

In general, when someone is injured or killed by gunfire it’s very hard for the victim or their family to hold the gun manufacturer or dealer responsible by suing them and making them pay damages. A federal law prevents most of those types of lawsuits.

But US law does permit some types of liability lawsuits, including when gunmakers break state or local laws regarding the sale and marketing of their products. Last year, New York approved a first-in-the-nation law declaring such violations a “public nuisance”, opening up gunmakers to lawsuits.

On Tuesday, the California assembly member Phil Ting of San Francisco unveiled a bill modeled after the New York law.

“Almost every industry in the US is held liable for what their products do … The gun industry is the one exception,” Ting said. “Financial repercussions may encourage the firearms industry and dealers to be more responsible.”

The bill is co-authored by assembly members Chris Ward of San Diego and Mike Gipson of Carson. Gipson’s son, his son’s fiancee and another man were shot in Los Angeles in April 2020. Gipson’s son and fiancee survived. But the other man, Gary Patrick Moody, was killed.

“This is absolutely personal to me,” said Gipson, a former police officer.

The New York bill is already being challenged in court by gunmakers. And critics were swift to denounce the California proposal as well.

Gun advocates denounced the bill, known as AB1594, as a smokescreen for another attempt by California progressives to ban guns. Sam Paredes, executive director of Gun Owners of California, compared it to suing the California governor, Gavin Newsom, because he owns a winery and people have misused his products by drinking and driving.

“He can’t ban guns, but he’s going to try to bankrupt lawful firearms-related businesses,” Paredes said.

California already has some of the toughest gun laws in the country, including a ban on most assault weapons that has been in place for decades. But last year, a federal judge overturned California’s assault weapons ban, prompting a lengthy appeals process.

Angered by the move, Newsom last month asked the state legislature to pass a law allowing citizens to enforce the state’s assault weapons ban through lawsuits. The idea is similar to a Texas law that bans most abortions but leaves it up to private citizens to enforce the law by taking offenders to court.

The bill announced on Tuesday would not do that. Instead, Ting said it would let people and governments sue gun manufacturers or dealers for liability in shooting deaths or injuries. That’s a key distinction from the Texas abortion law, which is only enforceable by private lawsuits.

It’s unclear what these potential lawsuits against gunmakers could include. The bill filed in the state legislature is just one sentence long, declaring gun manufacturers have created a public nuisance if their failure to follow state and local gun laws result in injury or death. The bill will probably be changed several times as it moves through the legislative process.

Tanya Schardt, senior counsel for gun control group the Brady Campaign, said lawsuits could include suing gun dealers who knowingly sell weapons to people who then sell them illegally to others who are not allowed to own them. Or it could mean suing a gun manufacturer that supplies dealers they know are selling guns used in crimes.

The goal is to “create an environment where the gun industry is held accountable”, Schardt said.

Chuck Michel, a civil rights attorney and president of the California Rifle and Pistol Association, said that goal will likely backfire by making it harder for law-abiding citizens to have guns for self-defense.

“As a matter of policy, to try and shift the blame for the criminal misuse of a lawful product that is used far more often to save lives and protect lives than to take them is a terrible idea,” he said.

Common Council committee discusses legal action against Hyundai and Kia over thefts

Twenty-eight cars stolen a day. That statistic was at the center of the issue Milwaukee Common Council’s Judiciary and Legislation Committee took up again Monday — possible legal actions regarding the rampant theft of Hyundai and Kia vehicles.

This comes after a private lawsuit was launched regarding the issue.

“We’re forced to rely on anecdotes and rumors coming out of the rank and file, that portray to us that they’re one big revolving door. People are arrested, they go in the front door and right out the back door, and within 24 hours they’re out stealing another car,” said 4th District Alderman Robert Bauman.

He said it seemed like it was hard to nail down the facts in regards to Kia and Hyundai theft during testimony from the City Attorney’s Office Monday.

Tenth District Alderman Michael Murphy said the issue is more than just rumor.

“Very few cases are eventually prosecuted from stolen vehicles,” said Ald. Murphy.

He said 50% of these offenders are under the age of 16.

Ald. Murphy suggested looking into inviting the head of children’s court, Judge Laura Crivello, as well as the district attorney, to speak on what issues they face addressing the situation.

One of those issues Ald. Murphy identified was the fact that these are kids, and oftentimes not the driver.

“Individuals who are caught in the car, that are not driving the vehicle, generally are released within a few hours to their guardian,” said Ald. Murphy.

He said sometimes they’re caught four, even five times.

To change this, Ald. Murphy thinks some sort of detention center for these youth could be established using ARPA funds, something tried in Portland.

“Instead of just releasing them immediately, they would be referred to this location and then proper social services would intervene to see why this individual is being involved,” said Ald. Murphy.

Thirteenth District Alderman Sean Siker said we need to figure out if more outreach is needed or if there really are just no consequences.

“If that’s the case, that seems to be the obvious thing staring me in the face,” said Ald. Spiker.

The council asked the city attorney if other cities have faced similar struggles, and if so, if they took legal action against Hyundai and Kia.

“I’m wondering if other municipalities had perused as municipalities, as opposed to private entities, any litigation,” said Ald. Spiker.

While city attorneys said Denver has seen similar issues, though not on the level of what’s happening here in Milwaukee, they hadn’t taken legal action against Hyundai or Kia.

City Attorney’s Office officials said the best possibility of perusing a cause of action is based on public nuisance laws.

That’s when the council went into private session to further discuss the matter, although they did make it clear that they aren’t taking any legal action at this time.

Trending in Tort Law Part II: Courts Address the Growing Use of Public Nuisance in Mass Torts

Since prescription opioids were first introduced for pain treatment in the 1990s, the number of drug overdose deaths has quadrupled, and more than a half million Americans have died from an overdose involving an opioid.^[1] The CDC has labeled this an epidemic, and most agree that it is a public health crisis. But courts are divided over whether this crisis is legally a public nuisance. As appellate courts issue decisions and trials across the country reach verdicts, the contours of tort law are being reshaped and defined — specifically the applicability of public nuisance in product liability and mass torts cases.

Public Nuisance and Mass Torts

As we previously explained in Part I of this two-part installment on the use of public nuisance in product liability claims, a public nuisance is “an unreasonable interference with a right common to the general public.”^[2]With its roots in the common law, states interpret public nuisance claims differently. For example, most states require the interference to be abatable — that is, capable of being remedied — but California does not.^[3]Additionally, courts often disagree as to whether the right at issue is a public or private right.^[4] And only a public right can be the basis of a public nuisance action.

Over the past few decades, plaintiffs have attempted to expand the public nuisance theory in various mass tort contexts with little success. This included claims against suppliers of asbestos, tobacco, firearms, and lead paint. Most claims failed either because the right at issue was individual — not public — or because the products were no longer within the suppliers’ control (and hence not abatable).^[5]

In the past few years, various government entities have filed many public nuisance lawsuits against opioid suppliers (manufacturers and distributors) and also the distributing pharmacies. As in previous public nuisance mass tort cases, control over the source of the harm has played a key role. Courts have also focused on government evaluation and approval of opioids.

California and Oklahoma Courts Reject the Public Nuisance Theory of Liability for Drugmakers

People v. Purdue Pharma L.P. (California)^[6]

In November, a California Superior Court ruled that Santa Clara, Orange, and Los Angeles counties and the city of Oakland failed to prove an actionable public nuisance by the defendant manufacturers.^[7] Under California law, a public nuisance requires that defendants cause “a substantial and unreasonable interference” with a “public right.” The court found that plaintiffs failed on both the “unreasonable interference” and “causation” elements.

In California, interference is “unreasonable” if the gravity of harm inflicted outweighs its social utility. In rejecting this claim, the court found that the FDA’s approval of opioids as Schedule II controlled substances prevented a finding of “unreasonable[ness]”. As the court explained, “the Federal government made a determination that the ‘social utility’ of appropriately prescribed opioids outweighed the ‘gravity of the harm inflicted’ by them.”

With respect to causation, California law (the Pain Patient’s Bill of Rights) approves the use of opioids in appropriate circumstances (i.e., “medically appropriate” prescriptions). Thus, without evidence linking the manufacturers’ marketing of the product to a rise in the “medically inappropriate” prescriptions that had led to the addiction crisis, the court could not conclude that the manufacturers had caused the alleged nuisance. Correlation alone—without some evidence of causation—was inadequate.

The court did not reach the issue of abatement, which is a required element in some public nuisance cases but not in California. Instead, its focus was simply on the fact that both the FDA and California “approve[] the use of opioids in appropriate circumstances,” and that plaintiffs’ evidence did not permit the court “to draw (and measure)” “a distinction between conduct resulting in anticipated, approved use, and conduct resulting in improper use.”

State ex rel. Hunter v. Johnson & Johnson (Oklahoma)^[8]

Just weeks after the California decision, the Supreme Court of Oklahoma overturned a 2019 verdict — awarded to the State of Oklahoma — that had imposed $465 million on opioid manufacturers under a public nuisance theory. Unlike California, the trial court found causation: “The increase in opioid addiction and overdose deaths following the parallel increase in opioid sales in Oklahoma was not a coincidence; these variables are ‘casually linked.’”^[9] On appeal, however, the Oklahoma Supreme Court categorically rejected use of public nuisance to cover the manufacturing, marketing, and selling of products. The court outlined three primary reasons for this decision.

First, the court rejected the State’s categorization of the right at issue as public rather than private. The claims were not similar to “communal” public health claims, such as “pollution in drinking water” or “discharge of sewage on property.” Those sorts of public nuisance claims are very different, the court reasoned, from recognizing a “public right” that individuals not misuse or abuse prescription opioids. The State’s theory would mean, for example, that product suppliers could be potentially liable for individual misuse of all sorts of legal products—a vast and unwarranted expansion of product liability.

Second, the court found that the manufacturers’ lack of control of the product at the time of the nuisance also precluded liability. The court essentially combined both the causation and abatement elements. The manufacturers could not have caused a nuisance because they did not control how others distributed the product, how the law regulated distribution, or how the product was prescribed by doctors or used by patients. And, without that control, the manufacturers could also not abate the nuisance.

Finally, imposition of liability for public nuisance would subject manufacturers’ to perpetual liability. Unlike product liability claims, there are no statutes of limitations for nuisance claims (since, in theory, a nuisance is ongoing). Because Oklahoma law had rejected endless liability in all other traditional tort theories, the court did so here as well.

Ohio and New York Juries Find Defendants Liable Under Public Nuisance Theory

While the California and Oklahoma decisions show defendants’ success in curtailing the expansion of the public nuisance doctrine, the success has not been universal. In November, a jury, rather than a judge — in a bellwether by two Ohio counties in the opioid multidistrict litigation in Ohio federal court — found that several nationwide pharmacy chains had “engaged in intentional and/or illegal conduct [that] was a substantial factor in producing the public nuisance.” While the remedy will not be decided until later this year, the pharmacies have vowed to appeal. They claim that the court erred by allowing the jury to evaluate the public nuisance theory, which they contend is inconsistent with Ohio law.

It is not clear why the Ohio result was so different — whether it was because a different entity — pharmacies — were the defendants, or whether the evidence was different, or simply because it was because a jury, rather than a judge, that was charged with applying the public nuisance theory to the facts presented. We will have to wait for the appellate decision (assuming that the case is eventually appealed).

Finally, at the end of December, a New York jury found drugmaker Teva Pharmaceuticals liable for having created a public nuisance in Suffolk and Nassau counties as well as the state as a whole. The verdict came after numerous other defendants settled out of the case for millions of dollars each. The jury also allocated 10% of the responsibility for the opioid crisis to the State of New York. Teva has said it is preparing to appeal the verdict, and as in the Ohio case, damages will be determined later this year.

Key Takeaways

Based on these recent decisions, it seems clear that public nuisance has not—and likely will not ever—become a complete replacement for mass tort and product liability actions. As the Oklahoma Supreme Court put it, “[p]ublic nuisance and product-related liability are two distinct causes of action, each with boundaries that are not intended to overlap.”

But the use of public nuisance in mass torts will still likely continue. If allowed, public nuisance theory provides a way for governmental entities (such as a state or a county) to seek mass damages without individualized proof of duty, causation, and damages. Two other trials, from coast to coast, are also set to consider the issue soon — a bench trial in federal court in West Virginia that concluded this past summer and a bench trial in Washington state court that is ongoing. The risks to the defendants are enormous, as the Oklahoma verdict showed. And those risks often lead to large settlements before trial, again as the Oklahoma litigation demonstrated.^[10] Nevertheless, there are a few key takeaways from these decisions:

First, it is more difficult for plaintiffs to prove the “unreasonable” prong of public nuisance where the product is highly regulated for safety and production and distribution is authorized by law. This was one of the main reasons that the California court declined to find the manufacturers liable.
Second, causation requires just that, causation — inferential correlation alone is insufficient in public nuisance cases. Where there are multiple intermediaries between the manufacturer and the end user and/or the alleged nuisance, plaintiffs will likely struggle to prove causation. Furthermore, other factors giving rise to the opioid crisis — such as the use and abuse of illegally imported opioids — also make it more difficult for plaintiffs to prove that manufacturers, distributors, or pharmacies directly caused the public nuisance.
Finally, the abatement element of public nuisance theory also presents some difficulties. Because the defendant does not control the product at the time the harm takes place, the defendant cannot “abate” the nuisance. In the Oklahoma opioid litigation, for example, damages sought from the defendants were earmarked for such things as government-run addiction treatment and prevention programs. Unlike an injunction that orders a noise polluter to stop, however, there is no certainty that these programs will actually remedy the alleged nuisance, and they have very little connection to the damage a particular defendant allegedly caused. This again highlights the difficulty of applying public nuisance theory to what are, in essence, product liability claims.

FOOTNOTES

^[1] Understanding the Epidemic, Centers for Disease Control & Prevention (Mar. 17, 2021), https://www.cdc.gov/opioids/basics/epidemic.html.

^[2]Restatement (Second) of Torts § 821B (1979).

^[3]People v. ConAgra Grocery Prods. Co., 17 Cal. App. 5th 51, 109 (2017).

^[4] Compare In re Nat’l Prescription Opiate Litig., No. 1:17-MD-02804, 2019 WL 2468267, at *30-32 (N.D. Ohio Apr. 1, 2019), report and recommendation adopted in part, rejected in part, No. 1:17-MD-2804, 2019 WL 3737023 (N.D. Ohio June 13, 2019) (holding the right to be free from unwarranted addiction is a public right), with City of Chicago v. Beretta U.S.A. Corp., 231 Ill.2d 351, 370–75 (2004) (holding the right to be “free from unreasonable jeopardy to health” is a private right).

^[5] See, e.g., Tioga Pub. Sch. Dist. No. 15 v. U.S. Gypsum Co., 984 F.2d 915, 920-22 (8th Cir. 1993).

^[6] People v. Purdue Pharma L.P., No. 30-2014-00725287-CU-BT-CXC (Super. Ct. Cal. Nov. 1, 2021).

^[7] The court finalized its decision on December 14, 2021, overruling all 50 of the plaintiffs’ objections.

^[8] State ex rel. Hunter v. Johnson & Johnson, 2021 OK 54.

^[9] State ex rel. Hunter v. Purdue Pharma L.P., No. CJ-2017-816, at ¶ 54 (Okla. Dist. Ct. Aug. 26, 2019).

^[10] For example, news reports state that Oklahoma collected over $370 million dollars in pretrial settlements from opioid manufacturers and distributors. See Kassie McClung, Most of the Money Oklahoma Secured from Opioid Companies Has Gone Unspent, Frontier (July 8, 2021), https://www.readfrontier.org/stories/most-of-the-money-oklahoma-secured-…. Only Johnson & Johnson proceeded to verdict in that case.

Conservatives for Abusive Lawsuits

Get ready for a surge in Covid-related employment lawsuits, driven in part by conservative state lawmakers who are introducing bills to expand liability against employers that require vaccines.

If these measures pass, employers will face a sued-if-you-do, sued-if-you-don’t situation. The Occupational Safety and Health Administration requires large businesses to mandate employee vaccinations and imposes hefty fines for failure to comply. Even if the Supreme Court strikes down the OSHA rule, employers are at risk for liability claims, particularly when employees work in high-risk environments, unless they adopt adequate safety measures.

These bills would also undermine state workers-compensation systems, the traditional mechanism for compensating employees injured on the job, and conflict with the federal Public Readiness and Emergency Preparedness Act of 2005, which provides immunity to private employers and others that administer vaccination programs.

Conservative lawmakers traditionally oppose such liability-expanding initiatives, but in this case they’re leading the charge. Such bills have been introduced in Alabama, Indiana, Michigan, Ohio and Oklahoma. It’s regrettable to see past proponents of civil-justice reform take such a turn. America is already litigious enough.

Since 2020, about two-thirds of states have appropriately recognized that the uncertainty of a once-in-a-century pandemic required the enactment of legislation to protect businesses, healthcare providers and others from meritless lawsuits by raising the standard for liability or providing a defense to those that comply with applicable public-health guidance. But some of these protections will expire if legislatures don’t extend them.

Lawmakers should prioritize passing and extending balanced proposals that protect the public while deterring senseless lawsuits. Laws providing new avenues to sue reverse needed reforms and hurt the important progress that has been made.

U.S. employers already are subjected to Covid-related personal-injury, employment, contract and other lawsuits and claims. Legislation that relaxes the need to prove causation or authorizes statutory minimum damages, regardless of whether a plaintiff experienced an injury, is dangerous and would lead only to unnecessary and abusive lawsuits.

‘Game Changer’: Florida Supreme Court Ruling Could Chill Punitive Damages Claims

Punitive damages, long the scourge of businesses named in lawsuits, and a tricky issue for insurers, may soon be much harder to come by in Florida after a recent opinion handed down by the state Supreme Court.

“This will definitely chill plaintiffs’ requests for punitive damages,” said Robert Jarvis, a professor at Nova Southeastern University College of Law in Fort Lauderdale.

In a 6-1 decision posted Jan. 6, the high court approved an appellate procedure rule change that will allow interlocutory appeals on whether lawsuits can include demands for punitive damages. The rule will take effect April 1. Until then, litigants have had to wait until the end of a trial to appeal punitive damage claims.

The practical effect of the new rule may be that the appeal, now to be allowed during the midst of a lower court lawsuit, could take months. That will add delays to litigation and will ultimately discourage many plaintiffs from seeking punitive damages and pressing ahead with trials, some attorneys said.

Defendants in lawsuits will like it when an appeals court bars punitive damages, and plaintiffs will smile when the damages are allowed to be considered, said Curry Pajcic, a Jacksonville plaintiffs’ lawyer. But despite the outcome, “It’s going to increase the cost of litigation” for both sides, he said.

A tort-reform advocate called the ruling a “game changer” that would help prevent rifts that often arise between insureds and insurers when hefty punitive damage awards are at stake. Many liability policies, per statute, will not cover punitive damages. That often prompts policyholders to settle suits prematurely, said William Large, president of the Florida Justice Reform Institute. In many cases, the insured will hire outside counsel to handle that.

“Prior to this rule change, parties had to wait until the conclusion of a trial to address the issue with an appellate court,” Large said. “Seldom did parties get to have an appellate review, because of insureds’ pressure on insurers to settle the case. Finally, defendants and insurers will be afforded the due process they have been lacking.”

A deterrent to punitive awards could potentially affect insurers in bad-faith claims. In some cases, insurance companies can be held liable for punitive damages if a court finds they behaved in a particularly egregious manner, according to an article by Orlando-area attorney Sean Schulz.

Kansas Gooden, president of the Florida Defense Lawyers Association, which spoke in favor of the rule change, said it is something that 20 Florida appeal court judges have asked for through the years.

“This will give an extra layer of protection to defendants’ right to privacy,” she said.

The Supreme Court’s new rule is striking because the court took the initiative on its own, attorneys said. Instead of the usual path for procedural rules – responding to a request from the Florida Bar or an action by the Legislature – the court in this case was the initiator that asked a Bar committee in 2020 to draft the rule.

“They used the Bar as fig leaf,” Jarvis said. “This was so unnecessary. No one was clamoring to change the interlocutory rules on punitive damages.”

It was not clear from the order which justice initiated the change, but the move is another example of Florida’s government and its governor-appointed justices taking a pro-business, pro-insurance, anti-plaintiff turn to the right in recent years, Jarvis argued.

“The courts, especially at the Supreme Court and the appellate courts, have become very hostile to punitive damages,” he said.

Justice Jorge Labarga wrote a sharp dissent to the ruling. Labarga, appointed by Gov. Charlie Crist in 2009, wrote that the “drastic change” will result in needless delays.

“Of particular concern are tort cases involving personal injury, where claims for much needed medical and economic relief will stall until the question of punitive damages is resolved,” Labarga wrote. “Access to our judicial system with claims authorized by law should not be impeded by unnecessary delay and resulting additional expense.”

He quoted from the Florida Bar committee that drafted rule, which noted that no other state has a similar procedure. While the committee and the Bar’s board of governors approved the change, the committee did so grudgingly, Labarga said.

In years past, the committee had declined to recommend the interlocutory rule change. But this time, the Bar members indicated they felt directed by a mandate from the Supreme Court, he said.

Labarga also pointed out that the majority of the justices had professed support for the change due to a concern about the privacy of litigants’ finances. State law forbids discovery of a defendant’s net worth until after punitive damages claims have been pleaded in court. Now, if an appeals court bars punitive damage claims, the plaintiffs cannot proceed with discovery of financial information.

Labarga noted that finances can easily be shielded by a confidentiality order, without abandoning the long-standing and efficient procedure the courts have relied upon.

Others said that businesses’ and jurists’ concerns over punitive damages may be overblown. Florida law already limits punitive awards, in most cases, to no more than three times the amount of compensatory damages or $500,000, whichever is greater. In cases in which the defendant knew the injurious activity was dangerous and pursued it purely for financial gain, punitives are limited to four times the compensatory amount, or $2 million.

In cases of deliberate intent to harm the victim, the law puts no cap on punitive damages.

Where California courts go, the country follows

California may be known as home to Hollywood stars and the mighty redwoods, but lawyers know California for what it really is — the trial bar’s laboratory.

Trial lawyers develop novel legal theories in the Golden State to expand liability and test litigation tactics on plaintiff-friendly judges. Once they find success in the west, they fine-tune their methods, then spread their newfound schemes across the country.

In the 20th edition of the American Tort Reform Foundation’s Judicial Hellholes report, California was named the worst Judicial Hellhole in the country. The annual report was released this month and calls out California’s civil justice system as ground zero for innovative liability expansion and lawsuit abuse.

One tactic California trial lawyers finessed is the use of questionable scientific evidence in trials, sometimes called “junk science.” Now, the state’s junk science may soon go before the U.S. Supreme Court due to an outlier study used to pin Monsanto’s Roundup weedkiller as carcinogenic.

Major environmental regulators long have agreed that the essential crop-protection product does not cause cancer. European Union regulators repeatedly certify its safety, along with our own U.S. Environmental Protection Agency.

But in 2015, the International Agency for Research on Cancer, a small agency of the World Health Organization, labeled glyphosate a “probable carcinogen.” It later emerged that IARC dismissed evidence of glyphosate’s safety but amplified and mischaracterized other data to suggest conclusions no other rigorous study found. This, unfortunately, was unsurprising, given IARC was advised by an “invited specialist” — a paid expert for a plaintiffs’ firm involved in glyphosate litigation.

The U.S. Supreme Court must take this opportunity to rein in California’s lax rules on junk science and stop the trial bar’s liability-expanding agenda from permeating courthouses nationwide.

Lawsuits targeting industries tied to public health and food supply chains can have a truly chilling effect not only on research and development but on the availability of products we use and need every day. If we continue down this path of lawsuit abuse, we’ll see more critical industries move production abroad, while the availability of new medicines and critical products decreases in the U.S.

Across the country, lawsuit abuse results in more than $160 billion in excessive tort costs annually, meaning every American pays nearly $500 each year in a “tort tax.” Further, tort costs affect more than 2.2 million jobs, causing an estimated loss of $143.8 million in wages.

Courts in fellow Judicial Hellholes, including Pennsylvania and Missouri, follow the liability-expanding lead of California and open their doors to plaintiffs from all over the country, showing how dangerous California’s example can be.

While the Supreme Court has an important opportunity to rein in lawsuit abuse in Monsanto v. Hardeman, judges and legislators in California and across the country cannot rely solely on federal courts to rein in lawsuit abuse at the state level.

It’s up to state lawmakers and courts to rebalance the playing fields and foster civil justice systems that treat all parties equally. Lawsuit abuse threatens our quality of life when our supply chains are under attack. All of us –elected officials, judges and consumers — must call out these judicial abuses and work to end them.

Chaos over ‘mountains of fees’ for private lawyers mucking up opioid settlements, AGs complain

A coalition of 11 state attorneys general is accusing cities, counties and their private lawyers of engaging in fee-driven litigation that has interfered with the states’ ability to negotiate global opioid settlements with companies.

Stating “state Attorney Generals make better plaintiffs,” Ohio AG Dave Yost said the thousands of lawsuits against consulting firm McKinsey & Co. represent a money grab by local government officials and the lawyers they hired to represent them on contingency fees. Echoing arguments made frequently by business groups including the U.S. Chamber of Commerce over municipality litigation, Yost and the AGs of Texas, Kansas, Louisiana, Connecticut and several other states said, “these cases harm our system of government, needlessly clog the courts, and result in a delayed and less-effective remedy.”

“We are entering an era where phalanxes of political subdivisions file salvos of copy-cat complaints to multi-State actions seeking duplicative remedies to gain a seat at the table,” the AGs said in an amicus brief filed with U.S. District Judge Charles Breyer in San Francisco on Jan. 3. “These political-subdivision complaints …and the resulting mountains of fees claimed by private counsel, become a costly scourge on these classes of suits, the courts, and indeed, on our government structure.”

Yost and the other AGs filed the brief even though most of their states are represented by private lawyers who stand to reap billions of dollars in fees from the opioid settlements they helped negotiate. Ohio is represented by multiple law firms including Hagens Berman and former Mississippi AG Mike Moore and Texas and Montana are represented by Motley Rice, for example.

The AGs sought to intervene in multidistrict litigation against McKinsey after 47 states and the District of Columbia negotiated a $575 million settlement with the firm last year over claims it assisted Purdue Pharma with deceptive opioid marketing schemes. Their complaints are similar to ones the National Association of Attorneys General made in 2020 to U.S. District Judge Dan Aaron Polster, who is in charge of federal multidistrict litigation against opioid manufacturers and distributors.

In that letter, NAAG criticized plans for a $3.3 billion common benefit fund that would steer billions of dollars in fees to private lawyers even though Judge Polster had no jurisdiction over state lawsuits. Those lawyers – many of whom contribute to state and local politicians – now stand to earn $2 billion in fees from a $26 billion multistate settlement with opioid distributors and Johnson & Johnson.

In their brief in the McKinsey case, the state AGs said cities and counties are political subdivisions without the independent power to sue over broad harms to society. Granting them that power is equivalent to “splitting the atom of sovereignty” which exists only for the states and the federal government, the AGs said.

As lawsuits mounted against Purdue and other opioid producers, private lawyers fanned out around the country, recruiting municipalities as clients with promises they could win funding for local programs safe from appropriation by state legislators. They typically cited the $260 billion tobacco settlement with the states, where little money actually flowed to local governments or antismoking programs.

With opioid litigation, “brilliant and capable plaintiffs’ attorneys’ rent-seeking will align with the desire of local governments to obtain funds free-and-clear from the normal purse-strings control of State legislatures,” the AGs said. “In other words, the political subdivision cases are designed to shift the control of any recovered funds from state to local officials.”

Yost took direct aim at his counterparts in Ohio, saying “a menagerie of 58 Ohio counties, cities, villages, townships and fire districts filed a single complaint against McKinsey on March 4, 2021, exactly one month after the AG Settlement was announced. These claims were not even asserted until after Ohio released them.”

As NAAG complained to Judge Polster back in 2020, the AGs said local lawsuits hamstring their ability to negotiate global settlements with companies. Defendants want an end to litigation and unless AGs can guarantee that, settlements remain elusive.

“Political subdivision MDLs have made settlement more difficult for the States. The multistate settlement with opioid distributors was delayed for years because of the competing claims from political subdivisions pending in MDL.”

The AGs cited U.S. Supreme Court precedent to support the idea states could override the legal powers of the subdivisions, even if that meant forcing them to accept a civil settlement. In 1886, the Supreme Court said “there exists within the broad domain of sovereignty but these two” – the states and the federal government. The court reiterated this in 1982, saying the dual system of government “has no place for sovereign cities.”

Dishonor roll for lawsuits includes Tootsie Rolls, Hawaiian rolls, and rolls of the dice

If you’re offended that Tootsie Rolls contain sugar and fat or that a brand of bread rolls called King’s Hawaiian is made in bakeries outside of Hawaii or that the Mrs. Smith’s brand of pies doesn’t contain enough butter in their crusts, well, then, step right up to the courthouse.

That’s what various plaintiffs did in 2021 in three examples of what the U.S. Chamber of Commerce’s Institute for Legal Reform called the “Most Ridiculous Lawsuits” of the just-completed year. They are joined by the suit filed by two reckless golfers against a golf course because they crashed carts while playing. And the suit demanding $5 million from Folger’s because a woman said she couldn’t produce the suggested numbers of cups of coffee from one of the brand’s canisters.

Oh, and then there’s the awful crime committed by Pop-Tarts, which puts other fruit products in addition to strawberry in its strawberry-flavored pastries. Please, don’t tell comedian Jerry Seinfeld about this one: It’ll make his head explode.

The problem is, this nation’s litigiousness (along with the laws that do not adequately dissuade frivolous suits) creates situations that really aren’t funny. Oftentimes, even a suit that ends up failing can cause the defendant to run up so much in legal fees that it puts him or her out of business. Witness, for example, the 2007 lawsuit that forced a community basketball facility to close because its second floor wasn’t easily accessible by wheelchair, even though the facility made provisions for those with disabilities to access to its first floor as per existing regulations.

“At last count, the U.S. spends over $3,000 per household on its tort system, while small businesses are paying more than half — $182 million — of the commercial liability costs,” said Harold Kim, ILR’s president. “The only winners are the plaintiffs’ lawyers and litigation funders. The more frivolous lawsuits they file, the more they get paid.”

Nobody should want to dissuade legitimate lawsuits for real injuries caused by actual negligence. But a whole spate of state-level reforms could make those suits get priority while strongly discouraging the idiotic ones. It should be easier for lawyers to face sanctions for truly frivolous suits. And some categories of suits should be subject to “loser pay” provisions so that the legal fees of winning defendants are covered. And so on.

Hint: If you lose a half-million dollars at a casino, that’s your own fault. Don’t sue the casino on the weird off-chance that you’ll draw an easily confusable jury.

The courts of law aren’t supposed to be a crapshoot.

Crash course: Injured patients who sign ‘letters of protection’ may face huge medical bills and risks

Jean Louis-Charles couldn’t afford spine surgery to ease nagging neck and back pain after a car crash. So he signed a document, promising to pay the bill with money he hoped to get from a lawsuit against the driver who caused the collision.

That never happened.

Louis-Charles, 68, died hours after the operation at a South Florida outpatient surgery center in March 2019. The surgery center had put him in an Uber with his wife, Marie Julien, according to depositions. After a 60-mile ride home, he collapsed, court records show.

Her husband’s death left Julien to deal with more than $100,000 in medical debt, as described in the “letter of protection,” or LOP, that Louis-Charles had signed.

In signing an LOP, people generally pledge to cover the costs of their care even if it exceeds what they win in a lawsuit or other settlement — and even if the prices are far higher than most doctors would charge.

The agreements are legal and binding in many states, though Florida appears to be the epicenter of their use in personal injury cases. Advocates say the letters throw a lifeline to low-income people who need vital medical care for injuries caused by the negligence of others and don’t have the money or insurance coverage to pay for it. Doctors and surgery centers that accept LOPs say they often wait years for a lawsuit to settle before being paid, if at all.

A KHN investigation found that letters of protection can saddle patients with medical debt — and drive a personal injury care system that operates with little oversight despite widespread complaints of grossly inflated billings and other problems that can place patients at risk.

Marie Julien blamed Dr. Kingsley R. Chin — a controversial Hollywood, Florida, surgeon who has accepted LOP payments for more than a decade — for her husband’s death after the spinal fusion procedure. Last year, she filed a malpractice suit against Chin alleging that Louis-Charles died after he “was discharged home while still in pain and with signs and symptoms of post-operative complications.” In court papers, Chin denied any negligence.

“We felt that the way the whole thing happened was very bizarre,” Julien, 71, a certified nursing assistant, recalled in a deposition taken in the case.

A ‘Terrible Situation’

Just before 8 a.m. on New Year’s Day 2018, Louis-Charles’ car was stopped at a red light near his home. Suddenly a white police vehicle, driven by a Palm Beach County Sheriff’s Office detective, backed into his Toyota Corolla, hitting the passenger side door, according to a police report.

In her deposition, Julien said Chin operated on her husband’s shoulder in 2018. But that didn’t help much, and Chin recommended more extensive surgery, she said. “I wasn’t happy at all with that idea,” she added.

Julien said she relented because Louis-Charles’ pain was getting worse “day by day” and he had confidence in the surgeon. The Aventura Surgery Center in Hallandale, Florida, where Chin had served as medical director, sent an Uber to collect the couple the morning of March 12, 2019, Julien said.

During the two-hour spinal fusion, Chin replaced three disks with an implant he invented, according to his deposition. The patient spent an hour or so in a recovery room before a nurse wheeled him out to a waiting Uber just after 3 p.m., according to Chin’s testimony.

Louis-Charles couldn’t speak, but signaled he was in pain and struggled to breathe during the hourlong ride home, according to Julien’s deposition. She helped him walk through the front door of their Riviera Beach home. Once inside he collapsed, she testified.

A fire rescue crew rushed him to a hospital in West Palm Beach, where he died just after 5:30 p.m., according to a Palm Beach County Medical Examiner’s autopsy report. The medical examiner ruled the death an accident caused by “post-surgical bleeding with airway compression.”

In his deposition, Chin said that Louis-Charles “looked great” heading out to the car and that traveling along the urban Interstate 95 corridor the driver was “at any given time probably within 10 minutes or so” from a “major hospital or emergency room.”

Chin called the outcome a “terrible situation” and told Julien’s lawyer during the deposition: “I just hope you can appreciate how much I regret what happened.”

Asked how her husband’s death has affected her life, Julien said: “How can you find words to explain such a thing?” The couple wed in 1987 in Miami after moving from their native Haiti, where he worked as a house carpenter.

“It’s been almost two years now. I have not been able to sleep on [the] bed” she shared with him, she said.

In late September, Julien and Chin settled the suit under confidential terms and the bills were “written off,” according to Kevin Smith, an attorney who represented Julien. Chin has denied any liability.

‘A Mixed Bag’

Though little-known to the public, letters of protection are commonly used to finance major medical care in personal injury cases, including costly orthopedic surgery.

Attorneys who refer injured clients to willing doctors say the liens are their best tool for ensuring clients not only gain access to care, but also are in a position to win fair settlements from insurance companies that fight to minimize their liability and costs.

An LOP form used by some Florida medical providers says they agree to wait for payment as a “courtesy” to the injured person, adding in boldface: “We understand insurance companies have unlimited resources, will hire defense lawyers and defense experts that will cause our payment to be delayed for months or years.”

The business community and insurers counter that LOP providers grossly inflate their medical fees to give juries a false picture of the costs of medical care.

“The sole purpose of the LOP, why it exists, is to drive up verdicts and settlements,” Lauren McBride, a lawyer for Publix Super Markets, a chain with more than 800 stores in Florida, testified in a state legislative hearing in February 2019.

McBride said that nearly two-thirds of “slip-and-fall” injury claims in Publix stores involve letters of protection. In more than half those cases, the injured person had some form of insurance but declined to use it, she said. In some cases, injured people traveled long distances for costly care they could have received closer to home at far less expense, she said. She also argued that LOPs give doctors an incentive to overtreat patients “to keep driving up medical bills” — and persuade juries to award big verdicts.

Kevin Leahy, an Austin, Texas, lawyer who has researched the practice there and represented clients on both sides of the debate, said LOPs deserve more scrutiny. “It’s a mixed bag,” he said. “There are definitely abuses going on. There are also hurt people getting care they need to get better.”

Leahy said LOPs have helped create a “liability-based” health care network with few checks on its financial dealings or other standards. He called it “unregulated, opaque and not fully accurate about charges.”

Across the country, LOPs have been tied to a range of alleged medical overcharges or other billing abuses, court records show.

Nearly 200 women from 42 states, for example, have joined a class-action suit that alleges doctors and lawyers talked them into signing LOPs promising to pay for surgical removal of pelvic mesh — whether they needed it removed or not.

The women allege that the doctors billed sky-high rates and told them their insurance would not cover the cost, so signing an LOP was the only way to safeguard their health. Private insurance would have paid about $8,000 for these services, far less than the $76,000-plus the women were charged under the LOP, according to the suit, filed in late August. The case is pending. Six doctors have filed motions to dismiss the case.

In a 2020 federal civil case, evidence emerged that a Texas spine surgeon charged nearly $400,000 under an LOP for procedures that Medicare would reimburse at less than $20,000, court records state.

Reviewing court cases in Florida, KHN found dozens of examples in which patients who signed LOPs alleged they were later sued for payment of excessive fees or received substandard medical care.

‘Unnecessary and Dangerous’

On the day of his spinal surgery, Louis-Charles signed a letter of protection that read in part: “While I am injured and need care, I cannot financially afford to pay your bill at the time services are rendered, I therefore, grant this provider a lien on my claim against any and all proceeds from any settlement, insurance benefits or judgment.”

The documents said he would be charged “what is usual and customary for our area.” But the fees were much higher than private health insurance would cover or what the Medicare fee schedule provides for.

The Aventura Surgery Center, co-owned by Miami personal injury attorney Sagi Shaked, billed nearly $100,000 for the operation, court records show. Two other Shaked-affiliated companies billed more than $35,000 for surgical supplies and anesthesia, according to the court records. Shaked did not respond to numerous requests for comment. In his deposition, Chin said he no longer operates at the Aventura Surgery Center.

Mark Woodard, 54, who was rear-ended in an April 2017 car crash in Fort Lauderdale, had three spine operations at the Aventura Surgery Center performed by Chin under a letter of protection.

His bills topped $430,000, including $179,500 for the surgery center, $177,972 billed by Chin’s medical office and $39,327 for implants from SpineFrontier, a Massachusetts medical device company Chin owns, court records show.

“These charges are way out of line,” said Michael Arrigo, a medical billing expert in California asked by KHN to review Woodard’s bills. Arrigo said “usual and customary” charges would be less than one-fourth of what was billed.

Woodard, who has worked as a painter and maintenance technician at beachfront hotels in Fort Lauderdale, argues in his lawsuit that his injuries from the crash were “nothing more than cervical and lumbar sprains and strains … such that no reasonable physician would have performed surgery other than for monetary purposes.”

According to Woodard’s lawsuit, Chin persuaded him to have multiple operations and during one tore a 1-centimeter hole through a nerve root, leaving him in “extreme agony and excruciating pain.”

The suit, filed in March 2021, alleges the surgery center offered Chin a “safe haven to perform his unnecessary and dangerous surgeries.” It also alleges that Chin “was unable to perform surgery at any hospital in the state of Florida and most if not all surgery centers where he had applied had either denied him privileges or he had his privileges revoked at multiple hospitals.” In court filings, Shaked has denied the allegations and any liability.

Chin also has denied any negligence in court filings and in a deposition called the fees he charged “reasonable within the community.” Woodard’s lawsuit is pending in Broward County Circuit Court.

Chin has been sued repeatedly for medical negligence, including several cases involving LOPs. He has been sanctioned by physician-licensing boards in three states, unrelated to his use of LOPs.

In early December, the Florida Department of Health, which licenses doctors, issued Chin a “letter of concern” and fined him $8,000. The action settled a state administrative complaint alleging that in August 2019 Chin sent home a 73-year-old man who suffered from complications of spinal surgery who should have been transferred “to a higher level of care in an inpatient setting (such as a hospital).” Chin disputed the allegations.

Separately, federal agents arrested Chin in early September in Fort Lauderdale on kickback charges as CEO at SpineFrontier, which sells spinal implants he invented and used in operations on Louis-Charles and Woodard. Chin has denied the civil allegations and has pleaded not guilty to the criminal charges.

In October, a federal judge ordered Chin to post a $500,000 bond secured by his Florida home. He is free to travel within the country “for business purposes only” and may travel one time per month to Jamaica “only for the purpose of practicing medicine there,” the order states. Chin has active medical licenses in Florida, Arizona, New Jersey, New York and in Jamaica, according to documents he filed with the court.

A ‘Complete Shock’

By its own account, the Broward Outpatient Surgical Center and its affiliates in Pompano Beach, Florida, have treated more than a thousand patients under letters of protection. But the billing practices — one lawsuit called its fees “astronomically unreasonable and inflated” — have been criticized in court filings for years. These cases often settle under confidential terms.

One patient argued in a lawsuit that injured patients were “bounced around” a web of affiliated clinics for services that included chiropractic care, pain injections, physical therapy and, finally, surgery, all done with no caps on the costs. The center denied the allegations, and the case has since been settled.

Albert Frevola, an attorney for the center, said that prior to treatment patients are given a price list and sign an agreement to pay the bills out of any settlement of their personal injury claims. He said the center serves many patients “who can’t afford to get medical care. It’s a service that is valuable and needed.”

Some three dozen former patients have filed a recent mass tort lawsuit alleging medical malpractice and billing fraud by the surgery center and its owners, chiropractors Brian and Craig Bauer, who are brothers. The suit also names spine surgeon Dr. Merrill Reuter, court records show. Neither Reuter nor his lawyer responded to requests for comment.

The patients allege they visited the center after a car crash or other accident and were persuaded to have spinal surgery. In some cases, the operations either were billed as more complex than they were, or not done at all, according to the suit. Patients often have run up bills of $100,000 or more under LOPs, court records show. “Due to the fact that personal injury patients rarely, if ever, use their private health insurance for such health care services, the Bauers and the Bauer entities were able to get away with charging inflated amounts,” according to the suit.

Frevola, who represents the brothers, said they “flatly deny” the allegations and “are sad and distressed that these accusations are being made by the same people they gave great care and medical treatment to.”

In a separate malpractice case, Terrell Harris, 37, alleged he was guided down a “treatment path” after a car crash in July 2017 that ended in surgery at prices “far beyond the scope of reason, let alone custom.” The center denied the allegations and filed a counterclaim accusing Harris of failing to pay for his care under the LOP.

The suit is one of eight pending in Broward County Circuit Court that make similar claims, including that of a woman who alleged she had the same pain after spinal surgery as she had beforehand. Nearly five years later, to her “complete shock,” an MRI found no evidence the operation she was billed for had been done, according to the suit.

In a February 2020 court filing in one of the cases, the center and Brian Bauer denied the allegations and called them “frivolous and scandalous.” They filed a counterclaim demanding to be paid for their services. The case is pending.

Warring Creditors

When fees are inflated under an LOP, patients can take home more money under an insurance settlement or jury verdict. But if a case settles for less than the sum of those bills, patients may be on the hook to pay the balance.

Lawyers who typically co-sign the LOPs try to persuade medical providers to reduce their fees, which often happens. When that fails, however, lawyers file a court action called an interpleader, which asks a judge to decide who gets what among warring creditors.

KHN reviewed dozens of Florida court cases in which medical creditors holding LOPs demanded payment in full. While many of these cases settled under confidential terms, court records show some accident victims ended up mired in debt or saw their damage awards drastically reduced by outsize medical billings and legal fees. In some cases, lawyers took home more than their injured clients.

That happened to Jose Merced, who fell and hurt himself after stepping into a hole outside his apartment in the Orlando area. He received a $75,000 settlement but incurred bills of more than $850,000 for operations and other medical costs, which he contested as “highly inflated,” court records show. The bills included more than $700,000 in orthopedic surgical and facility fees.

In August 2020, a judge allowed just over $35,000 to pay for the surgeries. Merced was awarded $10,000, while his lawyer got nearly $27,000, just over $18,000 of it for professional fees and the rest for expenses.

In some interpleader cases, lawyers asked judges for one-third of the total settlement for their fees, plus expenses, which can add hundreds, if not thousands, of dollars more to their share.

A law group founded by South Florida personal injury lawyer Robert Fenstersheib filed at least 50 interpleader cases in Broward County Circuit Court between January 2019 and October of this year. Fenstersheib, who was a fixture of local television ads as the “lawyer who listens,” was shot to death by his son in a murder-suicide in September 2020, though his Fenstersheib Law Group still operates under his relatives.

Many of the LOP patients now suing the Broward Outpatient Surgery Center and its owners were clients of the Fenstersheib firm, court records show. The center and the law firm did business for years, but the center sued the law firm in 2019 alleging the lawyers failed to pay it millions of dollars owed under LOPs. The law firm responded that it was a victim of a $6.5 million embezzlement by former employees who pocketed settlement money meant for the center. The suit was settled under confidential terms this year.

Federal prosecutors filed criminal charges against two former Fenstersheib employees in connection with the theft. In late November, one of the men, Michael Wihlborg, a 47-year-old high school dropout who had worked for the law firm for nearly two decades, admitted receiving more than $2.1 million in stolen funds from the scheme; he pleaded guilty to one count of conspiracy to commit wire fraud and three counts of filing a false income tax return, court records show. He faces up to 29 years in prison, according to court records. Co-defendant Matthew Matlock pleaded guilty to similar charges on Dec. 15, court records show. The law firm had no comment.

Ethics Question

Some lenders also accept LOPs as collateral for patients who borrow money to tide them over while their personal injury case winds through the courts, which typically takes years. Interest charges pile up fast.

A Miami man who was injured after a pile of wood fell on him at a home improvement store borrowed $51,400 from a finance company backed by an LOP in September 2014. He owed the company $140,322 three years later because of an interest rate of 18% charged every six months, court records show.

Doctors also can generate cash from letters of protection. While they argue they must wait years for payment, some spine surgeons sell the liens on a burgeoning medical debt market.

Court records in Florida show millions of dollars of these liens have changed hands when doctors sold them. Buyers paid 10% to 25% of the total amount of the bill and gambled they would be able to collect a tidy profit once a patient’s lawsuit was settled.

The ethics of doctors wheeling and dealing in patient bills and having a financial stake in the outcome of litigation has been questioned. An American Medical Association policy says such deals are unethical because “there is the ever-present danger that the physician may become less of a healer and more of an advocate or partisan in the proceedings.”

Dr. Scott Lederhaus, a retired California neurosurgeon who has reviewed personal injury cases for the defense, said some patients argue in depositions that under an LOP they never saw bills, so they had no idea of the extent of the medical costs they were incurring over time.

Lederhaus said there is little agreement on what is a reasonable medical fee and, as a result, doctors “are able to charge whatever they want” in personal injury cases.

And it remains unclear whether the No Surprises Act, which Congress passed last year amid a national outcry over huge and unexpected medical bills, offers patients who signed LOPs any protection.

“A lot of these doctors are under the impression they can do whatever they want and there’s not going to be any oversight by anyone,” Lederhaus said.

Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.