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decided: August 23, 1993.


Appeal from the United States District Court for the Eastern District of Louisiana. D.C. DOCKET NO. CA-87-4962-I. JUDGE Henry A. Mentz, Jr.

Before King, Higginbotham and DeMOSS, Circuit Judges.

Author: Demoss

DeMOSS, Circuit Judge:

In this case we review, principally, the district court's application of Louisiana's Medical Malpractice Act, La. Rev. Stat. Ann. § 40:1299.41 - 1299.47 (West 1992) (the "Act" or "statute").

I. The Medical Malpractice Act

Louisiana has established a statutory scheme for the prosecution of medical malpractice claims against qualified health care providers. Health care providers who choose to comply with certain of the statute's provisions become qualified under the statute and subject to its procedures and protection. See Id § 40:1299.42 (A).

The protection afforded qualified providers is a limitation on liability exposure to no more than $100,000, plus interest, on malpractice claims. Id. § 40:1299.42 (B)(2). Any amount owing from a Judgement or settlement in excess of the total liability of all qualified providers on a malpractice claim is to be paid from the Patient's Compensation Fund (the "Fund"). Id. § 40:1299.42 (B)(3)(a).

The statute also provides for limitation on the Fund's exposure. The total amount recoverable from the Fund is limited to $500,000, plus interest and cost, exclusive of damages for future medical care and related benefits. Id. § 40:1299.42 (B)(1).

In the event a qualified provider settles for its $100,000 policy limits, its liability becomes "admitted and established" for the purposes of any subsequent action by the malpractice victim against the Fund for additional compensation. Id. § 40:1299.44 (C)(5). As a consequence, the statute precludes the Fund from contesting the settling provider's liability in any such action. Id. ; Koslowski v. Sanchez, 576 So. 2d 470, 471 (La. 1991). The only issue the Fund is allowed to litigate under the statute is the quantum of the victim's damages.*fn1 Koslowski, 576 So. 2d at 471.

In light of the forgoing, we review the facts material to our decision today.

II. Facts

Mrs. Castillo and her husband sued three Louisiana health care providers for malpractice because of injuries she suffered while receiving treatment for a liver condition. Two of the providers, Dr. Oms and Montelepre Memorial Hospital, are qualified under the Medical Malpractice Act. The other provider, Dr. Gordillo, is not.

The Castillos subsequently entered into settlements with all three providers. In their settlement with Montelepre, Montelepre agreed to pay its $100,000 statutory limits, and the Castillos reserved their right to seek excess compensation from the Fund. Pursuant to the statute, the Castillos requested the district court to approve their settlement with Montelepre.

Before the court could give its approval, the Fund intervened. It sought to challenge the settlement and prevent Montelepre from paying its statutory limits, which would preclude the Fund from raising the issue of Montelepre's liability in the Castillo's forthcoming suit for additional compensation. The court denied the Fund's challenge, concluding that the Fund had no right to challenge a settlement between a qualified provider and a malpractice victim. Having denied the Fund's challenge, the court approved the Castillos/Montelepre settlement.

From this point forward, the Fund repeatedly and unsuccessfully implored the district court to allow it to litigate Montelpre's liability at the upcoming trial of the Castillos' damages. Anticipating the Fund's trial strategy, the Castillos filed a motion in limine seeking to exclude any evidence pertaining to Montelpre's liability. The Fund opposed the motion, contending that it had the right to prove the proportionate fault of the three providers and reduce the Castillos' damages by whatever measure the jury portioned out to Dr. Gordillo. The district court rejected the Fund's contention and granted the Castillos' motion.

On the eve of trial, the Castillos filed a motion for summary judgment. Both parties stipulated to facts material to the only issue to be tried before the jury, the amount of the Castillos' damages.*fn2 Based on these stipulations, the court entered judgment awarding the Castillos, inter alia, $500,000 in general damages, plus interest, subject to a $200,000 credit in favor of the Fund because of Dr. Oms and Montelepre's settlements, and $280,000 in past medical expenses.

Shortly thereafter, the Fund filed its notice of appeal. That same day, the court signed an order, over the Castillos' objection, exempting the Fund from posting a supersedeas bond during the pendency of its appeal. The Castillos subsequently filed a cross appeal challenging the court's stay of execution.

Against this factual backdrop, we address the issues raised by the parties in this case.

III. Discussion

A. The Settlement Challenge

In its second point of error, the Fund argues that the district court erred by not allowing it to challenge the settlement between Montelepre and the Castillos and thereby force the litigation of Montelepre's liability. At the heart of the matter, the Fund contends, is its right to challenge a settlement between a malpractice victim and a qualified provider in every instance where the provider's insurer pays its $100,000 policy limits. It tries to support this argument on two grounds: the language of section 40:1299.44 (C)(3) and the duty imposed on the provider's insurer under section 40:1299.44 (C)(7).

The relevant portion of section 40:1299.44 (C)(3) reads as follows:

The board and the insurer of the health care provider ... may agree to a settlement with the claimant from the patient's compensation fund, or the board and the insurer of the health care provider ... may file written objections to the payment of the amount demanded.

Paragraph (C)(3) must be read in the complete context of section 40:1299.44 (C). This section provides the procedure when a qualified provider's insurer has agreed to settle its insured's liability and the victim demands from the Fund, for a complete and final release, amounts in excess of the settlement. Id. § 40:1299.44 (C). Assuming the settlement was for the provider's $100,000 policy limits, the liability of the insured has already become "admitted and established." Id. § 40:1299.44 (C)(5). The only remaining issue, therefore, is whether the Fund will agree to pay the excess amount the claimant is demanding for his damages.

The Fund has two choices: either agree to the amount demanded or litigate the sole issue of the claimant's damages. Id. § 40:1299.44 (C)(3) & (5). If it chooses not to pay the demanded amount, then subparagraph (C)(3) allows the Fund to file written objections "to the amount demanded" and thereby force the litigation of the claimant's damages. Stuka v. Fleming, 561 So. 2d 1371, 1373 (La. 1990). In the latter instance, the only issue to be litigated is the quantum of the claimant's damages. Id. at 1374. Importantly, this inquiry has nothing to do with liability; that issue was conclusively resolved between the provider's insurer and the claimant when the insurer agreed to settle for its $100,000 policy limits. Id. The written objections, therefore, provide the vehicle through which the Fund puts into issue, between itself and the claimant, only the amount of the claimant's damages and not the provider's liability.

We therefore hold that the district court was correct in ruling that nothing in the language of section 1299.44 (C)(3) allowed the Fund to challenge the ...

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