Judge Rules US Entitled to Offset of $600K in Malpractice Suit

On Friday in the District of New Mexico, Judge Richard K. Eaton ruled that the United States, the defendant in a medical malpractice case, is entitled to an offset of $600,000 and that the patient in the case is entitled to a trust of future medical expenses, but the leftover principal will be directed to the U.S. after the patient’s death.

The patient in the original case, a minor, had fallen from playground equipment in 2016 that was manufactured by PlayPower, a commercial manufacturer of playground and recreational equipment. The patient suffered a brain injury “resulting in permanent and profound disability,” the judge explained. The father of the patient and others brought a federal suit on behalf of the patient to recover medical damages against the U.S. under the Federal Tort Claims Act. They also brought a state suit against PlayPower and the city of Gallup, New Mexico, where the child’s injury occurred. In the state court matter, the plaintiffs and PlayPower reached a settlement at an undisclosed amount, only including nonmedical damages, the court noted.

The parties do not dispute whether the future medical damages should be placed in a trust, but whether that trust should default to the patient’s estate after their death or to the U.S., called a “reversionary trust,” with the plaintiffs arguing that the former is germane and the defendant arguing the latter.

The U.S. argued for an offset of costs on the basis that the “(p)laintiffs have not adequately carried their burden of showing how much, if any, of the settlement amount is attributable to the injury allegedly caused by PlayPower, as distinct from the injuries proven against the United States,” the judge explained, and because the settlement between the plaintiffs and PlayPower “does not effectively protect” the U.S. from “double recovery” as the matter against the U.S. excluded nonmedical damages. The court noted that no such double recovery had occurred throughout the case; however, the judge agreed with the U.S. in that the plaintiffs “failed to establish, based on the evidence on the record, which non-medical damages were definitively covered by the settlement and Release, and which were the subject of the suit against the United States,” so an offset of $600,000 is proper for the U.S. to avoid potential double recovery.

On the question of the child’s trust, the plaintiffs argued that the standard that ought to be used to determine what type of trust to invoke is the Tenth Circuit’s: “whether a reversionary trust is in (the patient’s) ‘best interests.’ ” The U.S. postulated that the court should use a standard that would most closely resemble “the applicable state statute,” the judge explained, which would see the U.S. “in the same manner and to the same extent as a private individual under like circumstances” pursuant to 28 U.S.C. § 2674. Further, the defendant argued that regardless, a reversionary trust would be most appropriate “as a preventive measure to any mishandling of the funds during (the patient’s) lifetime.”

The court sided with the U.S. here, stating that the plaintiff’s proffered standard was “misplaced” and that a reversionary trust will keep the U.S. accountable for its responsibilities while ensuring it “is not required to pay for more than the medical expenses paid for the benefit” of the patient during their lifetime.

The plaintiffs are represented by Barudin Law Firm, Kaplan & Lukowski, and William H. Carpenter Law Office.