Elbaor v. Smith

OPINION BY: RAUL A. GONZALEZ

In this medical malpractice case we consider: 1) whether the trial court should have submitted to the jury a requested issue concerning the plaintiff's contributory negligence; and 2) whether Mary Carter agreements are void as contrary to public policy. The trial court rendered judgment in favor of the plaintiff, and the court of appeals affirmed. We hold that the trial court committed reversible error in refusing to submit an issue on the plaintiff's contributory negligence. We further hold that Mary Carter agreements are void as against public policy. We thus reverse the judgment of the court of appeals and remand this cause to the trial court for a new trial.

At 2:00 a.m. on May 8, 1985, Carole Smith was seriously injured in a single-vehicle accident when the Corvette she was driving left the highway and collided with a tree. She received emergency treatment at the Dallas/Fort Worth Medical Center-Grand Prairie ("D/FW Medical Center") from Dr. Abraham Syrquin for multiple injuries including a compound fracture of her left ankle. In an effort to stop the bleeding, Dr. Syrquin performed emergency surgery closing the ankle wound. Ms. Smith remained under Dr. Syrquin's treatment for eight days at D/FW Medical Center after which time she was transferred to the care of Dr. James Elbaor, an orthopedic surgeon, at Arlington Community Hospital ("ACH").

While Ms. Smith was at ACH, she was treated by a team of physicians including Dr. Elbaor, Dr. Joseph Stephens, a plastic surgeon, and Dr. Bienvenido Gatmaitan, an infectious disease specialist. Upon admission to ACH, Ms. Smith was evaluated by Dr. Gatmaitan and placed on intravenous antibiotics. During the course of her stay, Dr. Stephens performed two debridements of the ankle wound. Although the issue of whether Ms. Smith's ankle was infected was hotly contested at trial, Dr. Stephens' progress notes following both debridement procedures indicated that there was no active infection present in the ankle. On June 3, Ms. Smith was transferred to the care of Dr. Wayne Burkhead at Baylor University Medical Center ("Baylor"). Four days after admission, Dr. Burkhead removed a two inch section of bone from Ms. Smith's ankle. Ms. Smith received treatment from several orthopedic specialists over the next three years which ultimately led to the fusion of her ankle joint.

Ms. Smith's medical records from D/FW Medical Center and ACH indicate that she refused to cooperate with the instructions of her doctors and nurses. She frequently refused to take her antibiotics, and directed family members to remove weights from her femoral traction device. Some time later, Ms. Smith was transferred to another hospital for surgery to shorten and fuse the bone, leaving her permanently disabled.

Ms. Smith filed suit against D/FW Medical Center, ACH, Drs. Syrquin, Elbaor, Stephens, and Gatmaitan. Sometime before trial, Ms. Smith entered into Mary Carter agreements with Dr. Syrquin, Dr. Stephens, and ACH. The Mary Carter agreements provided for payments to Ms. Smith of $ 350,000 from Dr. Syrquin, $ 75,000 from ACH, and $ 10 from Dr. Stephens. Under the terms of each agreement, the settling defendants were required to participate in the trial of the case. The agreements also contained pay-back provisions whereby Dr. Syrquin and ACH would be reimbursed all or part of the settlement money paid to Ms. Smith out of the recovery against Dr. Elbaor.

Ms. Smith nonsuited her claim against Dr. Gatmaitan and settled and dismissed her claim against D/FW Medical Center. Dr. Elbaor filed a cross claim against Dr. Stephens, Dr. Gatmaitan, Dr. Syrquin, and ACH. He alleged that in the event he was found liable to Ms. Smith, that he was entitled to contribution from these defendants. Furthermore, Dr. Elbaor requested that the trial court hold the Mary Carter agreements void as against public policy, and alternatively, to dismiss the settling defendants from the suit. The trial court denied this request. The suit proceeded to trial against Dr. Elbaor and the cross defendants.

At trial, the jury found that Ms. Smith's damages totalled $ 2,253,237.07, of which Dr. Elbaor was responsible for eighty-eight percent, and Dr. Syrquin for twelve percent. After deducting all credits for Dr. Syrquin's percentage of causation and settlements with other defendants, thetrial court rendered judgment against Dr. Elbaor for $ 1,872,848.62. . . .

. . . Ms. Smith entered into Mary Carter agreements with Dr. Syrquin, ACH, and Dr. Stephens. Under the terms of the agreements, the settling defendants were required to participate in the trial of the case. The agreements also contained pay-back provisions whereby Dr. Syrquin and ACH would be reimbursed for all or part of the settlement money paid to Ms. Smith out of the recovery against Dr. Elbaor.

Dr. Syrquin had performed emergency surgery on Ms. Smith's ankle. Testimony at trial revealed that Dr. Syrquin, who was not an orthopedic specialist, committed malpractice by closing the ankle too soon after debriding it. Eight days after the surgery, Dr. Syrquin recommended transferring Ms. Smith to ACH where she came under the care of, among others, Dr. Elbaor, an orthopedic specialist. At ACH, Dr. Elbaor observed but did not participate in two additional debridements of Ms. Smith's ankle which were performed by Dr. Stephens, a plastic surgeon. Dr. Stephens sought to explore and alleviate any infection in Ms. Smith's ankle. Additional expert medical testimony elicited during the trial demonstrated that, in all probability, Ms. Smith's ankle was beyond restoration by the time she arrived at ACH. Arguably neither the subsequent surgeries performed at ACH nor the care she received there could have remedied the damage caused by Dr. Syrquin's malpractice.

Although the Mary Carter agreements were not entered into evidence, the trial judge was troubled by them and he took remedial measures to mitigate their harmful effects by reapportioning the peremptory challenges, changing the order of proceedings to favor Dr. Elbaor, allowing counsel to explain the agreements to the jury, and instructing the jury regarding the agreements.

During the trial, the settling defendants' attorneys, who sat at the table with Dr. Elbaor's attorneys, vigorously assisted Ms. Smith in pointing the finger of culpability at Dr. Elbaor. This created some odd conflicts of interest and some questionable representations of fact. For example, although Ms. Smith's own experts testified that Dr. Syrquin committed malpractice, her attorney stated during voir dire and in her opening statement that Dr. Syrquin's conduct was "heroic" and that Dr. Elbaor's negligence caused Ms. Smith's damages. And during her closing argument, Ms. Smith's attorney urged the jury to find that Dr. Syrquin had not caused Ms. Smith's damages. This is hardly the kind of statement expected from a plaintiff's lawyer regarding a named defendant. ACH and Drs. Syrquin and Stephens had remained defendants of record, but their attorneys asserted during voir dire that Ms. Smith's damages were "devastating," "astoundingly high," and "astronomical." Furthermore, on cross examination they elicited testimony from Ms. Smith favorable to her and requested recovery for pain and mental anguish. The settling defendants' attorneys also abandoned their pleadings on Ms. Smith's contributory negligence, argued that Ms. Smith should be awarded all of her alleged damages, and urged that Dr. Elbaor was 100 percent liable.

The term "Mary Carter agreement" has been defined in different ways by various courts and commentators. [Footnote 13] This Court has yet to definitively define the requisite elements of a Mary Carter agreement--our prior pronouncements utilized different definitions of the term. Today we clarify what we mean by the term "Mary Carter agreement." A Mary Carter agreement exists when the settling defendant retains a financial stake in the plaintiff's recovery and remains a party at the trial of the case. This definition comports with both the present majority view and the original understanding of the term.

=====FOOTNOTE 13=====
The majority of cases and commentators define "Mary Carter agreement" as one in which the settling defendant possesses a financial stake in the outcome of the case and the settling defendant remains a party to the litigation.
=====End Footnote=====

A Mary Carter agreement exists, under our definition, when the plaintiff enters into a settlement agreement with one defendant and goes to trial against the remaining defendant(s). The settling defendant, who remains a party, guarantees the plaintiff a minimum payment, which may be offset in whole or in part by an excess judgment recovered at trial. This creates a tremendous incentive for the settling defendant to ensure that the plaintiff succeeds in obtaining a sizable recovery, and thus motivates the defendant to assist greatly in the plaintiff's presentation of the case (as occurred here). Indeed, Mary Carter agreements generally, but not always, contain a clause requiring the settling defendant to participate in the trial on the plaintiff's behalf.

Given this Mary Carter scenario, it is difficult to surmise how these agreements promote settlement. Although the agreements do secure the partial settlement of a lawsuit, they nevertheless nearly always ensure a trial against the non-settling defendant. Mary Carter agreements frequently make litigation inevitable, because they grant the settling defendant veto power over any proposed settlement between the plaintiff and any remaining defendant. Thus, "only a mechanical jurisprudence could characterize Mary Carter arrangements as promoting compromise and discouraging litigation--they plainly do just the opposite." . . .

Many jurisdictions have decided to tolerate the ill effects of Mary Carter agreements, presumably because they believe that the agreements promote settlement. Some have sought to mitigate the agreements' harmful skewing of the trial process by imposing prophylactic protections. Indeed, Texas previously has taken such an approach. [Footnote 19] These protective measures generally seek to remove the secrecy within which Mary Carter agreements traditionally have been shrouded.

=====FOOTNOTE 19=====
The guidelines provided in the Smithwick concurrence require that Mary Carter agreements: (1) are discoverable; (2) should be fully disclosed "to the trial court before trial or immediately after the agreement is formed;" (3) should be considered by the trial court in allowing jury strikes and ruling on witness examination; and (4) should be fully disclosed to the jury at the start of the trial.
=====End Footnote=====

Justice Spears rightly noted in [Scurlock Oil Co. v. Smithwick] the falsity of the premise upon which the prophylactic protection approach is founded, namely, the promotion of equitable settlements. Mary Carter agreements instead: present to the jury a sham of adversity between the plaintiff and one co-defendant, while these parties are actually allied for the purpose of securing a substantial judgment for the plaintiff and, in some cases, exoneration for the settling defendant.

The agreements pressure the "settling" defendant to alter the character of the suit by contributing discovery material, peremptory challenges, trial tactics, supportive witness examination, and jury influence to the plaintiff's cause. These procedural advantages distort the case presented before a jury that came "to court expecting to see a contest between the plaintiff and the defendants [and] instead sees one of the defendants cooperating with the plaintiff." Mary Carter agreements not only allow plaintiffs to buy support for their case, they also motivate more culpable defendants to "make a 'good deal' [and thus] end up paying little or nothing in damages." Remedial measures cannot overcome nor sufficiently alleviate the malignant effects that Mary Carter agreements inflict upon our adversarial system. No persuasive public policy justifies them, and they are not legitimized simply because this practice may continue in the absence of these agreements. The Mary Carter agreement is simply an unwise and champertous device that has failed to achieve its intended purpose. . . .

As a matter of public policy, this Court favors settlements, but we do not favor partial settlements that promote rather than discourage further litigation. And we do not favor settlement arrangements that skew the trial process, mislead the jury, promote unethical collusion among nominal adversaries, and create the likelihood that a less culpable defendant will be hit with the full judgment. The bottom line is that our public policy favoring fair trials outweighs our public policy favoring partial settlements.

This case typifies the kind of procedural and substantive damage Mary Carter agreements can inflict upon our adversarial system. Thus, we declare them void as violative of sound public policy. . . .

[W]e reverse the judgment of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion.

Dissenting opinion by Justice Doggett, joined by Justices Mauzy and Gammage

Today a medical doctor is prohibited from participating in the trial of a lawsuit in which he is a defendant. This extraordinary and unprecedented maneuver is rooted in the majority's growing distrust of our jury system -- its unfounded belief that twelve ordinary citizens are incapable of assessing facts after full disclosure of all the surrounding circumstances. Plunging helter-skelter into uncharted territory to save another medical doctor that a jury found to have committed malpractice, the majority writes without regard to the chaotic effect of its ruling on both the retrial of this action and other complex litigation pending across Texas. Because today's decision only serves to inject uncertainty and unfairness into trials, I dissent.

In the instant case the trial court took great care to safeguard procedurally the adversarial nature and fairness of its proceedings. Nothing about the agreements now under attack was hidden from anyone. The court appropriately solicited and welcomed suggestions from Elbaor and the other parties as to what and when to tell the jury about the Mary Carter agreements. At voir dire, the court informed prospective jury members that ACH and Syrquin, by participating in the trial, could recover all or a portion of the amounts paid in settlement to Smith, depending on the size of the verdict. An additional warning was extended regarding the possibility of witness bias arising from the agreements. The implications of the agreements were also explored by various counsel during voir dire.

To offset any disadvantage to Elbaor resulting from the agreements, the trial court gave him the same number of peremptory challenges as those of Smith and the three settling defendants together. Recognizing that these settling parties effectively were no longer aligned against one another, the trial court denied them the customary right of an opponent to lead each other's witnesses. Finally, the order of presentation was changed to guarantee that Elbaor always had the final opportunity to present evidence and examine witnesses. While Elbaor specifically complains of a lack of forcefulness in Smith's assertion of her claim against Syrquin, her counsel criticized Syrquin beginning in voir dire, though crediting his efforts to save Smith's life. Since in some multi-party suits co-defendants become aligned against one another, Elbaor might have found Syrquin and Stephens blaming him for Smith's injury even in the absence of the Mary Carter agreements. Despite Elbaor's concession that "the trial court [correctly] followed Texas law when it disclosed the Mary Carter agreements and implemented the other procedures to protect [him]," the majority rejects these procedures as "missing the point," thereby renewing its commitment to limit the role of the jury in the truth-seeking process. Simply because jurors may initially expect the plaintiff to have interests adverse to all defendants does not mean that they are incapable of understanding that certain defendants have an incentive for the plaintiff to succeed. Indeed the same may occur in some multiparty litigation where no Mary Carter agreement is involved. The trial cannot be a "sham of adversity," when the jury, as here, is fully aware of this shift in alliances. Nor does the trial become less adversarial merely because some of the parties have switched sides -- the names may have changed but the struggle is left intact. So long as at least two parties with antagonistic interests remain, the likelihood that the truth will emerge is not diminished.

Accordingly, most jurisdictions allow Mary Carter agreements when trial courts implement similar procedural safeguards to those adopted here. In rejecting the full disclosure approach, today's opinion embraces a decidedly minority view accepted in only "a couple of states" that have previously chosen to prohibit such agreements. . . .

Texas has today become the first state in the nation to lock the courthouse door on a party solely because of a pretrial contract involving a partial settlement which the majority dislikes. The elitist view that ordinary people acting as jurors are incapable of determining the facts after full disclosure has once again prevailed. While protecting the litigation process from deleterious agreements, this court should avoid precipitous action with uncertain consequences for so many litigants, particularly when, as here, the parties have exercised considerable care and the trial court has conscientiously monitored the proceedings.