LOST CHANCE DOCTRINE. Background

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1 LOST CHANCE DOCTRINE Background In order to recover damages in a typical tort action, a plaintiff must show by a preponderance of the evidence that the defendant's negligence was the proximate cause of the plaintiffs' injury. The Lost Chance Doctrine typically arises in medical malpractice matters where causation plays a critical role. However, this doctrine can readily be applied to construction defect matters where destructive testing is performed at less than 50% of the homes in the litigation or at less than 50% of locations tested for major issues. This may also arise in cases where destructive testing is performed at a large percentage of homes, but defects are found at less than 50% of the homes or locations tested. In medical malpractice matters, a plaintiffs' injury may be caused by many factors, including a doctor's misdiagnosis, performance of a medical procedure, a patient's genetic predisposition, unhealthy lifestyle, or any combination of other factors. Because there are so many factors to consider, it is difficult to prove that the doctor's negligence was the proximate cause of plaintiff s injury. Generally, the Plaintiff presents expert testimony to show that the doctor's negligence is more likely than not the cause of her injury, i.e., that similarly situated patients who were treated correctly generally enjoy a better medical outcome than the plaintiff. The issue of causation becomes complicated when the plaintiff's odds of recovery are already less than 50% before the doctor's negligent act. For example, if plaintiff's chance of recovery is already 40% when they are misdiagnosed, they stand no chance of recovery because they cannot show by a preponderance of the evidence (more than 50%) that their injury was caused by the misdiagnosis. To address the inequities of this issue of causation, some states have adopted the Lost Chance Doctrine. This doctrine allows the Plaintiff to recover even when their odds of recovery are less than 50% prior to the doctor's negligent act. cthe courts that have adopted the Lost Chance Doctrine use the "Proportional Approach" in calculating damages. The Proportional Approach decreases the plaintiff's recovery by the percentage reduction caused by the physician. cfor example, if the patient had a 40% chance of recovery, but the doctor's negligent action caused a 20% reduction, then the plaintiff's total recovery would be 20% of her total damages. Not every state has adopted the lost chance doctrine. Twenty-two (22) states have adopted the doctrine and sixteen have not. California has not adopted the Lost Chance Doctrine, and instead continues to only allow recovery only where to a reasonable medical probability, the physician's negligence was a substantial factor in causing plaintiffs' injury. (Bird v. Saenz (2001) 103 Cal.Rptr.2d 131, ) 1

2 California's Position Regarding Lost Chance Doctrine Bromme v. Pavitt (1992) 5 Cal.App.4th 1487 In the leading case in California regarding the Lost Chance Doctrine, the court held that a physician could not be held liable for wrongful death for failing to timely diagnose and treat his patient's cancer unless the plaintiff could show that there was at least a 50% chance that the patient would have survived the cancer had it been diagnosed at a time that was within the standard of care. In Bromme, a patient's husband filed a wrongful death action against a physician who failed to diagnose the patient's colon cancer. (Bromme v. Pavitt (1992) 5 Cal.App.4th 1487, ) The trial court granted a partial nonsuit for the physician with respect to alleged negligent acts occurring after the patient's cancer had spread to surrounding lymph nodes because at that time the patient s chance of survival was less than 50%. (Id.) On appeal, the court held that evidence supporting the trial court's determination that the patient's chance of surviving colon cancer was less than 50 percent after the cancer reached the lymph nodes, and thus was appropriate to grant the partial nonsuit. (Id.) The Bromme court noted that in order to show Bromme s death was caused by defendant s medical negligence plaintiff had to establish a reasonable medical probability that the negligence was sufficient of itself to bring about the death, i.e. the death was more likely than not the result of negligence. (Bromme v. Pavitt, supra, 5 Cal.App.4th at , citing Jones v. Ortho Pharmaceutical Corp. (1985) 163. Cal.App.3d 396, ) The expert witnesses agreed that Bromme s chance of surviving was less than 50 percent after June 1981, so defendant s alleged negligence after June 1981 was not a substantial factor of Bromme s death. Therefore, the court granted nonsuit as to the acts that occurred after June 1981, but entered judgment on jury verdict for physician for negligence occurring before that date. After rejecting the husband's various arguments attempting to avoid this result, the court concluded: It follows that California does not recognize a cause of action for wrongful death based on medical negligence where the decedent did not have a greater than 50 percent chance of survival had the defendant properly diagnosed and treated the condition. (Id. at ) Bird v. Saenz (2001) 103 Cal.Rptr.2d 131 More recently, in Bird v. Saenz, the Second District, Division 7, Court of Appeal in the Second District, Division, 7, followed the holding in Bromme and reversed the trial court's ruling granting a motion for summary adjudication on the issue of causation. The trial court granted the summary adjudication based on the Lost Chance Doctrine and testimony of the defendant doctor's expert that because the patient had a 35% chance of a cure for her cancer when her cancer was diagnosed, defendants' treatment "did not cause Bird's cancer to progress from probably curable (i.e., 51 percent chance of five-year survival), to probably incurable (i.e., less than 51 percent chance of five-year survival)." (Bird v. Saenz, supra, at 135.) 2

3 The Bird appeals court noted that to date, the California Supreme Court had not addressed the issue and several courts of appeal had rejected the Lost Chance Doctrine. (Bird v. Saenz, supra, at ; Hughey v. Candoli (1958) 159 Cal.App.2d 231 (Defendants' contention that the heart defect would ultimately have caused death independent of medical intervention fails because the defendant is liable for negligence that precipitates or accelerates death; Logacz v. Limansky (1999) 71 Cal.App.4th 1149 (holding in a medical malpractice action that that multiple or concurring causes, including plaintiffs' obesity and failure to follow medical advice, do not preclude plaintiff's recovery.) The Bird court reversed the trial court's ruling and stated that the Lost Chance Doctrine does not apply and plaintiffs had presented "sufficient evidence to create a triable issue of fact as to whether respondents' negligence was a substantial factor in bringing about their mother's death." (Id. at 138.) BLUE BUS SCENARIO This is a frequent scenario that is used as an example of the evidence needed to support a finding by a preponderance of the evidence: A collision occurs involving a blue bus. In the Blue Bus Scenario, there is no eyewitness that can identify the company that owned the bus. 1 We have uncontested data regarding the distribution of buses in this particular location, i.e., that the Blue Bus Company owns a certain percentage, or 70% of the buses in the area. However, the fact that the Blue Bus Company owns a certain percentage of the buses in the area is not enough to carry the burden of proof. Even though it is statistically likely that the bus was owned by the Blue Bus Company, this does not meet the burden of proof by a preponderance of the evidence. RECENT CASES There are a few recent cases where the courts have held that expert testimony is too speculative. These could be analogized to the construction defect arena and include Duran v. U.S. Bank National Association and Sargon Enterprises, Inc. v. University of Southern California. The case entitled Duran v. U.S. Bank National Association that is referenced below is pending review by the California Supreme Court, as such it is not currently citable, but the future holding will necessarily impact this area of the law. Both of these cases address issues concerning expert testimony as it relates to the use of extrapolation. Duran v. U.S. Bank National Association (2012) 137 Cal.Rptr.3d 391 This case involved a class action wherein a class of 290 employees claimed they had been mislabeled as outside sales exempt from California s overtime laws. On appeal, U.S. Bank National Association ( USB ) appealed contending that the trial court s trial management plan deprived it of its constitutional due process rights in that the plan prevented it from defending against the individual claims for over 90 percent of the class. The court of Appeal, First District, Division1, agreed that the trial management plan was fatally flawed 1 Michael I. Meyerson, William Meyerson, Significant Statistics: The Unwitting Policy Making of Mathematically Ignorant Judges (2010) 37 Pepperdine L.Rev. 771, 829 3

4 and reversed the judgment. The court also concluded that the case must be decertified as a class action. The trial management plan involved a phased trial using surveys and random sampling. The trial court determined that it would use a random sample of 20 class members to testify as representatives for the class. To choose the representatives, the court proposed putting the names of all potential class members into a hat and drawing 20 names with 5 alternates. After an opt-out process, the 5 alternates were substituted for four representatives that opted out of the action. Ultimately, the testimony of 21 class members was extrapolated to all 290 class members. In overruling the trial management process, the court of appeal noted that While innovation is to be encouraged, the rights of the parties may not be sacrificed for the sake of expediency. As we observed in Bell III, In this area of litigation, the California Supreme Court has in fact challenged the trial courts to develop pragmatic procedural devices to simplify the potentially complex litigation while at the same time protecting the rights of all the parties. (Duran v. U.S. Bank Nat. Assn. (2012) 137 Cal.Rptr.3d 391, 420.) Plaintiffs in Duran relied on the Bell III case for their case management plan. In Bell III, there was a class of about 2,500 claims representatives who sued their employer for unpaid overtime compensation. The trial court suggested that a one-hour margin of error would be satisfactory. Each side retained expert statisticians who ultimately determined that a one-hour margin of error could be achieved using a sample size of 286 plaintiffs. The parties ultimately deposed a total of 295 individuals and, after agreeing on the employees work patterns, the two experts calculated an average weekly overtime figure of 9.42 hours with a margin of error of 0.9 hours per week, or approximately 9.6 percent as the relative margin of error. The time-and-a-half overtime damages analysis was upheld as an accurate process of analysis. However, the double-time calculation was not because it used only 16 employees in the sample group accounted for half the double-time hours, which resulted in a margin of error of about 32 percent. The margin of error is not a bright line rule, but the parties had not offered foundational calculations for the determination of double-time or propose[d] an appropriate class size, margin of error, or sampling methodology. (Id. at , citing Bell III, supra, 115 Cal.App.4th 715, ) The Duran case did not comport with the Bell case for several reasons, including the fact that the trial court chose the size of the representative group without any consideration as to probable margin of error and without the benefit of any surveys or pilot studies. Moreover, the restitution award was affected by a 43.3 percent margin of error. The court appeared to arrive at the procedure on its own without legal precedent or the advice of expert witnesses. With regard to the 43.3 percent margin of error, the court notes, [s]etting aside issues of whether the sampling method was invalid as a means of proving liability, a due process violation is clearly implicated where the method for determining restitution has the potential to increase a defendant s aggregate liability by close to double that which would be warranted if the low end of the margin were applied. (Id. at 437, citing Bell III, supra, 115 Cal.App.4th 715, ) Also, the Bell III case involved statistical analysis with regard to calculation of damages and not, as in Duran, the determination of liability. [C]ourts are generally skeptical of the use of representative sampling to determine liability, even in cases in 4

5 which plaintiffs have proposed using expert testimony and statistical calculations as the foundations for setting the sample size. Here, the trial management plan was lacking in expert input or principled statistical foundation. (Id. at 428.) Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747 The court concluded that trial courts have a duty to act as a gatekeeper to exclude speculative expert testimony. (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 753.) In this case, the trial court acted appropriately in excluding speculative testimony of lost profits. (Id.) Sargon obtained a patent for a new type of dental implant that was a one stage implant, i.e., it could be implanted immediately following an extraction and contained both the implant and the full restoration. Other implants in the industry required several steps to complete the same action. (Id. at 754.) Sargon entered into a contract with USC to conduct clinical trials for the new dental implant. Sargon argued that clinical trials are important because they establish the efficacy of the device and introduces students to the device who will later use the product in their practices. (Id. at 756.) Sargon sued USC for breach of contract for failing to provide proper reports during clinical trials as the contract required. Regarding the amount of lost profits, USC moved to exclude testimony from Sargon s expert, James Skorheim, as speculative. The trial court conducted an evidentiary hearing regarding this testimony and determined that Mr. Skorheim s testimony was too speculative. Mr. Skorheim testified that Sargon s lost profits ranged from $220 million to $1.18 billion. He testified that the innovation of the immediate load implant would propel Sargon to a market share in line with the largest six dental implant manufacturers in the world. He testified that because of Sargon s innovation, it should be compared to these large companies even though it had only had $101,113 in 1998 and did not have the employee or manufacturing base of these other large companies. The Trial Court excluded the testimony for several reasons. The first reason is that he compared Sargon to industry leaders, all multi-million or multi-billion international corporations, or subsidiaries of such, which have nothing in common with Sargon. In all relevant areas, such as size, history, product line, sales force, access to financial, among others, Sargon is worlds apart from these companies. (Id. at 762.) Furthermore, Skorheim s reliance on degrees of innovation as a predictor of success of dental implant companies is inherently subjective and speculative. As there is no evidentiary basis that equates the degree of innovativeness with the degree of difference in market share, the question posed to the jury to rank innovativeness and assign a market share, the sine qua non of Mr. Skorheim s opinion has no rational basis. (Id. at 764.) The Court of Appeal by a two-to-one vote reversed the judgment and remanded the matter for a new trial on lost profits. It concluded that the trial court erred in excluding Skorheim s testimony. The California Supreme Court granted USC s petition for review. The California Supreme Court agreed with the trial court that the Skorheim s testimony was too speculative. The court noted that trial courts have a substantial gatekeeping responsibility. Evidence Code section 801 governs judicial review of the type of matter; Evidence Code section 802 governs judicial review of the reasons for the opinion. 5

6 (Id. at 771.) The California Supreme Court also relied on several holdings to determine that Mr. Skorheim s testimony was too speculative and not supported by reasonable certainty based on past volume of business and other provable data relevant to probable future sales. (Id. at 774, citing Grupe v. Glick (1945) 26 Cal.2d ) The California Supreme Court held that the trial court excluded the expert testimony for proper reasons. It properly found that the expert s methodology was too speculative for the evidence to be admissible. Skorheim considered Sargon to be comparable to the Big Six dental implant companies rather than the ones that appear to have far more closely resembled it. Moreover, Skorheim s testimony that the Big six were innovative because they were successful and that the smaller companies were less successful because they were not innovative. In essence, he said the smaller companies were smaller because they were not innovative. The trial court properly considered this circularity in reasoning as a basis to exclude the testimony under Evidence Code section 802. Relation to Construction Defect Litigation Overall, these are cases that construction defect practitioners are not generally exposed to in their every day practice, but can be readily analogized to the construction defect arena. Plaintiffs attorneys in construction defect litigation frequently limit destructive testing to less than 50% of the homes in the matter and/or test a limited number of homes as to major defect claims. These same plaintiffs then use extrapolation evidence via expert testimony from a statistician to show that the deficiencies located at the tested homes or locations exist at all or a larger portion of the untested homes. As noted during oral argument by the Trial Judge on pre-trial motions in a recent case, what plaintiffs often fail to understand in cases with numerous plaintiffs, is that each plaintiff is their own plaintiff and each home stands alone. Moreover, each of these plaintiffs has the burden to prove each element of every cause of action by a preponderance of the evidence or greater than 50%. The court found compelling the fact that even if an appropriate number of homes were destructively tested, the locations tested for each alleged defect was not appropriate. The Trial Judge discussed the lost chance doctrine and ruled that in that case the findings from the plaintiff s limited testing was not sufficient to proving negligence by a preponderance of the evidence as to all of the plaintiffs homes. For example, in that case the Court found extrapolation to be improper where plaintiffs tested only 10 windows out of approximately 200 windows, but their expert testified that all 200 windows needed to be replaced. The Court ruled that the plaintiffs did not show by a preponderance of the evidence that all of these windows need to be replaced. Therefore, where Plaintiffs only test 10% of the homes and present testimony and evidence that there is a failure rate of less than 50%, then two arguments can be made. The first is that due to the limited amount of testing, the expert s testimony is too speculative to prove liability and should be excluded from trial. This argument could be made during motions in limine based on the Sargon holding above. This argument will potentially also rely on a future holding from the California Supreme Court in Duran. 6

7 The defense could also argue that because they cannot show failure at more than 50% of the homes, Plaintiffs have not proven liability by a preponderance of the evidence based in part on the fact that California has not adopted the lost chance doctrine. This would also apply to cases where plaintiffs test a significant number of homes, but only find deficiencies at less than 50% of the homes tested. 7

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