Breach of Fiduciary Duty-How to Defend Against It

SANTA MONICA, Calif—It can be especially difficult for physicians and managed care organizations to defend against patient lawsuits that include legal causes of action other than medical malpractice or negligence, said Michael Gonzalez, Esq, a defense attorney and partner in the Los Angeles firm of Kern, Streeter & Gonzalez.

When a physician and a managed care organization are co-defendants, the allegations typically revolve around the physician’s failure to recommend certain procedures or diagnostic tests, he said.

Plaintiffs may further allege that these actions were motivated by the physician’s financial concerns, rather than medical appropriateness, a legal cause of action called breach of fiduciary duty.

The best method of defending these types of cases is to take an aggressive approach and limit plaintiffs in their theories of how they may recover damages, Mr. Gonzalez said at a seminar sponsored by the Defense Research Institute, Inc., Chicago.

“If breach of fiduciary duty is ever widely recognized as applying to doctors, we’re in big trouble, because then the burden of proof would be shifted to the defendant to prove that financial considerations were not driving patient care,” Mr. Gonzalez said.

The best tactic for defense lawyers is to keep moving these cases back toward medical negligence. Meeting the standard of care is the issue that should be before the jury, he said, adding that motive is irrelevant in a negligence case.

Since the present state of the law actually favors managed care defendants, failure to contest these cases from the outset could allow plaintiff’s attorneys to obtain favorable judicial opinions, he said. These opinions could then weaken the defendant’s position, allowing plaintiffs to gain a foothold in their attack upon the managed care system as a whole.

Contracts on Trial

Mr. Gonzalez noted that these cases are expensive for the physician’s insurance company. Defense attorneys need to file protective orders and discovery orders to try to stop the plaintiff from obtaining documents such as the physician/managed care organization contract.

Once the contract is admitted into evidence, plaintiff attorneys will probably use it in attempts to convince the jury that the physician’s treatment decisions were based on the financial impact they would have on his or her practice.

“These contracts are not attractive exhibits on trial,” he said. “Hearing that the doctor gets to share in a bonus pool of unspent monies at the end of the year doesn’t make him look warm and fuzzy to the jury.”

He cautioned that defense attorneys must expect that eventually the contract will be obtained by the plaintiff. In California, for example, the threshold for discovery is whether or not the contract will lead to other relevant evidence, even if that evidence is not admissible.

Insulating the Doctor

To defend against breach of fiduciary duty suits, Mr. Gonzalez suggested a trial strategy that insulates a doctor from the managed care business. The company’s benefits administrator or nonphysician CEO has intimate knowledge of the health care plan available to the particular patient/plaintiff; this executive can present to the jury the cost of services provided to the plaintiff to date and the financial benefit to the medical group under that plan.

He did caution that such a person may be perceived as a “bean counter” by the jury, which might reinforce the idea that medical decisions are being made strictly on financial grounds. However, he said that in most cases, “the doctor is not the best person to defend the numbers, because ultimately, the doctor will have to stand up, look the jury in the face, and tell them these were legitimate medical judgment calls.”

He added that it increases physicians’ credibility if they can divorce themselves even more by explaining that they draw their earnings from their group’s profits at the end of the month, and are not focusing on who is paying for each specific patient’s care.

On the other hand, in certain instances, there can be a benefit to the defense in allowing the articulate, well-informed physician to explain that he or she purchases re-insurance or a “stop loss” policy to protect the practice from runaway costs. Such policies take financial considerations out of any decision-making regarding a particular patient’s treatment.

The physician could also be in the best position to explain that an expensive test may not have been medically necessary—and be better believed by a jury. This testimony would allow the jury to see that the doctor is firmly in charge of each patient’s care, and rebut the plaintiff’s contentions that medical care today is nothing more than big business, Mr. Gonzalez said.

Media Scrutiny

Intense media scrutiny often muddies the waters when these cases go to trial. Mr. Gonzalez noted that this media attention usually helps the plaintiff rather than the defendant physician and managed care organization.

“The media is full of stories about some poor person who had been denied care and died. There’s a huge public perception that managed care organizations are evil, and doctors are their pawns,” he said.

Another problem for the defense is that doctors don’t want to talk about fiduciary duty cases. “They’re embarrassed anyway by being sued just in the normal medical malpractice aspect,” he said. “And there are always implications about retaining staff privileges. In California, with the Federal Practitioners Data Bank, these settlements and judgments are reported. Doctors don’t want this news going out, but by the same token, they don’t want to be blackmailed by it,” Mr. Gonzalez said.

He suggested the use of jury consultants and focus groups to attempt to choose jurors who are more likely to be receptive to the defense’s argument. This is an expensive undertaking that insurance companies may be loath to pay for, he commented.

However, in his experience, the type of jury that has, in the past, been open to the defense arguments in medical malpractice cases may not be a good jury for hearing lawsuits against physicians and managed care organizations based on breach of fiduciary duty. Additional work needs to be done to define what type of juror defense attorneys should seek in this situation, he said.

‘Work Out a Plan’

The number of lawsuits against managed care companies appears to be on the increase, Mr. Gonzalez said. “You only have to see a couple of multimillion dollar verdicts to think that plaintiff attorneys will be filing these lawsuits in greater numbers.”

He believes that defense attorneys, insurance companies, and doctors and medical groups must work out some kind of a plan or prospective action, “so that when 60 Minutes shows up saying ‘Doctor, isn’t it true that your greed killed this patient?’ we’ve got a ready response, instead of ‘No comment.’”