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ML Healthcare Services, LLC v. Publix Super Markets, Inc.

United States Court of Appeals, Eleventh Circuit

February 7, 2018

ML HEALTHCARE SERVICES, LLC, Interested Party - Appellant, ROBIN HOUSTON, Plaintiff- Appellant,
v.
PUBLIX SUPER MARKETS, INC., Defendant-Appellee.

         Appeals from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:13-cv-00206-TWT.

          Before TJOFLAT and JULIE CARNES, Circuit Judges, and CONWAY, [*] District Judge.

          JULIE CARNES, Circuit Judge

         This is a personal injury case arising from plaintiff Robin Houston's slip and fall at a Publix Supermarket operated by Defendant. Following an eight-day trial, the jury returned a verdict in favor of Defendant. Plaintiff and third-party ML Healthcare appeal, claiming that the district court erred by requiring ML Healthcare to produce, and then by admitting at trial, evidence of collateral source payments made by ML Healthcare on Plaintiff's behalf. Plaintiff further contends that the district court erred by denying her motion for sanctions based on Defendant's alleged spoliation of evidence. We find no error, and thus AFFIRM the entry of judgment in Defendant's favor.

         BACKGROUND

         On July 24, 2012, Plaintiff was shopping at a Publix Supermarket in McDonough, Georgia, when she slipped and fell in the dairy aisle. Plaintiff sued Defendant in state court, alleging that she had slipped on liquid that had been left in the aisle and that her subsequent fall had caused serious medical injuries. Defendant removed the case to federal court on the ground of diversity jurisdiction. Following an eight-day trial, the jury returned a verdict in favor of Defendant.

         During the litigation, Defendant conducted discovery concerning the relationship between Plaintiff, her treating doctors, and third-party ML Healthcare. Through its discovery, Defendant learned that ML Healthcare is a "litigation investment" company that contracts with doctors to provide medical care for injured people with viable tort claims who lack medical insurance. Pursuant to the contracts, ML Healthcare purchases at a discounted rate from these physicians the medical debt that the putative plaintiffs incur during their treatment. But the contract also allows ML Healthcare the right to later recover the full cost of the medical care provided out of any subsequent tort settlement or judgment the treated individuals receive. The discovery showed that ML Healthcare had entered into such agreements with Plaintiff and the treating doctors who would testify at her trial concerning the extent and cause of her medical injuries.

         Defendant sought to introduce at trial evidence of the relationship described above to show that Plaintiff's doctors were biased in their testimony and that Plaintiff's claimed medical expenses were unreasonable. In connection with its efforts, Defendant served subpoenas on ML Healthcare requiring it to provide testimony at trial. Plaintiff and ML Healthcare objected to the admission of such evidence, arguing that it was unfairly prejudicial and barred by Georgia's collateral source rule. Plaintiff filed a motion in limine to exclude the evidence related to ML Healthcare, and ML Healthcare moved to quash the subpoenas it had received.

         The district court denied Plaintiff's motion in limine, ruling that the ML Healthcare evidence could be admitted for the limited purposes identified by Defendant. The court also denied in part ML Healthcare's motion to quash, requiring ML Healthcare to appear and provide evidence at trial.

         Plaintiff and ML Healthcare appeal the district court's rulings on the motion in limine and the motion to quash. In addition, Plaintiff appeals the district court's denial of her motion for sanctions based on Defendant's alleged spoliation of evidence: specifically, its destruction of video from the McDonough Publix for all but the one hour immediately surrounding Plaintiff's accident.

         DISCUSSION

         I. Standard of Review

         We review the evidentiary and sanctions rulings at issue in this appeal under the abuse of discretion standard. See United States v. Clay, 832 F.3d 1259, 1314 (11th Cir. 2016) ("The district court has broad discretion to determine the relevance and admissibility of any given piece of evidence." (internal quotation marks omitted)); Flury v. Daimler Chrysler Corp., 427 F.3d 939, 943 (11th Cir. 2005) ("We review the district court's decision regarding spoliation sanctions for abuse of discretion."). Likewise, we apply the abuse of discretion standard to the district court's denial in part of ML Healthcare's motion to quash. See In re Hubbard, 803 F.3d 1298, 1307 (11th Cir. 2015) ("We review a district court's decision on whether to quash a subpoena only for an abuse of discretion."). Applying that standard, we will only reverse if we find that "the district court has made a clear error of judgment, or has applied the wrong legal standard." Eghnayem v. Boston Sci. Corp., 873 F.3d 1304, 1313 (11th Cir. 2017) (internal quotation marks omitted).

         II. Impeachment of Treating Physicians with Evidence Concerning ML Healthcare's Payments

         A. Collateral Source Rule and District Court Ruling

         When a tort plaintiff has been compensated by her health insurer, or other non-defendants, for injuries that have been caused by the defendant, the question arises whether the plaintiff can recover those expenses for which she has already been reimbursed. The collateral source rule provides that the plaintiff is entitled to recover those already-reimbursed expenses. Georgia follows the collateral source rule, which:

gives [a plaintiff] the right to recover damages undiminished by collateral benefits. It refuses credit to the benefit of a tortfeasor of money or services received by the plaintiff in reparation of the injury or damage caused which emanate from sources other than the tortfeasor.

Polito v. Holland, 258 Ga. 54, 55 (1988). "The collateral source rule, stated simply, is that the receipt of benefits or mitigation of loss from sources other than the defendant will not operate to diminish the plaintiff's recovery of damages." Id. (citation omitted). "If a windfall must be had, it will inure to the benefit of the injured party rather than relieve the wrongdoer of full responsibility for his wrongdoing."[1] Broda v. Dziwura, 286 Ga. 507, 508 (2010).

         Given this prohibition against a credit to the defendant for expenses already recovered by the plaintiff, it follows that evidence of collateral benefits is inadmissible "if the only proposition for which it is offered is in reduction of damages, because it is then offered to help prove a proposition which is not a matter in issue." Polito, 258 Ga. at 56. On the other hand, the Georgia Supreme Court has recognized that "there may be another issue in a case to which evidence of collateral benefits is material." Id. When that happens and the evidence is admitted for that other purpose, the court should nonetheless "charge the jury that collateral benefits shall not reduce damages the tortfeasor is otherwise liable to pay." Id. Indeed, Georgia appellate courts have recognized that evidence of collateral benefits received by the plaintiff may be admissible for impeachment purposes when a witness gives false evidence relating to a material issue in the case. Kelley v. Purcell, 301 Ga.App. 88, 90 (2009) (citing Warren v. Ballard, 266 Ga. 408, 410 (1996)). In short, under Georgia law, evidence of collateral benefits is not typically admissible in a personal injury tort case unless that evidence serves a valid evidentiary purpose other than just revealing to the jury those benefits. When that occurs and the evidence is admitted, the trial court should instruct the jury about the limited purpose of the evidence and, in particular, remind the jury not to consider the collateral payments to reduce its award of reasonable and necessary medical expenses.

         Plaintiff and ML Healthcare argue that the collateral source rule was violated in this case as a result of the district court's orders requiring ML Healthcare to produce-and admitting at trial- evidence concerning payments made by ML Healthcare to Plaintiff's treating doctors. As noted, the district court denied the motion, in part, ruling that this evidence could be admitted for only two limited purposes: (1) to attack the credibility of the causation opinions proffered by Plaintiff's doctors and (2) to challenge the reasonableness of Plaintiff's claimed medical expenses. As discussed below, we conclude that the district court did not abuse its discretion.

         B. Choice of Law

         The district court concluded that the business model used by ML Healthcare, which included the fronting of medical expenses for plaintiffs to the treating doctors that ML Healthcare had selected, was "highly relevant and probative" as to the bias of those doctors, as well as the reasonableness of the medical bills. This conclusion led naturally to the district court's evidentiary ruling that the doctors could be impeached with evidence of this relationship between themselves, ML Healthcare, and the patients ML Healthcare had referred.

         In federal diversity actions, state law governs substantive issues, but federal law governs procedural issues. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). See also McDowell v. Brown, 392 F.3d 1283, 1294-95 (11th Cir. 2004); Adams v. Lab. Corp. of Am., 760 F.3d 1322, 1328 n.8 (11th Cir. 2014). Further, "[r]ules of procedure encompass rules of evidence, and therefore, the Federal Rules of Evidence, not state evidentiary rules, apply" to evidentiary disputes in a federal diversity action. McDowell, 392 F.3d at 1294.

         Although Georgia's collateral source rule is a substantive rule of damages, it also has procedural evidentiary implications. The substantive component of the rule, which prohibits the reliance on collateral source payments to reduce a plaintiff's damages award, is binding on a federal court sitting in diversity. As a procedural ruling, an evidentiary ruling deciding whether particular evidence runs afoul of this state substantive rule will typically be governed by federal evidence law. See McDowell, supra.

         Nevertheless, we have recognized that "[s]ome state evidentiary rules are substantive in nature, and transcend the substance-procedure boundary, " id. at 1295, meaning that sometimes a state's evidentiary rule can trump a federal evidentiary rule. In fact, we have explored a somewhat similar phenomenon in a case involving the Alabama collateral source rule. In Southern v. Plumb Tools, A Division of O'Ames Corporation, 696 F.2d 1321 (11th Cir. 1983), the plaintiff had been injured on the job when a shard of metal flew off a hammer. He sued the manufacturer of the hammer. During the federal litigation, his employer's workmen's compensation carrier sought to intervene in the action to recover the money it had paid the plaintiff for his resulting disability. Id. at 1322. But absent some limitations, the carrier's participation in the case would necessarily reveal the fact that the plaintiff had already been paid in part for his injuries. As it happens, Alabama law had anticipated the possibility of intervention by an insurance carrier and allowed that intervention so long as conditions were imposed on its participation. Id. In fact, the plaintiff did not object to intervention so long as the court imposed these limitations, which presumably would have helped to shield evidence of the payment of the compensation benefits from the jury. Id. at 1323. But in allowing the intervention, the federal district court refused to impose any limitations. Id. at 1322, 1323.

         We reversed. In the first place, the Alabama limitations on an intervenor's participation did not further, or undermine, any federal evidentiary or civil rule. Id. at 1322 (noting that Fed. R. Civ. P. (24(b) permits a court to condition intervention). Second, recognizing that the Alabama collateral source rule was a state substantive law-which must be applied by a federal court in a diversity action-we also recognized that a procedural ruling permitting intervention would undermine this state substantive law. Southern, 696 F.2d at 1323. Further, we could "identify no strong federal interest requiring us to uphold a procedural ruling that severely undermines Alabama's substantive law." Id. Indeed, we noted that "Alabama strictly adheres to the collateral source rule with respect to insurance payments and workmen's compensation benefits, and any showing that plaintiff has received such payments constitutes reversible error." [2] Id. (emphasis in original). Ergo, any mention of the plaintiff's prior receipt of compensation for her injuries would violate this substantive state law, transforming the procedural ruling that essentially revealed this compensation into a ruling that ran afoul of Alabama's substantive law.

         Contrary to Alabama law, Georgia law does not create a substantive evidentiary rule that bars the admission of collateral source payments under all circumstances. See Polito, 258 Ga. at 56. Rather, Georgia law recognizes that there can be circumstances in which evidence of these payments is admissible. Indeed, in Polito, the Georgia Supreme Court helpfully outlines the dichotomy between the substantive component and the procedural component of its collateral source rule. Noting that "[s]ubstantive law is that law which creates rights, duties, and obligations . . . [whereas] [p]rocedural law is that law which prescribes the methods of enforcement of rights, duties, and obligations, " Polito described the collateral source rule as "primarily substantive in nature." Id. at 55. That is, "[i]t gives a party the right to recover damages undiminished by collateral benefits. It refuses credit to the benefit of a tortfeasor of money or services received by the plaintiff in reparation of the injury or damage caused which emanate from sources other than the tortfeasor." Id.

         The above principle represents the substantive component of the collateral source rule. Id. at 56. The court noted, however, that there is also an "evidentiary" consequence of the rule. "Because of the substantive consequence of the rule, evidence of collateral benefits is not generally material." Id. (emphasis added). This is so because as "a result of the interaction between the collateral source rule and a rule of evidence, " evidence of collateral benefits will not typically be material in a damages case, given the existence of a substantive rule that disallows the setting off of collateral benefits against damages. Polito, 258 Ga. at 56.

         The Georgia Supreme Court made clear, however, that the inadmissibility of collateral benefits is not always required by Georgia's collateral source rule. "Certainly [the immateriality of collateral benefits] is true if the only proposition for which it is offered is in reduction of damages, because it is then offered to help prove a proposition which is not a matter in issue . . . . The substantive collateral source rule removes the proposition as an issue in the case and the evidence rule of materiality precludes proof of collateral benefits." Id. But the court goes on to note: "Of course, there may be another issue in a case to which evidence of collateral benefits is material. When such evidence is admitted on another issue it is proper to charge the jury that collateral benefits shall not reduce damages the tortfeasor is otherwise liable to pay." Id.

         In short, unlike the Alabama collateral source rule at issue in Southern, Georgia's rule is not an all-or-nothing proposition. Evidence concerning the receipt of collateral benefits will likely be inadmissible most of the time, but sometimes admission will be proper. Translated: as Polito defined it, the substantive Georgia rule provides that a tortfeasor will not receive a set-off on the damages it has caused based on the payment of part or all of those damages by a third party. But deciding whether proffered evidence is offered for the above proscribed purpose versus a legitimate evidentiary use requires an evidentiary ruling. That evidentiary decision is a procedural one and when made in a federal court, federal law controls.[3] Accord Fitzgerald, P.P.A. v. Expressway Sewerage Const., Inc., 177 F.3d 71, 74 (1st Cir. 1999) (reaching the same conclusion with respect to Massachusetts's collateral source rule).

         C. Admissibility of Evidence for Purposes of Showing Bias[4]

         Defendant asserted a theory of bias in this case stemming from ML Healthcare's business model and the incentives it creates for the treating doctors who testify on behalf of their patients. As explained above, ML Healthcare matches injured, uninsured plaintiffs who have viable tort claims with treating doctors. It then purchases at a discounted rate the medical bills these doctors generate. To recoup its investment and make a profit, its contract with the plaintiffs permits ML Healthcare to recover the full amount of these bills from any tort damages recovered by the plaintiffs. The contract also provides that the referred plaintiffs will personally repay ML Healthcare the full amount of the bills if they recover no damages or if there are insufficient damages to cover the bills. In short, the contract allows ML Healthcare to recover the difference between the discounted bills it pays treating doctors and what those doctors say is the full value of those medical services: either from the plaintiffs themselves or from any tort recovery the plaintiffs receive. Nonetheless, a plaintiff who recovers insufficient damages to pay back ML Healthcare may be unable or unwilling to repay her debt, meaning that, absent a recovery by the plaintiff in such cases, ML Healthcare will be out not only its investment, but also any hoped-for profit. Thus, for its business model to flourish, ML Healthcare needs the plaintiffs whom it subsidizes to win their lawsuits.

         According to Defendant, this arrangement creates the risk of bias on the part of doctors who receive referrals from ML Healthcare and who subsequently testify on behalf of the plaintiffs they have treated pursuant to those referrals. This is so, Defendant contends, because if a doctor did not provide a favorable causation analysis-which is necessary to win a tort action-ML Healthcare likely would find other doctors who would. Thus, to continue to receive referrals from ML Healthcare-and the guaranteed income stream they ...


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