For The Defense, July 2010 - DRI Today

M E D I C A L L I A B I L I T Y A N D H E A LT H C A R E L A Wthe fact of inadequate staffing; and (3) theparent’s budgetary directives, made in derogationof traditional parent/subsidiary relationships,resulted in understaffing at thetime of the incident. Absent appropriatefactual allegations supporting the requiredelement of proximate cause, a claim of a directparticipant liability will likely be subjectto dismissal.Defense counsel shouldpay special attention tothe required elementof proximate cause.Discovery ApproachesEven where the plaintiff’s allegations insupport of direct participant claims areinadequately pled, defense counsel maywish to bring a motion for summary judgmentinstead. In that case, written discoveryrequests aimed at revealing the lack offactual support for the plaintiff’s claimsshould be served without delay.Contention interrogatories asking theplaintiff to “state the complete factualbasis” for each separate allegation assertingparental liability, paired with a request fordocuments seeking production of “all documentsthat relate to or support” the plaintiff’sdirect- participant liability claims, canbe effective in demonstrating that plaintiff’sclaims lack a sufficient factual basis.If, as often happens, the plaintiff objects tosuch interrogatories as premature, overlyburdensome, or irrelevant, the point willhave been tacitly conceded. Requests foradmissions asking the plaintiff to admit ordeny that the plaintiff knows of no facts insupport of the direct participant liabilityclaims other than those alleged in the complaint,or asking the plaintiff to admit ordeny that the only documents in support ofsuch claims are those attached to the complaintor those produced in discovery, servethe same purpose.Because the burden of proof on claimsfor direct participant liability rests withthe plaintiff, summary judgment as tothese claims is warranted if the plaintiff22 n For The Defense n July 2010is unable to come forward with admissibleevidence supporting each essentialelement of the claim. See Celotex Corp. v.Catrett, 477 U.S. 322–323 (1985). Where theplaintiff’s responses to the defendant’s initialdiscovery requests are evasive or lackreal substance, summary judgment maybe appropriate—even where the plaintiffargues that further discovery is needed—because inadequate responses may indicatethat there is no reason to believe thatfurther discovery is likely to elicit informationthat would defeat summary judgment.Getting an early jump on discoveryrelating to the plaintiff’s direct participantliability claims also serves to provide defendantswith strong arguments in supportof motions for protective orders againstcostly and burdensome discovery requestsdirected at multiple corporate defendants.Duplicative or overlapping discoveryrequests, including Rule 30(b)(6) corporaterepresentative deposition notices, althoughburdensome and expensive, may be difficultto prevent given the liberal scope ofdiscovery envisioned by the rules of civilprocedure. However, if defense counsel isable to demonstrate, via the plaintiff’s inadequatediscovery responses, that the factualunderpinnings for the direct participantclaims asserted against the parent andrelated entities are weak or non- existent,the Court may be inclined to agree that theburden of such discovery outweighs anylikely benefit.Proactive and forward thinking discoverymanagement is another tool forcombating the problems associated withcorporate parent defendants. Defensecounsel should also consider pressing forhighly controlled phased discovery on theparent’s direct participation. It should notbe necessary to conduct all of the discoverythat might illuminate direct participation.Instead, an early phase should be limitedto answering the question whether thereis reason to conclude that a second, andmore robust, phase on this issue would befruitful. This may not be practical in everycase, but a premium should be placed onattempting to frame the discovery debateearly on rather than on responding to theissues as they arise. Moreover, in our experience,courts often respond more positivelyto a proactive and even-handed planthan to ad hoc discovery disputes.ConclusionPlaintiffs’ litigation groups throughoutthe country now recommend the use ofdirect participant liability theory in claimsagainst health care providers. This theoryis favored over traditional corporateveil piercing theory because it is viewedas easier to allege and prove. Assertion ofdirect participant claims creates burdensand challenges for the defense, includingincreased defense costs, obfuscation ofboth factual and liability issues, and susceptibilityto familiar and misleading argumentsabout corporate greed or “profitsover people.” However, these challengescan be managed if they are approachedwith care and forethought.The first step in minimizing the riskof exposure to direct participant liabilityclaims is to closely adhere to corporateformalities to avoid any appearance thata parent is mandating a course of conductfor its subsidiary in disregard of thesubsidiary’s interests. Careful documentationof the decision making process atthe subsidiary level, particularly in areasthat could affect the safety or the deliveryof care to patients, is critical. Dual officersor directors must avoid the appearanceof “wearing two hats” when engagedin subsidiary- related actions. These measureswill minimize the likelihood thatdirect participant liability claims againstparents or related entities in the healthcare field will be successful.Where direct participant claims againstparent corporations are asserted, an understandingof the principles governing andlimiting direct participant liability is criticalin seeking their dismissal. Plaintiffsmust allege facts plausibly suggesting bothan eccentric level of control over the subsidiary,and specificity in directing the conductat issue. Traditional tort elements,such as duty and proximate cause, mustalso be properly alleged. A complaint thatbaldly asserts parental liability in conclusoryfashion should not survive a motionto dismiss.Even where parents are not dismissedat the outset, proactive and early discoverycan yield substantial benefits for thedefense and minimize the burdens, costs,and disadvantages associated with claimsagainst corporate parents.