Nellie Woods, as Personal Representative of the Estate of John N. Woods v. Holy Cross Hospital

In this case we are called upon to examine portions of Florida's Medical Malpractice Law1 and determine whether its mandate that a medical malpractice claimant participate in a mediation process prior to bringing an action in court must be enforced by a federal district court in a diversity case. For the reasons set forth below, we find that this requirement meets federal constitutional standards and must be applied in such an action.

* On July 21, 1975, Nellie Woods, a citizen of Ohio and the administratrix of the estate of her late husband, John N. Woods, filed an action in federal district court in which she claimed damages pursuant to Florida's Wrongful Death Act2 for Mr. Woods's death. The alleged cause of death was medical malpractice committed by two physicians and a hospital, all named as defendants. Their malpractice insurers were later added as parties-defendant. Jurisdiction was based upon diversity of citizenship, 28 U.S.C. § 1332 (1976). The defendants separately moved to dismiss Mrs. Woods's complaint, alleging that her failure to abide by the mediation panel requirement of Florida Statutes section 768.44 precluded her action.3 The district court granted the motions to dismiss on the ground that Mrs. Woods had failed to perform a condition precedent to her suit by not proceeding before a Florida malpractice mediation panel. This appeal was taken by Mrs. Woods from the final judgment dismissing her complaint.

Mrs. Woods has raised various issues in this appeal. Her major arguments are as follows: (1) the Florida Medical Malpractice Law is procedural rather than substantive and under the rules of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny is inapplicable in a diversity case; and (2) the Florida Medical Malpractice Law violates federal equal protection, due process, and right to jury trial standards. We dismiss her other arguments as nonmeritorious. We will discuss Mrs. Woods's major arguments seriatim after we set forth the relevant Florida statutory scheme.II

In 1975 the Florida Legislature found as follows:

WHEREAS, the cost of purchasing medical professional liability insurance for doctors and other health care providers has skyrocketed in the past few months; and

WHEREAS, it is not uncommon to find physicians in high-risk categories paying premiums in excess of $20,000 annually; and

WHEREAS, the consumer ultimately must bear the financial burdens created by the high cost of insurance; and

WHEREAS, without some legislative relief, doctors will be forced to curtail their practices, retire, or practice defensive medicine at increased cost to the citizens of Florida; and

WHEREAS, the problem has reached crisis proportion in Florida . . ..

Preamble to 1975 Fla.Laws ch. 75-9. Accordingly, it adopted the Medical Malpractice Reform Act of 1975. 1975 Fla.Laws ch. 75-9, § 1. The predecessor to sections 768.44 and .47 was contained in that provision. Id. § 5.

Florida Statutes section 768.44 creates a system under which prior to bringing an action against a medical or osteopathic physician, podiatrist, hospital or health maintenance organization in any court of the state a medical malpractice claimant must submit his claim to a medical liability mediation panel by filing the claim on special forms with the clerk of a state circuit court.4 If he fails so to file he is precluded from bringing any action based on medical malpractice in "any court of (the state of Florida)." See, e. g., Riccobono v. Cordis Corp., 341 So.2d 805 (Fla.Dist.Ct.App.1977).

After a claim is properly filed all defendants must answer within twenty days or else a claimant may proceed in court. If answers are timely filed a claim is heard by a mediation panel consisting of a state circuit judge,5 an attorney, and a licensed physician. The circuit judge is chosen in a "blind" system; the attorney and physician are chosen from lists compiled by the chief judge of each judicial circuit in Florida. The attorney and physician panel members are each paid one hundred dollars for each day they spend on the panel; both parties to a claim are assessed equally for the payment of these fees. A hearing must be held within ten months of the filing of a claim with the circuit court clerk or else the mediation panel's jurisdiction terminates and a normal lawsuit may be filed; any applicable statute of limitations is tolled from the filing of a claim until at least sixty days after a mediation panel either mails its decision to the parties or has its jurisdiction otherwise terminated. Discovery rules of the Florida Rules of Civil Procedure are applied at panel hearings, and procedural and evidentiary rules are less formal than in ordinary civil litigation. Parties may subpoena and cross-examine witnesses at hearings; counsel for the parties may make opening and closing statements. The judge presiding over a hearing is precluded from presiding over any subsequent judicial proceedings arising out of the claim at issue, and other panel members may act as neither counsel nor witnesses at any subsequent trial of the claim.

Within thirty days of the completion of any hearing a panel files a written decision in which, using specified language, it finds the defendant was or was not negligent and accordingly is or is not liable to the plaintiff. A panel member may concur or dissent to the decision in writing. If liability is found and the parties so agree the panel may proceed to help the parties reach a settlement. In this regard, the panel may recommend a reasonable range of damages, but may not recommend punitive damages. Any damage recommendation is not admissible into evidence at any subsequent trial.

Section 768.47 provides that if any party rejects the decision of a mediation panel he may institute litigation based on his claim in an appropriate court. The panel findings are admissible into evidence in any subsequent litigation, but specific findings of fact are inadmissible. Parties may comment upon panel findings in opening statement or closing argument just as on any other evidence introduced at trial. If there was a dissenting opinion to the panel's decision the numerical vote of the panel is also admissible into evidence. If a defendant fails to participate in the mediation panel process the plaintiff may disclose this fact in any subsequent civil action. Carter v. Sparkman, 335 So.2d 802, 805 (Fla.1976), Cert. denied, 429 U.S. 1041, 97 S.Ct. 740, 50 L.Ed.2d 753 (1977). Panel members may not be called to testify as witnesses concerning the merits of a case. The jury is instructed that a panel's finding is not binding upon it but should be accorded such weight as the jury chooses to ascribe to it.

Sections 768.44 and .47 are important parts of Florida's Medical Malpractice Law. They successfully weathered both state and federal constitutional challenges in Carter v. Sparkman. We now turn to Mrs. Woods's various attacks on these provisions in the case before us.

Mrs. Woods's most troublesome argument is that sections 768.44 and .47 are procedural rather than substantive and thus should be inapplicable in a district court diversity case. As a general rule, in a federal diversity case the district court applies the substantive law of the forum state. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Owl & Turtle, Inc. v. Travelers Indemnity Co., 554 F.2d 196 (5th Cir. 1977). The test for the application of state as opposed to federal law has been expressed in various ways, whether in a "substance-procedure" test, Erie Railroad v. Tompkins, an "outcome determinative" test, Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), or by reference to the "discouragement of forum-shopping and avoidance of inequitable administration of the laws," Hanna v. Plumer, 380 U.S. 460, 468, 85 S.Ct. 1136, 1142, 14 L.Ed.2d 8 (1965). See generally C. Wright, Law of Federal Courts §§ 54-59 (3d ed. 1976). Under any of the relevant tests we are convinced that Florida Statutes sections 768.44 and .47 must be applied in federal court. Our opinion on this matter is heightened by the fact that we are guided by "the policies underlying the Erie rule." See Hanna v. Plumer, 380 U.S. at 467-68, 85 S.Ct. at 1141-42; Guaranty Trust Co. v. York, 326 U.S. at 108-12, 65 S.Ct. at 1469-71.

Section 768.44 provides that a plaintiff whose claim is based on an injury or death allegedly caused by medical malpractice must submit his claim to a medical liability mediation panel before he files an action in court; section 768.47 requires the admission into evidence of the panel's findings at any subsequent trial of such a claim. If federal courts sitting in diversity cases refuse to apply sections 768.44 and .47, Florida's medical malpractice statutory scheme will be inequitably administered. Non-resident plaintiffs will have a substantial advantage over resident ones, as non-resident suitors may avoid the mediation panel provision simply by bringing their actions in federal court; consequently, the worst form of forum-shopping will be encouraged. As we have observed, the Florida Legislature acted in 1975 to avert what it viewed as an impending crisis in the health care field. An integral part of its action was to require malpractice claimants to submit their claims to mediation, "thereby reducing the cost of medical malpractice insurance and ultimately medical expenses." Carter v. Sparkman, 335 So.2d at 806.6 We would do grave damage to the legislative response evidenced by Florida's Medical Malpractice Law if we refused to apply the mediation requirement in diversity cases. We decline to take such a step. Cf. Woods v. Interstate Realty Co., 337 U.S. 535, 69 S.Ct. 1235, 93 L.Ed. 1524 (1949) (state statute barring foreign corporations not qualified to do business in state from suing in state courts barred suit in federal diversity action); 1A J. Moore, W. Taggart, A. Vestal, & J. Wicker, Moore's Federal Practice P 0.317(6), at 3236-38 (2d ed. 1978).

We note that our holding that sections 768.44 and .47 must be applied in a diversity case is in accord with the result reached in at least six other federal court decisions. Davison v. Sinai Hospital of Baltimore, Inc., 462 F.Supp. 778 (D.Md.1978); Perry v. Soldiers & Sailors Memorial Hospital, No. 78-107 (M.D.Pa. Apr. 10, 1978); Wells v. McCarthy, 432 F.Supp. 688 (E.D.Mo.1977); Marquez v. Hahnemann Medical College & Hospital, 435 F.Supp. 972 (E.D.Pa.1976); Wood v. Hernandez, No. 76-81 (N.D.Fla. Aug. 31, 1976); Flotemersch v. Bedford County General Hospital, 69 F.R.D. 556 (E.D.Tenn.1975). See Cline v. Richards, 455 F.Supp. 45 (E.D.Tenn.1978) (implies that court would enforce mediation requirement in diversity case). In each of these cases the district court dismissed a malpractice action because the plaintiff had failed to comply with a state statutory scheme similar (or identical, as in Wood v. Hernandez ) to that of Florida Statutes sections 768.44 and .47. We have examined Wheeler v. Shoemaker, 78 F.R.D. 218 (D.R.I.1978), which Mrs. Woods has proffered as support for her argument that sections 768.44 and .47 should not be applied in this case. We find that Wheeler is inapplicable here; it involves a malpractice statutory framework significantly different from that presently before us.7

As a result of our holding, before a non-resident plaintiff may bring a Florida-law-based diversity malpractice action he must first follow the steps set forth in section 768.44.8 If he fails to do so he must face the same result that a resident plaintiff would face in a Florida state court dismissal of his action until he abides by section 768.44. He will incur no undue detriment in abiding by this provision since section 768.44(4) provides for the tolling of any applicable statute of limitations during the mediation process.9 After the mediation process is completed, a diversity court must permit the admission of panel findings into evidence pursuant to section 768.47 in any subsequent action based upon the malpractice claim. In our view the result of our holding is essential, as otherwise the principles of Erie and its offspring would be violated non-resident plaintiffs would be encouraged to forum-shop in the federal courts, and justice would be inequitably applied between resident and non-resident malpractice claimants.

Having decided that a federal diversity court must apply the mediation panel provisions of Florida law, we turn to Mrs. Woods's federal constitutional arguments. We note at the outset that both the Florida provisions in particular, See Carter v. Sparkman, 335 So.2d 802 (Fla.1976),10 Cert. denied, 429 U.S. 1041, 97 S.Ct. 740, 50 L.Ed.2d 753 (1977), and the medical malpractice mediation requirements of a number of other states in general,11 have successfully withstood challenges based on both state and federal constitutional grounds.12 While we are not bound by state court determinations on federal constitutional issues, United States ex rel. Moore v. Woods, 420 F.2d 1260, 1262 (7th Cir. 1970); Smith v. Estelle, 445 F.Supp. 647, 661 (N.D.Tex.1977), we do consider these various state decisions relevant to our consideration of Mrs. Woods's constitutional claims. We now make our own examination of the Florida provisions in order to determine their constitutionality.

Before we turn to the specific points of Mrs. Woods's equal protection attack on sections 768.44 and .47, we set forth the appropriate test to be applied when a state statute is challenged on federal equal protection grounds. Traditionally, equal protection analysis was a two-tier scheme, with courts applying either the strict scrutiny or rational basis standard. Strict scrutiny was applied whenever a state statute contained a "suspect classification" or limited a "fundamental right." Suspect classes have included, E. g., race, McLaughlin v. Florida, 379 U.S. 184, 85 S.Ct. 283, 13 L.Ed.2d 222 (1964); alienage, Graham v. Richardson, 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534 (1971); and ancestry, Oyama v. California, 332 U.S. 633, 68 S.Ct. 269, 92 L.Ed. 249 (1948). Fundamental rights have been defined as those rights "explicitly or implicitly guaranteed by the Constitution." San Antonio Independent School District v. Rodriguez, 411 U.S. 1, 33-34, 93 S.Ct. 1278, 1297, 36 L.Ed.2d 16 (1973). Such rights include, E. g., those of privacy, Roe v. Wade, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973); marriage, Zablocki v. Redhail, 434 U.S. 374, 98 S.Ct. 673, 54 L.Ed.2d 618 (1978); the vote, Bullock v. Carter, 405 U.S. 134, 92 S.Ct. 849, 31 L.Ed.2d 92 (1972); travel, Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969); and freedom of association, NAACP v. Alabama, 357 U.S. 449, 78 S.Ct. 1163, 2 L.Ed.2d 1488 (1958). Statutes subjected to strict scrutiny have frequently been found to violate equal protection. In all other cases state laws were tested under the rational basis standard, under which:

The constitutional safeguard (of equal protection) is offended only if the classification rests on grounds Wholly irrelevant to the achievement of the State's objective. State legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality. A statutory discrimination will not be set aside if any statement of facts reasonably may be conceived to justify it.

McGowan v. Maryland, 366 U.S. 420, 425-26, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961) (emphasis added).

In recent years another level of equal protection analysis has arguably appeared between strict scrutiny and the rational basis test, a "means scrutiny" test. See Gunther, Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for a Newer Equal Protection, 86 Harv.L.Rev. 1, 20-24 (1972). Under this new standard a court inquires whether a challenged state statutory classification Substantially furthers a purported legislative purpose;13 it does not question the legitimacy of the legislative rationale for the classification under examination. While the means scrutiny standard gives a legislature more latitude than the strict scrutiny test, it requires a state to give greater justification for a statutory classification than is normally required for rational basis analysis.

Under McGowan v. Maryland a statute falls before the rational basis test only if a classification rests on grounds "wholly irrelevant" to achievement of a legitimate state purpose, but under means scrutiny there must be a substantial relationship between the ends and means of challenged legislation. A court applying the rational basis test will generally defer to a legislative holding that the stated end will be accomplished by the chosen means, but under means scrutiny a court carefully studies the factual assumptions underlying the supposed connection between legislative ends and means. See Redish, Legislative Response to the Medical Malpractice Insurance Crisis: Constitutional Implications, 55 Tex.L.Rev. 759, 771-72 (1977). At least one commentator has questioned whether the means scrutiny test in fact exists. Id. at 773. Even if there is such a test, it may be limited to "quasi" suspect classifications such as sex, the classification examined in Reed v. Reed, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971). See Redish, Supra, at 773-79. Such a test is inapplicable in the case presently before us.14

The Florida provisions at issue need not be evaluated under the strict scrutiny standard, as neither a suspect class nor a fundamental right is involved in the classifications15 made by sections 768.44 and .47.16 Accord, e. g., Everett v. Goldman, --- La. ---, 359 So.2d 1256, 1266 (1978); Attorney General v. Johnson, 282 Md. 274, 308-311, 385 A.2d 57, 77-78 (1978); Comment, Supra note 12, at 171. Consequently, there need only be a rational basis for the classifications made by them

In the area of economics and social welfare, a State does not violate the Equal Protection Clause merely because the classifications made by its laws are imperfect. If the classification has some "reasonable basis," it does not offend the Constitution simply because the classification "is not made with mathematical nicety or because in practice it results in some inequality."

Dandridge v. Williams, 397 U.S. 471, 485, 90 S.Ct. 1153, 1161, 25 L.Ed.2d 491 (1970) (quoting Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78, 31 S.Ct. 337, 340, 55 L.Ed. 369 (1911)).

When a state provision does not violate a fundamental right "the burden is not upon the state to establish the rationality of its restriction, but is upon the challenger to show that the restriction is wholly arbitrary." Karr v. Schmidt, 460 F.2d 609, 617 (5th Cir.) (en banc) (footnote omitted), Cert. denied, 409 U.S. 989, 93 S.Ct. 307, 34 L.Ed.2d 256 (1972); Accord, Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364-65, 93 S.Ct. 1001, 1006, 35 L.Ed.2d 351 (1973). We note the special circumstances which gave rise to Florida's Medical Malpractice Reform Act of 1975. As stated in the preamble to this law, Supra, the Florida Legislature found that a crisis had developed in Florida's health care industry because of rising malpractice insurance rates. See Carter v. Sparkman, 335 So.2d at 805; Ashler, Medical Malpractice Insurance The Regulator's View, 49 Fla.B.J. 506 (1975); French, Florida Departs from Tradition: The Legislative Response to the Medical Malpractice Crisis, 6 Fla.St.U.L.Rev. 423, 424 (1978); Redish, Supra, at 759-62; Note, The Florida Medical Malpractice Reform Act of 1975, 4 Fla.St.U.L.Rev. 50, 51, 57-58 (1976). See generally Roth, The Medical Malpractice Insurance Crisis: Its Causes, the Effects, and Proposed Solutions, 44 Ins.Couns.J. 469 (1977). This crisis would cause injury not only to the health care industry but also to the citizenry of Florida; as physicians curtailed their practices, retired, or practiced defensive medicine and other health care providers restricted their services both the quantity and quality of health care in Florida would diminish. One significant factor causing the rising insurance rates was an increase in malpractice litigation, and one way to reduce such litigation was to screen out nonmeritorious claims through the use of liability mediation panels. See Steinberg, Medical Malpractice Reform Act A Legislator's View, 49 Fla.B.J. 510, 513 (1975); Comment, Recent Medical Malpractice Legislation A First Checkup, 50 Tul.L.Rev. 655, 681 (1976). In addition, such panels could encourage the settlement of meritorious claims, since after a panel found a malpractice defendant negligent he would be encouraged to settle the dispute rather than proceed to a trial in which the panel finding would be introduced into evidence against him. See, e. g., Roth, Supra, at 495. The use of mediation panels, as well as the provision for the subsequent admission of panel findings in evidence, was a reasonable legislative response to the malpractice problem. Moreover, we note that such panels have apparently proved successful in Florida. In the words of one commentator,

While medical mediation panels have existed for a relatively short time and no formal data have been collected on a statewide basis quantifying the results of panel activity to date, most observers feel that the mediation panel system is an unqualified success. The settlement of meritorious claims is being expedited, claims lacking merit are being weeded out, and truly disputed claims are still going to the jury. The panels appear to provide an effective screening mechanism without imposing undue hardship on the participants. And the jury system is functioning in its purest form settling true disputes.

French, Supra, at 428. Under the rational basis standard of equal protection analysis the Florida provisions clearly make constitutionally permissible classifications.17 In so finding, we agree with the Florida Supreme Court's decision in Carter v. Sparkman, as well as the analogous holdings of the highest state courts in Arizona, Louisiana, Maryland, Massachusetts, Nebraska, and Wisconsin and the Appellate Division of the Supreme Court of New York, see note 11 Supra. Cf. Jones v. Union Guano Co., 264 U.S. 171, 44 S.Ct. 280, 68 L.Ed. 623 (1924) (state provision requiring state agriculture department analysis of fertilizer prior to bringing of claim for damages from use of fertilizer against fertilizer manufacturer upheld as reasonable condition precedent to bringing suit; required admission of state analysis report into evidence at subsequent trial held valid against equal protection and due process attacks).18

The second major constitutional challenge Mrs. Woods raises against sections 768.44 and .47 is a claimed denial of due process.19 The Supreme Court has distinguished between due process and equal protection as follows: " 'Due process' emphasizes fairness between the State and the individual dealing with the State, regardless of how other individuals in the same situation may be treated. 'Equal protection,' on the other hand, emphasizes disparity in treatment by a State between classes of individuals whose situations are arguably indistinguishable." Ross v. Moffitt, 417 U.S. 600, 609, 94 S.Ct. 2437, 2443, 41 L.Ed.2d 341 (1974). Since we have already disposed of Mrs. Woods's equal protection objections to the Florida provisions, we now need only examine the manner in which these statutes affect the fairness of dealings between a malpractice claimant and the state. The Supreme Court recently observed that:

It is by now well established that legislative Acts adjusting the burdens and benefits of economic life come to the Court with a presumption of constitutionality, and that the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way.

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15, 96 S.Ct. 2882, 2892, 49 L.Ed.2d 752 (1976). We find that in this case Mrs. Woods has fallen far short of meeting her burden.

While there was a time when substantive due process was used as a weapon through which state laws regulating social and economic activities were frequently invalidated, See, e. g., Lochner v. New York, 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937 (1905), beginning with Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934), this use of substantive due process was abandoned. In Nebbia the Court stated that:

(T)he function of courts in the application of the Fifth and Fourteenth Amendments is to determine in each case whether circumstances vindicate the challenged regulation as a reasonable exertion of governmental authority or condemn it as arbitrary or discriminatory. . . .

So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio.

291 U.S. at 536-37, 54 S.Ct. at 515-16. If a regulation is reasonable in relation to its subject and adopted in the interests of the community, it does not violate substantive due process. West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703 (1937).

The state must prove a compelling reason for a law only if it restricts a fundamental right; so long as such a right is not affected a law need only rationally relate to a legitimate