Case 1:17-cv-00384-JAP-JHR Document 276 Filed 02/12/21 Page 1 of 20
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW MEXICO
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`DENNIS MURPHY, Guardian Ad Litem
`for N.E.D., an incapacitated minor; JACOB DOTSON;
`DOMINIQUE BILLY, individually and as next friend
`of I.C. and S.D., minors,
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`vs.
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`THE UNITED STATES OF AMERICA,
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`Plaintiffs,
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`No. 1:17-cv-00384 JAP/JHR
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`Defendant.
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`MEMORANDUM OPINION AND ORDER***
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`In its July 27, 2020 Findings of Fact and Conclusions of Law (Doc. 267) (“Murphy I”), this
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`Court awarded damages for injuries to N.E.D., a minor child, resulting from Defendant’s
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`negligence. The Court’s award, in substance, was $1,137,840.00 for past medical expenses,1
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`*
`Defendant filed the release by Plaintiffs of PlayPower Inc. (Confidential Doc.
`219-1) and its brief in support of an offset (Confidential Doc. 256) under seal. The Court afforded
`the parties fourteen days to propose redactions to protect confidential information. See Sealed
`Memorandum Opinion and Order, filed January 27, 2021 (Confidential Doc. 275). On February 8,
`2021, Plaintiffs’ counsel asked that the dollar amount of Plaintiffs’ settlement with PlayPower be
`redacted. In this public version, the Court has redacted all references to the dollar amount.
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`**
`Richard K. Eaton, Judge of the United States Court of International Trade, sitting
`by designation.
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`This included $500,000.00 for past medical expenses, stipulated to by the parties
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`prior to trial. (Doc. 216.)
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` 1
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`$14,219,657.00 for future medical expenses, and $600,000.00 for non-medical damages.2 Murphy
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`Page 2
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`I at 15. Before the Court are two remaining issues concerning this award.
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`First, Defendant contends that it is entitled to an offset of the full amount of a settlement
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`between Plaintiffs and PlayPower, Inc., a former defendant in a parallel state proceeding. For the
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`reasons set forth below, the Court finds that Defendant is entitled to an offset of $600,000.00,
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`which represents double recovery of non-medical damages covered by Plaintiffs’ settlement with
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`PlayPower.
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`Second, the parties disagree as to whether the trust protecting the award for future medical
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`expenses should be reversionary in nature. That is, Defendant argues that, following N.E.D.’s
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`death, any remaining principal should revert to the United States, rather than to N.E.D.’s estate.
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`Subject to its instructions below, the Court directs that the award of future medical expenses,
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`$14,219,657.00, be placed in a reversionary trust for the benefit of N.E.D., with any remaining
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`principal after her death reverting to the United States.
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`BACKGROUND3
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`On October 20, 2020, the Court held a closed oral argument on the issues of the potential
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`offset and the type of trust in which the award for future medical expenses would be held.
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`2
`The New Mexico Medical Malpractice Act caps recovery of damages for non-
`medical expenses at $600,000.00. See N.M. STAT. ANN. § 41-5-6(A), (B) (1978), amended by 1992
`N.M. Laws ch. 33.
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`This opinion presumes familiarity with the facts and holdings set out in Murphy I.
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` 3
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`Case 1:17-cv-00384-JAP-JHR Document 276 Filed 02/12/21 Page 3 of 20
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`No. 1:17-cv-00384
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`I.
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`Settlement with Former State Court Defendant PlayPower
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`Page 3
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`In February 2016, N.E.D. fell from playground equipment manufactured by PlayPower.
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`Her father, Plaintiff Jacob Dotson, took her to the Gallup Indian Medical Center, where
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`Defendant’s negligence caused her to suffer an anoxic brain injury resulting in permanent and
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`profound disability. On behalf of N.E.D., Plaintiffs brought suit in federal court against the United
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`States under the Federal Tort Claims Act (“FTCA”), and in state court against PlayPower and the
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`City of Gallup for common law tort claims of negligence, negligence per se, willfulness or
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`recklessness of suppliers, and strict product liability. (Doc. 99-1.) Thereafter, Plaintiffs and
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`PlayPower reached a confidential settlement. The amount of the PlayPower settlement was
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`.
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`The release by Plaintiffs of PlayPower (the “Release”) (Confidential Doc. 219-1), provides
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`that it is only for non-medical damages.4 See Pls.’ Post-Trial Mem. Opp. Gov’t’s Offset Claim
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`(Doc. 252) (Jan. 31, 2020) (“Pls.’ Br. Re: Offset”) 7.
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`At the close of trial, the Court ordered that Plaintiffs’ settlement with PlayPower, the
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`accompanying release, and the Guardian Ad Litem report, be placed under seal on the record.
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`(Doc. 266.) The parties submitted post-trial briefing regarding the United States’ claimed offset of
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`the total settlement amount against Plaintiffs’ recovery.
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`4
`“[N]o portion of [the settlement] represent[s] payments for past medical damages,
`future medical damages, any medical related expenses, prejudgment interest, post judgment
`interest, exemplary damages or punitive damages.” Release at 3.
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`II.
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`Reversionary Trust
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`Page 4
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`The parties agree that the damages award for future medical expenses should be placed in
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`trust for the benefit of N.E.D. The parties further agree that a New Mexico trust company, such as
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`the New Mexico Bank & Trust, may act as trustee.
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`The parties disagree, however, as to what type of trust is appropriate. Plaintiffs argue that
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`any unused trust principal should revert to N.E.D.’s estate in the event of her death. Defendant
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`contends that a “reversionary trust” is warranted, where any unused principal reverts to the United
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`States upon N.E.D.’s death. In support of its position, Defendant provided a sample trust
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`instrument with its pre-trial briefing, outlining a reversionary trust by the terms of which the New
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`Mexico Bank & Trust would act as trustee, and MediBill, Inc., a California company, would act
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`as “administrator.” (Doc. 159-1.)
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`LEGAL FRAMEWORK
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`Settlement agreements are contracts, and New Mexico courts interpret them according to
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`contract principles. “A court is bound by the unambiguous language of a settlement agreement.”
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`Russell v. Russell, 1990-NMCA-080, ¶ 8, 111 N.M. 23, 26, 801 P.2d 93, 96.
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`In cases involving two successive tortfeasors, New Mexico law accounts for the possibility
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`that a plaintiff may settle with one tortfeasor but not the other and, in so doing, recover damages
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`for a portion of its injuries that may not later be recovered a second time. See Lujan v. Healthsouth
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`Rehab. Corp., 1995-NMSC-057 ¶¶ 26-27, 120 N.M. 422, 429, 902 P.2d 1025, 1032 (emphasis
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`added) (“[The plaintiff has] the burden to show what portion of the . . . settlement obtained from
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`[one tortfeasor] reasonably is attributable to the original injury. Absent evidence affirmatively
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`establishing such an amount, the entire [settlement] must be set off against any judgment obtained
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`against [the successive tortfeasor].”). That is, if the settlement or accompanying release does not
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`Page 5
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`specify what damages the plaintiff has foregone in exchange for the settling tortfeasor’s payment,
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`the plaintiff bears the burden of showing that any damages it may obtain against the non-settling
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`tortfeasor have not already been recovered. See id. (citing Sanchez v. Clayton, 117 N.M. 761, 768,
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`877 P.2d 567, 574 (N.M. 1994)).
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`In the context of the FTCA, tort plaintiffs suing the United States are barred from
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`repeatedly seeking payment of damages from the United States for the same injury. See, e.g., Hull
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`by Hull v. United States, 971 F.2d 1499, 1505 (10th Cir. 1992) (“[C]ourts cannot subject the
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`government to ongoing obligations like . . . continuing payments . . . .”). The New Mexico Medical
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`Malpractice Act bars the payment of a lump sum for future medical expenses. See N.M. STAT.
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`ANN. § 41-5-7(D) (1978), amended by 1992 N.M. Laws ch. 33 (emphasis added) (“Payment for
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`medical care and related benefits shall be made as expenses are incurred.”). In circumstances such
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`as these, the Tenth Circuit authorizes district courts in FTCA cases to fashion remedies, including
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`reversionary trusts, by which periodic payments can be made to injured parties after the United
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`States has discharged its one-time obligation. See Hull, 971 F.2d at 1505.
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`DISCUSSION
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`I.
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`The United States Is Entitled to an Offset of $600,000.00 of the Award for Non-
`Medical Damages
`The issue of whether Defendant is entitled to an offset depends on what damages were
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`covered by the Court’s award (set out in Murphy I), and by the settlement between Plaintiffs and
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`PlayPower.
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`Plaintiffs characterize the settlement with PlayPower as one that covers only non-medical
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`damages, whether caused by PlayPower’s allegedly tortious conduct or by Defendant’s
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`malpractice in this case. See Pls.’ Br. Re: Offset 7 (“Recognizing that Plaintiffs would be entitled
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`Page 6
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`to pursue their claims against the Government for a full recovery for medical and related expenses
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`from the anoxic injury, Plaintiffs and PlayPower agreed to limit the PlayPower Settlement to non-
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`medical damages.”). In other words, Plaintiffs contend that there is no double recovery because
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`the damages recovered from the United States are primarily medical damages,5 and the
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` recovered from PlayPower is only for non-medical damages.
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`Plaintiffs base this argument on the language of the Release itself.6 See Release at 3; Pls.’
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`Br. Re: Offset 7-8. Plaintiffs also argue that there is no reason to question the settlement, outside
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`the language of the Release, because
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` is reasonable compensation “for the non-
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`medical damages resulting from the permanent and irreversible catastrophic brain injury suffered
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`by [N.E.D.].” Pls.’ Br. Re: Offset 9-10.7
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`5
`Plaintiffs recovered $600,000.00 in non-medical damages from the United States.
`However, the primary award of $15,357,497.00 is for past and future medical expenses.
`Specifically, the Court awarded $14,219,657.00 for “future medical expenses.” Prior to trial, the
`parties stipulated to past medical damages (Doc. 216) in the amount of $500,000.00, and Plaintiff
`Dominique Billy was additionally compensated for her medically related care of N.E.D. in the
`amount of $637,840.00. See Murphy I at 15.
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` 6
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`“[N]o portion of [the settlement] represent[s] payments for past medical damages,
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`future medical damages, any medical related expenses, prejudgment interest, post judgment
`interest, exemplary damages or punitive damages.” Release at 3.
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` 7
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`Although the Murphy I award for non-medical damages against Defendant in this
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`case was capped at $600,000.00 under the New Mexico Medical Malpractice Act, that cap has no
`bearing on what Plaintiffs could have recovered for medical or non-medical damages in a personal
`injury suit against PlayPower, because Plaintiffs sued PlayPower for negligence and strict liability,
`(Doc. 99-1), not medical malpractice. See N.M. STAT. ANN. § 41-5-6(A), (B).
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`Page 7
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`In addition, in the Release, PlayPower agreed to assign certain rights of indemnity to
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`Plaintiff.8 See Release at 4. In their briefing and at oral argument, Plaintiffs have stated that they
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`intend to pursue an indemnification claim against the United States, only if an offset is granted by
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`the Court. See Pls.’ Br. Re: Offset 8 (“[I]f the Government were successful in its claim for a full
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`offset against the total amount of the PlayPower Settlement, PlayPower would have a viable claim
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`for indemnity. Plaintiffs recognized the potential value of such an indemnity claim and,
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`consequently, included the assignment of PlayPower’s right to indemnity in the Release as
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`additional protection for Plaintiffs.”).
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`Defendant claims that an offset is warranted on two primary grounds.9 See Def.’s Sealed
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`Br. Support Offset (Confidential Doc. 256) (Jan. 31, 2020) (“Def.’s Br. Re: Offset”) 7-10. First,
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`Defendant argues that, in accordance with Lujan, Plaintiffs have not adequately carried their
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`burden of showing how much, if any, of the settlement amount is attributable to the injury allegedly
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`caused by PlayPower, as distinct from the injuries proven against the United States. See Def.’s Br.
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`Re: Offset 11 (citations omitted) (“In Lujan, the only contemplated apportionment of a settlement
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`is between the original injury and the enhanced injury. . . . The subject Settlement Agreement made
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`no such apportionment. . . . Absent evidence affirmatively establishing the amount attributable to
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`8
`PlayPower agreed to “assign to the Plaintiffs all claims for indemnification and/or
`contribution they may have against the City of Gallup or the United States government, as
`concurrent or joint tortfeasors.” Release at 4.
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`Additionally, Defendant appears to take issue with Plaintiffs’ “characterization” of
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`the PlayPower settlement as covering only non-medical damages because (1) the proceeds have
`been used for medically-related expenses, and (2) because the PlayPower defendants were released
`from all liability, both for medical and non-medical damages. Defendant does not support this
`argument with any legal authority, however. Def.’s Br. Re: Offset 10. It bears noting that neither
`the eventual use of the settlement money, nor the consideration PlayPower received for settling,
`bears on the nature of damages covered by the settlement.
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` 9
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`the original injury, the entire settlement amount must be set off against any judgment obtained
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`Page 8
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`against the successive tortfeasor.”).
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`Second, Defendant argues that the settlement does not effectively protect the United States
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`from double recovery. Defendant specifically points to the “assignment” by PlayPower to
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`Plaintiffs of PlayPower’s right to seek indemnification against the United States:
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`There is nothing that stops the PlayPower Defendants (or Plaintiffs, if the
`assignment is valid) from seeking recoupment of the Settlement Amount from the
`United States. Both the PlayPower Defendants, by filing a notice of claim, and,
`after receiving the assignment, Plaintiffs have threatened the United States that they
`intend to seek indemnification for the full Settlement Amount. Indeed, Plaintiffs
`acknowledge the United States’ double exposure by taking an assignment of the
`indemnification claim. If Plaintiffs believed that neither Plaintiffs nor the
`PlayPower Defendants could recover for the Settlement Amount against the United
`States purportedly because the Settlement Amount covered only medical expenses,
`they would have negotiated a full release of the indemnification claim. Instead, they
`took an assignment for it.
`Def.’s Br. Re: Offset 11.
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`A.
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`The Settlement Amount Is Reasonable Because of the Extent of N.E.D.’s Non-
`Medical Damages
`As a threshold matter, the Court finds that, for purposes of deciding the issue of offset, the
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`amount of the settlement—
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`—is not so great as to compel a finding that it was
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`intended to cover medical as well as non-medical damages. In other words, the settlement amount
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`is reasonable, given the severity of N.E.D.’s injuries and the non-medical damages she and her
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`parents suffered as a result. See Murphy I at 7. The award for non-medical damages against
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`Defendant in this case was capped at $600,000.00 under the New Mexico Medical Malpractice
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`Act, but the application of the cap has no bearing on what Plaintiffs could potentially recover for
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`medical or non-medical damages in a personal injury suit outside the medical malpractice context.
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`N.M. STAT. ANN. § 41-5-6(A). Thus, the $600,000.00 cap would not have applied to any award
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`obtained against PlayPower, because Plaintiffs sued PlayPower for negligence and strict liability,
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`Page 9
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`not medical malpractice. (Doc. 99-1.)
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`The Court has previously found that N.E.D. and her parents suffered extensive non-
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`economic loss. First, it found that N.E.D.’s injury has severely impaired her cognitive, emotional,
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`social, and physical abilities. See Murphy I at 5. It also found that N.E.D.’s parents suffered
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`significant and permanent losses in their relationship with N.E.D. as a consequence of her injuries.
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`Id. at 7. Finally, contrary to Defendant’s position at trial that N.E.D.’s expected lifespan was 53
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`years, the Court found that N.E.D.’s expected lifespan was 81 years, which necessarily increased
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`the duration of medical and non-medical damages. Id. at 8.
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`Moreover, as Plaintiffs point out in their brief, PlayPower may well have considered that
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`recent New Mexico personal injury cases have resulted in jury awards for non-medical damages
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`far exceeding the amount,
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`, it paid here. See, e.g., Morga v. Fedex Ground Package
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`Sys., Inc., 2018-NMCA-039 ¶¶ 18, 26, 420 P.3d 586, 594-96, cert. granted, June 4, 2018
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`(upholding a jury award of $32,000,000 in damages to a child who suffered numerous traumatic
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`injuries in a vehicle accent, even though the evidence showed that his medical treatment amounted
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`to less than $500,000, because “a jury is given wide latitude in fixing the amount of . . . awards
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`[for non-economic damages such as pain and suffering]”). Thus, there is no reason to believe that
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`Plaintiffs’ settlement with PlayPower was for anything other than it purports to be—i.e., a
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`settlement with respect to non-medical damages only.
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`B.
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`Plaintiffs Have Carried Their Burden as to Double Recovery
`1.
`There Is No Double Recovery as to the Murphy I Award for Medical
`Damages
`The New Mexico Supreme Court has held, in Lujan and Sanchez, that a plaintiff who settles
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`with the intent of obtaining an additional award of damages through litigation “has an obligation
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`to establish what compensatory damages he is foregoing in the settlement.” See Lujan, 1995-
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`Page 10
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`NMSC-0571 ¶ 27, 120 N.M. at 429, 902 P.2d at 1032 (quoting Sanchez, 117 N.M. at 768, 877
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`P.2d at 574). In Lujan, which involved a settlement with the first but not the successive tortfeasor,
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`the Court held that an offset was warranted where the plaintiff had failed, in the language of the
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`release or otherwise, to indicate what portion of the damages compensated by settlement were
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`attributable to the original versus the enhanced injury. See Lujan, 1995-NMSC-0571 ¶ 27, 120
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`N.M. at 429, 902 P.2d at 1032 (“There is no specification in the Lujan release as to how the
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`consideration paid by [the first tortfeasor] is to be divided between the original injury . . . and the
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`enhanced injury.”). Sanchez, on which Lujan relied, held that the “[p]roportion of compensatory
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`damages not paid in settlement may be recovered.” Sanchez, 117 N.M. at 768, 877 P.2d at 574.
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`Neither Lujan nor Sanchez, however, address Plaintiffs’ precise situation, where damages
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`were allocated according to type: “medical” (sought only against the United States) and “non-
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`medical” (covered by the PlayPower settlement). Rather, the cases involved apportionment
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`between the “original injury” and a later injury, in Lujan, and of compensatory damages generally,
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`in Sanchez. See Lujan, 1995-NMSC-0571 ¶ 27, 120 N.M. at 429, 902 P.2d at 1032; Sanchez, 117
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`N.M. at 768, 877 P.2d at 574. Here, the Court must determine whether a release that explicitly
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`stated the type of damages that were covered and what type of damages were excluded, sufficiently
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`demonstrates that there has been no double recovery by Plaintiffs, and thus there is no entitlement
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`to an offset.
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`Settlement agreements are contracts, and New Mexico courts construe them in accordance
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`with contract principles. “A court is bound by the unambiguous language of a settlement
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`agreement.” Russell, 1990-NMCA-080, ¶ 8, 111 N.M. at 26, 801 P.2d at 96; see also In re Otero
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`Cnty. Hosp. Ass’n, Inc., 571 B.R. 854, 861 (Bankr. D.N.M. 2017), on reconsideration in part, 585
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`B.R. 161 (Bankr. D.N.M. 2018) (citing Walters v. Wal-Mart Stores, Inc., 703 F.3d 1167, 1172
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`Page 11
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`(10th Cir. 2013)) (“Because a settlement agreement is a form of contract, the Court applies general
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`principles of contract interpretation under state law to determine the meaning of a settlement
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`agreement.”).
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`Here, as a threshold matter, the Court finds the language of the Release to be unambiguous.
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`See Release at 3 (“[N]o portion of [the settlement] represent[s] payments for past medical damages,
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`future medical damages, any medical related expenses, prejudgment interest, post judgment
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`interest, exemplary damages or punitive damages.”). Because the settlement agreement provides
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`that it covered only a type of injury not found (for the most part) in the case against Defendant,
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`Lujan’s prohibition against double recovery is inapplicable. Lujan does not work to prevent
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`Plaintiffs from fully recovering both medical and non-medical damages. Accordingly, it is possible
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`to effectuate the settling parties’ intent without violating Lujan, and Defendant is not entitled to an
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`offset as to the $15,357,497.00 award in Murphy I for medical damages, because the PlayPower
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`settlement clearly excluded medical damages.
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`This finding is consistent with other New Mexico precedents where both state and federal
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`courts have considered the types of damages or other compensation unambiguously covered by a
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`settlement, when determining whether an offset is warranted against future recovery. See, e.g.,
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`Sanchez, 117 N.M. at 768, 877 P.2d at 574; Summit Properties, Inc. v. Pub. Serv. Co. of New
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`Mexico, 2005-NMCA-090, ¶ 50, 138 N.M. 208, 223, 118 P.3d 716, 731 (finding, in a contract
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`case, that an offset or “credit” was warranted because the settlement at issue had been characterized
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`as for “attorney fees” where there was, in fact, “no legal right to those fees”); see also Otero, 571
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`B.R. at 862 (“[T]he intended meaning of the language used in the Settlement Agreement . . . is
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`clear: claims are released if not covered by and to the extent damages are not payable under any
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`available insurance; unreleased claims are claims that are covered by available insurance to the
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`Page 12
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`extent the type of damages that may be awarded on the claims are the type of damages payable
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`under insurance.”). Moreover, as has been noted, the evidence at the trial demonstrated that the
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`amount of the settlement was consistent with the amount of non-medical injury.
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`Thus, with one limited exception, this Court finds that the settlement agreement and the
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`Court’s award in Murphy I compensate Plaintiffs for distinct types of damages, and no double
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`recovery has occurred. Unlike the release at issue in Lujan, Plaintiffs’ Release of PlayPower
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`specifically divided these damages so that there would be no ambiguity about what the settlement
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`covered and what it did not. The settlement covered non-medical damages up to
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`.
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`The Court’s award set forth in Murphy I, covered medical and medically-related damages in the
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`total amount of $15,357,497.00, with an additional $600,000.00 award for non-medical damages.
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`Nothing prevents Plaintiffs from using settlement and litigation to maximize their potential
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`recovery. See, e.g., Rummel v. Lexington Ins. Co., 1997-NMSC-041, ¶ 47, 123 N.M. 752, 764, 945
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`P.2d 970, 982 (“Nothing prevents the allocation of damages so as to provide maximum protection
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`for the insured.”). Here, Plaintiffs could only recover $600,000.00 in non-medical damages from
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`Defendant because of the state statutory cap, and thus they settled for an amount that reflected a
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`reasonable approximation of their non-medical losses. Because no cap applied to their suit for
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`medical damages against Defendant, Plaintiffs chose to forgo those damages in their settlement,
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`and instead bring their medical malpractice claims to trial.
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`2.
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`Defendants Are Entitled to an Offset of $600,000.00
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`The Court next finds that Plaintiffs have not carried their burden with respect to the
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`$600,000.00 award for non-medical damages, also set forth in Murphy I. Plaintiffs argue in their
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`brief that the non-medical damages in this case exceed the
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` settlement with
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`PlayPower, due to the severity of N.E.D.’s injuries. See Pls.’ Br. Re: Offset 11 (“N.E.D. must
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`Page 13
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`suffer [profound difficulties] each and every day, . . . which will continue to plague her throughout
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`her life. . . . [H]er injuries [have also had a destructive impact] on her extremely limited capacity
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`in the future to enjoy life in any meaningful way. . . . Thus, N.E.D. faces not only a lifetime of
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`struggle ahead, but of ongoing losses – the loss of the enjoyment of life on a daily basis.”).
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`In their briefing and at oral argument, however, Plaintiffs failed to establish, based on the
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`evidence on the record, which non-medical damages were definitively covered by the settlement
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`and Release, and which were the subject of the suit against the United States. See Release at 3
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`(“All amounts received under the terms of this Release are for damages on account of personal
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`physical injuries or sickness . . . .”); see also Murphy I at 7 (awarding non-medical damages).
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`Under Lujan, “[a]bsent evidence affirmatively establishing [what damages are attributable to what
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`injury], the entire [settlement amount] must be set off against any judgment obtained against”
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`Defendant. Lujan, 1995-NMSC-0571 ¶ 27, 120 N.M. at 429, 902 P.2d at 1032. Plaintiffs cannot
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`recover for the same non-medical damages twice. Thus, to avoid double recovery against
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`Defendant in this case, the Court orders that $600,000.00 be offset against the judgment in
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`Murphy I.
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`C.
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`The “Assignment” of PlayPower’s Indemnification Rights to Plaintiffs Does
`Not Direct a Different Result
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`Defendant argues that the settlement with PlayPower creates a risk of double recovery by
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`Plaintiffs no matter how they characterize the damages it covers. Defendant maintains that
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`Plaintiffs intend to treat the settlement in two ways: for non-medical damages only for the purposes
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`of preventing offset, while simultaneously asserting that PlayPower, through the settlement, has
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`paid medical damages attributable to the United States. Defendant argues:
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`Case 1:17-cv-00384-JAP-JHR Document 276 Filed 02/12/21 Page 14 of 20
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`No. 1:17-cv-00384
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`Page 14
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`Plaintiffs’ characterization of the Settlement Amount is of no consequence. . . . The
`United States remains subject to paying twice for the same injuries. There is nothing
`that stops the PlayPower Defendants (or Plaintiffs, if the assignment is valid) from
`seeking recoupment of the Settlement Amount from the United States. Both the
`PlayPower Defendants, by filing a notice of claim, and, after receiving the
`assignment, Plaintiffs have threatened the United States that they intend to seek
`indemnification for the full Settlement Amount. Indeed, Plaintiffs acknowledge the
`United States’ double exposure by taking an assignment of the indemnification
`claim. If Plaintiffs believed that neither Plaintiffs nor the PlayPower Defendants
`could recover for the Settlement Amount against the United States purportedly
`because the Settlement Amount covered only [non-]medical expenses, they would
`have negotiated a full release of the indemnification claim. Instead, they took an
`assignment for it.
`Def.’s Br. Re: Offset 10-11. In other words, Defendants believe that Plaintiffs will not be satisfied
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`with the settlement against PlayPower and the Court’s prior award, but that they will try to recoup
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`the settlement amount a second time by suing the United States for indemnification pursuant to
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`their assignment from PlayPower.
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`Plaintiffs, on the other hand, have represented that they will only seek to pursue
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`indemnification if the Court offsets the settlement against the prior award. See Pls.’ Resp. Gov’t’s
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`Br. Supp. Offset PlayPower Settlement (Doc. 260) (Feb. 28, 2020) 7 (“That assignment was
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`obtained only to protect Plaintiffs’ right to recover fully for both the medical and non-medical
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`damages they suffered. Therefore, if the Government is held responsible for all the medical
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`damages caused by its medical facility, that, together with the PlayPower settlement for the major
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`portion of the non-medical damages suffered by Plaintiffs, would obviate any need for invoking
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`that assignment.”).
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`The validity of the assignment to Plaintiffs is not presently before the Court—and nor is
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`any action for indemnification. The Court observes, however, that the New Mexico Court of
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`Appeals has invalidated assignments, such as the one at issue here, under the New Mexico Medical
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`Malpractice Act. Any action for indemnification by Plaintiffs would be governed by the New
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`Mexico Medical Malpractice Act, since the “gravamen” of such an action is necessarily
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`Case 1:17-cv-00384-JAP-JHR Document 276 Filed 02/12/21 Page 15 of 20
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`No. 1:17-cv-00384
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`Defendant’s medical malpractice. See Christus St. Vincent Reg’l Med. Ctr. v. Duarte-Afara, 2011-
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`Page 15
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`NMCA-112, ¶ 15, 267 P.3d 70, 74 (“[Because] the gravamen of Medical Center’s equitable
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`indemnification claim is predicated upon the allegation that Doctors negligently caused, and were
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`partly liable for, [Plaintiff’s] injuries. . . . [W]e hold that Medical Center’s equitable
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`indemnification claim is a malpractice claim as that term is used in the [Medical Malpractice Act]
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`and is, therefore, subject to [the Act].”). That is, “[t]he controlling inquiry in determining whether
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`a claim [including an indemnification claim] constitutes a ‘malpractice claim’ under the [Act] is
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`merely whether the gravamen of the claim is predicated upon the allegation of professional
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`negligence.” Id. 2011-NMCA-112, ¶ 18, 267 P.3d at 74.
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`Where the gravamen of any action brought against Defendant would be for medical
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`malpractice (there could be no serious claim that Plaintiffs could argue for damages under any
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`other theory), then the Act applies, and would bar assignment of claims pursuant to it. See N.M.
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`STAT. ANN. § 41-5-12 (“A patient’s claim for compensation under the Medical Malpractice Act is
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`not assignable.”).
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`Thus, based on the “gravamen” rule, PlayPower’s assignment of its indemnification claim
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`to Plaintiffs would not result in Defendant being required to pay, because the PlayPower
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`assignment of any right to contribution would be based on Defendant’s medical malpractice. See
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`Leger v. Leger, 2019-NMCA-033, ¶ 40, 444 P.3d 1036, 1048, cert. granted Apr. 8, 2019 (emphasis
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`added) (citations omitted) (“[T]he Legislature intended the [Act’s] requirements and restrictions
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`to apply to all ‘malpractice claims’ covered by the [Act] (which the indemnification claim at issue
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`undisputedly is) and, accordingly, that Section 41-5-12 bars assignment of all ‘malpractice claims’
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`for compensation covered by the [Act].”). Therefore, it appears that the assignment and any later
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`Case 1:17-cv-00384-JAP-JHR Document 276 Filed 02/12/21 Page 16 of 20
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`No. 1:17-cv-00384
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`lawsuit for indemnification cannot accomplish what the statute forbids, and Defendant is not at
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`Page 16
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`risk of being found liable for any amount of non-medical damages in excess of $600,000.00.
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`II.
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`The Damages for Future Medical Expenses Will Be Placed in a Reversionary Trust
`The parties disagree as to whether the trust for the future medical expenses award
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`(