By Steven G. Mehta

An appellate court in California has added another decision that will either help or hurt the debate on the issue of whether medical bills can be recovered by plaintiffs in personal injury cases based on the amount billed or actually paid.

The Website Law.com has reported on the decision recently.  Here is a brief excerpt of the article.

Plaintiffs lawyers are celebrating the second appeal court ruling in seven months that lets individuals recover the full cost of medical care even if the insurer paid only a smaller, negotiated amount.

The ruling by San Francisco’s 1st District Court of Appeal was handed down Thursday, adding support to an opinion issued by the 4th District’s San Diego branch in November. The California Supreme Court granted review in the latter case by a unanimous vote in March.

The fact that both rulings favor plaintiffs didn’t worry David Ettinger, a partner with Encino’s Horvitz & Levy who was on the losing side of Thursday’s opinion.

“Really,” he said, “until the Supreme Court speaks I don’t think we can make any judgments.”

In Thursday’s ruling in Yanez v. SOMA Environmental Engineering Inc., A123893, the 1st District held that an Alameda County judge erred by reducing a negligence award from $150,000 in damages — including more than $44,500 for past medical expenses — to about $18,000. The lower amount represented the actual payment plaintiff Ana Yanez’s doctors accepted under their contracts with the woman’s insurers.

The appeal court invoked the collateral source rule, which says damages shouldn’t be reduced simply because the victim receives benefits from other sources, such as insurance companies.

“The rule,” Justice Sandra Margulies wrote, “reflects a policy preference favoring the tort victim over the wrongdoer since not applying the rule allows the wrongdoer to profit from the victim’s investment in purchasing insurance or from the generosity of those who come to the victim’s aid.”

Click here to read the full article.

Here is the actual case in its entirety courtesy of Leagle.com:

ANA SILVA YANEZ, Plaintiff and Appellant,
v.
SOMA ENVIRONMENTAL ENGINEERING, INC., et al., Defendants and Respondents.

No. A123893.

Court of Appeals of California, First District, Division One.

Filed June 24, 2010.

Certified for Publication

Law Office of Paul B. Kemp, Paul B. Kemp and Dan C. Schaar for Plaintiff and Appellant.

Hinton, Alfert & Sumner, Scott H.Z. Sumner and Jeremy Lateiner for Consumer Attorneys of California as Amicus Curiae for Plaintiff and Appellant.

Horvitz & Levy, H. Thomas Watson and David S. Ettinger; Toschi, Sidran, Collins & Doyle, Steve Toschi and Sumair S. Sandhu for Defendants and Respondents.

MARGULIES, Acting P.J.

Plaintiff Ana Yanez sued defendants SOMA Environmental Engineering, Inc., Mansour Sepehr, and Brian Tims (collectively SOMA) for injuries she suffered in an automobile accident. A jury found that SOMA’s negligence caused Yanez’s injuries, and returned a special verdict awarding her $150,000 in damages, including $44,519.01 in damages for past medical expenses. After judgment was entered, SOMA moved to reduce the award for medical expenses to $18,368.24, which was the amount actually accepted by Yanez’s medical providers as payment in full under their contracts with Aetna and Healthnet, her private health insurers. The trial court granted the motion and entered an amended judgment reducing Yanez’s damage award.

Yanez appeals from the amended judgment, contending the trial court erred in reducing the jury’s award, and in denying Yanez her post-offer costs and interest under Code of Civil Procedure section 998. We reverse the amended judgment and remand the case back to the trial court to (1) enter a new judgment restoring the original amount of damages awarded by the jury, and (2) redetermine Yanez’s entitlement to an award of costs and prejudgment interest.

Yanez sued SOMA for injuries suffered in an October 2005 automobile accident. The individual defendants were the driver of the pickup truck that collided with Yanez’s automobile and the owner of SOMA Environmental Engineering, Inc.

Over SOMA’s objections, the trial court granted Yanez’s motion to allow into evidence the amounts billed by her health care providers for her medical treatment, without regard to the amount of the billed expenses that were actually paid (by Yanez or her health insurers) or were still considered owing by the provider. SOMA contended unpaid amounts were irrelevant to its liability but conceded the trial court had no choice but to grant the motion in light of Greer v. Buzgheia(2006) 141 Cal.App.4th 1150 (Greer).[ 1 ]

Over Yanez’s objection, the court ruled it would conduct a posttrial hearing to determine if her medical expense damages should be reduced to the amount of the expenses actually paid to her providers by Yanez or her insurance carriers, and accepted by the providers as payment in full for their services.

The trial was limited to the issues of causation and damages. During the trial, Yanez submitted documentary evidence of her past medical bills to the jury and her surgeon testified that the surgery bill for approximately $17,000 was reasonable. Regarding past medical expenses, the jury was instructed to award damages in an amount that would compensate Yanez for “the reasonable cost of reasonably necessary medical care that she has received.” The jury returned a special verdict of $150,000, which included an award of $44,519.01 in damages for past medical expenses for services from 10 different health care providers. The court entered judgment on the verdict for $150,000.

SOMA moved to reduce Yanez’s medical expenses to $18,368.24, the amount actually accepted by her medical providers as payment in full for the services she received. The motion included evidence of medical billings and actual payments, and stated further evidence would be presented through affidavits or live testimony at the posttrial hearing the court had agreed to hold. At the hearing, SOMA’s witnesses, representing several of Yanez’s providers, furnished business records of billings and payments, and testified that each of the providers had written off a substantial amount of what had been billed, pursuant to their contracts with Yanez’s health insurers, Aetna and Healthnet, and that she did not owe the amounts written off. None of the provider-insurer contracts in question were introduced in evidence. Although the witnesses testified that set amounts or percentages were discounted, they did not testify about how the providers and insurers negotiated or arrived at the amount of the discounts. Yanez’s counsel objected to admission of the business records on the grounds their admission violated the collateral source rule and the records were irrelevant. Yanez’s objection was overruled and the court reduced her medical expense damages by a total of $21,355.66, for five different health care providers. The court entered an amended judgment reducing Yanez’s damages award accordingly. The judgment also awarded her all of her recoverable court costs.

Before trial, Yanez had made an offer to settle for $150,000 under Code of Civil Procedure section 998 (hereafter section 998 offer). SOMA did not accept the offer. In her posttrial memorandum of costs, Yanez claimed entitlement to prejudgment interest of $17,133.67 and to $6,992.50 in expert witness fees because, including ordinary trial costs, she recovered more than her settlement offer. (Code Civ. Proc., § 998, subd. (d); Civ. Code, § 3291.) SOMA moved to tax the prejudgment interest and expert witness fees on the ground that if the medical expense award were reduced, the judgment would be less than Yanez’s section 998 offer.[ 2 ] After granting SOMA’s motion to reduce Yanez’s medical expense damages, the trial court held that she did not obtain a judgment exceeding her settlement offer. The court accordingly struck the prejudgment interest cost claim in its entirety and struck $5,992.50 of the expert witness fees claimed by Yanez.

Yanez timely appealed from the amended judgment.

Yanez contends the trial court erred in (1) reducing the jury’s award of past medical specials to the amounts actually paid by her and her insurers to her medical providers, and (2) finding it had no discretion to award Yanez her post-offer costs and interest under Code of Civil Procedure section 998 due to the reduced amount of her medical specials.

Yanez argues the trial court violated the collateral source rule by limiting her recoverable damages to the amounts she and her insurers actually paid for her accident-related medical care. According to Yanez, the portions of the medical bills written off by the providers, totaling $21,355.66, were in fact collateral source benefits that under California’s collateral source rule could not be deducted from her recoverable damages. We begin by reviewing the applicable authorities defining the collateral source rule.

The collateral source rule provides that the compensatory damages recoverable from a tortfeasor in a personal injury case should not be reduced merely because the tort victim also receives compensatory benefits from independent or collateral sources, such as insurance. The rule has been described as follows: “`[T]he courts generally have held that benefits received by the plaintiff from a source wholly independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer. . . . [T]he wrongdoer cannot take advantage of the contracts or other relation that may exist between the injured person and third persons. Thus, while a plaintiff’s recovery under the ordinary negligence rule is limited to damages which will make him whole, the collateral source rule allows a plaintiff further recovery under certain circumstances even though he has suffered no loss.’ [¶] 22 Am.Jur.2d Damages § 566 (1988) (citations omitted).” (Marsh v. Green (Ala. 2000) 782 So.2d 223, 230.)

California has adopted the collateral source rule. (Lund v. San Joaquin Valley Railroad (2003) 31 Cal.4th 1, 9.) The rationale for it was explained in Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1 (Helfend). The plaintiff inHelfend was injured when a transit district bus driver sideswiped his car. (Id. at pp. 4-5.) The plaintiff sued the bus driver and his public employer. (Id. at p. 5.) At trial, the defendants asked to show that about 80 percent of the plaintiff’s hospital bill had been paid by the plaintiff’s Blue Cross insurance carrier and that some other medical expenses had been paid by other insurance. (Ibid.) The trial court denied the request, and the jury awarded the plaintiff $16,400. (Ibid.) The defendant appealed, claiming the collateral source rule did not apply to tort actions involving public entities. (Id. at p. 14.)

Helfend explained the rationale for the collateral source rule as follows: “Courts consider insurance a form of investment, the benefits of which become payable without respect to any other possible source of funds. If we were to permit a tortfeasor to mitigate damages with payments from plaintiff’s insurance, plaintiff would be in a position inferior to that of having bought no insurance, because his payment of premiums would have earned no benefit. Defendant should not be able to avoid payment of full compensation for the injury inflicted merely because the victim has had the foresight to provide himself with insurance.” (Helfend, supra, 2 Cal.3d at p. 10.) The Helfend court rejected arguments that the rule provides plaintiffs with a double recovery, pointing out plaintiffs rarely receive full compensation for injuries due to the significant portion of the recovery that goes to compensate the plaintiff’s attorney under standard contingent fee agreements. (Id.at p. 12.) According to Helfend, the collateral source rule “partially serves to compensate for the attorney’s share and does not actually render a `double recovery’ for the plaintiff.” (Ibid.) The court further noted the tort victim obtains no double recovery to the extent insurers can recover their outlays from the tort victim via contractual subrogation rights. (Id. at pp. 10-11.)

Nonetheless, the courts apply the collateral source rule even when it unquestionably does confer a windfall benefit on the tort plaintiff. The rule reflects a policy preference favoring the tort victim over the wrongdoer since not applying the rule allows the wrongdoer to profit from the victim’s investment in purchasing insurance or from the generosity of those who come to the victim’s aid. (SeeSmock v. State of California (2006) 138 Cal.App.4th 883, 888.)

California also applies a closely related evidentiary principle that, absent special circumstances, the jury should not hear evidence concerning collateral source benefits received by the plaintiff: “The potentially prejudicial impact of evidence that a personal injury plaintiff received collateral insurance payments varies little from case to case. Even with cautionary instructions, there is substantial danger that the jurors will take the evidence into account in assessing the damages to be awarded to an injured plaintiff. Thus, introduction of the evidence . . . creates the danger of circumventing the salutary policies underlying the collateral source rule. Admission . . . should be permitted only upon a persuasive showing that the evidence sought to be introduced is of substantial probative value.” (Hrnjak v. Graymar, Inc (1971) 4 Cal.3d 725, 732-733, fn. omitted (Hrnjak).)

The Legislature has limited the application of the collateral source rule in certain contexts. Judgments against public entities may be reduced under Government Code section 985, based on services or benefits the plaintiff has received from certain publicly funded sources and private insurance. Civil Code section 3333.1 partially exempts malpractice actions against health care providers from the collateral source rule.

There is no dispute in this case that the collateral source rule applied to and entitled Yanez to recover the actual amounts paid by her and her insurers to her health care providers for injuries caused by SOMA’s negligence. There was also no dispute that the fact Yanez had insurance coverage for part of the medical costs she incurred as a result of the accident was inadmissible under Hrnjak. The primary question raised by this appeal is whether the collateral source rule entitled Yanez to recover the full amount billed by her providers for her medical care, $44,519.01, or only the discounted amount actually paid out of pocket by her and her insurers, and accepted by her medical providers as payment in full, $18,368.24.

In Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 (Hanif), a Third Appellate District panel held that a plaintiff struck by an automobile, who had no private medical insurance, could not recover amounts for medical services in excess of those paid on his behalf by Medi-Cal. (Id. at p. 640.) The plaintiff had sought to introduce evidence that the reasonable value of the medical services he received exceeded the amounts Medi-Cal had actually paid to his providers. (Id. at p. 639.) Based on the collateral source rule, Hanif held initially that Medi-Cal’s payments did not preclude the plaintiff from recovering as special damages the amount Medi-Cal paid for those services. (Id. at pp. 639-640.) The court stated it was “not unreasonable or unfair in light of Medi-Cal’s subrogation and judgment lien rights” for the plaintiff to be deemed to have personally paid or incurred liability for those amounts for purposes of assessing special damages. (Id. at p. 640.) But, based on its separate analysis of the proper measure of medical expense damages, Hanif went further. The court held that the plaintiff was not entitled to recover any more than the actual amount paid for past medical care and services or for which a liability was incurred. (Ibid.) As will be discussed in further detailpost, the court reasoned that any compensation in excess of the amount actually paid or incurred, plus any discounts furnished as gifts to the plaintiff, would place the plaintiff in a better position than he would have been in had the tort not been committed. (Id. at pp. 640-644.)

Decided by another panel of this court, Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298 (Nishihama ), involved a plaintiff with an employer-sponsored Blue Cross medical plan under which her provider agreed to accept reduced rates as payment in full for its services. (Id. at p. 306.) The defendant conceded its liability to pay the plaintiff the amounts actually paid by Blue Cross to the provider, but objected to the jury’s award of medical damages based on the provider’s higher, normal rates. (Id. at p. 307.) The plaintiff insisted she was entitled to a recovery based on the provider’s normal charges because the provider had filed a lien against her judgment seeking to recover the difference between the Blue Cross payments it received and its normal rates, pursuant to the Hospital Lien Act (HLA) (Civ. Code, § 3045.1 et seq.). (Nishihama, at p. 307.)Nishihama reasoned that the damages awarded should have been limited to the reduced charges Blue Cross actually paid rather than the provider’s normal charges because the provider’s lien rights under the HLA derived from, and could be no greater than, the plaintiff’s rights against the tortfeasor. (Nishihama, at pp. 307-309.) As to the latter, Nishihama simply followed Hanif in holding that the plaintiff could recover no more from the tortfeasor than the amount actually paid or incurred for medical services, whether by the plaintiff herself or by an independent source such as insurance. (Nishihama, at p. 306.) Nishihama did not address whether Hanif should apply outside of the Medi-Cal context, but assumed without discussion that discounted provider reimbursement rates negotiated by private insurance companies were indistinguishable from reduced rates established by publicly funded medical insurance programs like Medi-Cal for purposes of establishing economic damages under the collateral source rule.[ 3 ]

In Greer, the appellate court implicitly accepted Nishihama‘s premise that “it is error for the plaintiff [in a tort action] to recover medical expenses in excess of the amount paid or incurred.” (Greer, supra, 141 Cal.App.4th at p. 1157, italics omitted.) The court nonetheless upheld a judgment awarding the plaintiff tort victim the full amount of the medical expenses billed by his providers because the defendant had failed to preserve his claim for a “Hanif/Nishihama reduction” by not requesting a sufficiently specific special verdict form. (Greer, at pp. 1154, 1157-1159.)

In Olsen v. Reid (2008) 164 Cal.App.4th 200 (Olsen), the plaintiff and amicus curiae asked the appellate court to reconsider the holdings in Hanif and Nishihamathat when a plaintiff has medical insurance, tort damages must be limited to the amount actually paid or incurred. (Olsen, at p. 203.) The court declined to reach that question, however, because it was not clear from the evidence that the plaintiff’s medical providers had in fact discounted or written off part of their medical expense charges. (Id. at pp. 202-203.) Two of the justices, in separate concurring opinions, did reach the issue. Justice Moore argued that, as applied to situations involving private insurance, the Hanif/Nishihama line of cases abrogated the collateral source rule. (Olsen, at p. 213 (conc. opn. of Moore, J.).) She reasoned that under Hanif/Nishihama, an uninsured tort victim would receive a greater recovery from the tortfeasor than a victim with private insurance, a result she viewed as drastically undermining a key policy rationale behind the collateral source rule. (Olsen, at p. 215.) Justice Moore contended a change of this sort to the collateral source rule could only be adopted by legislative action or by endorsement from the California Supreme Court. (Id. at pp. 213-214.) Justice Moore also observed confusion had arisen about the procedures to be followed in reducing a damage award under the Hanif/Nishihama line of cases—over the type of hearing to be held, the burden of proving the amounts actually paid, and the standard of review on appeal—which she attributed to trying to apply “judge-made rules of this kind.” (Olsen, at p. 213, fn. 3.)

Justice Fybel, in his concurring opinion, endorsed the Hanif/Nishihama analysis, which he characterized as “limiting recovery . . . to the amount of actual damages incurred . . . .” (Olsen, supra, 164 Cal.App.4th at p. 216 (conc. opn. of Fybel, J.).) He found the principles underlying these cases to be firmly grounded in several California statutes—Civil Code sections 3281,[ 4 ] 3282,[ 5 ] 3333,[ 6 ]1431.2, subdivision (b)(1)[ 7 ] —as well as the Restatement Second of Torts (Restatement), section 911, comment h.[ 8 ] Justice Fybel contended that Hanifand Nishihama followed the collateral source rule “because the plaintiffs in those cases recovered all medical costs actually incurred, even though the costs were paid by others.” (Olsen, at p. 215.)

SOMA also calls our attention to a recent criminal case—People v. Millard (2009) 175 Cal.App.4th 7. The defendant in Millard was convicted of driving under the influence causing bodily injury to another person, and was ordered to pay restitution for the victim’s medical expenses. (Id. at p. 13.) The People appealed the trial court’s restitution order, arguing in part that the trial court erred by valuing the victim’s medical expenses based on the amount paid by his insurance company rather than the amount billed by his medical providers. (Ibid.) The appellate court upheld the trial court’s methodology, following People v. Bergin (2008) 167 Cal.App.4th 1166, a previous restitution case that had relied on Hanif. Applying an abuse of discretion standard of review to the trial court’s restitution order, theMillard court found that limiting restitution to the amount actually paid by the insurer had a rational basis and was not based on a demonstrable error of law. (Id.at pp. 26, 28-29.) The court observed that a restitution order was not intended to provide the crime victim with a windfall, but only to reimburse the victim for the actual economic loss incurred, even if the amount of the loss is paid by a collateral source such as Medi-Cal or private insurance. (Id. at p. 28.) Because Millard‘s consideration of the issue was limited to whether there was a rational basis for the trial court’s restitution order, we do not find it persuasive in the present context.

The issue of whether amounts written off by a health care provider pursuant to its contract with a private insurer may be recovered as damages under the collateral source rule is now before the California Supreme Court.[ 9 ]

The great majority of decisions from other jurisdictions have concluded that the collateral source rule entitles tort victims to recover the full amount of reasonable medical expenses charged, including amounts written off from their bills pursuant to contractual rate reductions or under Medicaid or Medicare. (See case law reviews in Robinson v. Bates (Ohio 2006) 857 N.E.2d 1195, 1199; Lopez v. Safeway Stores, Inc. (Ariz.Ct.App. 2006) 129 P.2d 487, 495 (Lopez); Scott v. Garfield (Mass. 2009) 912 N.E.2d 1000, 1011-1012; Stanley v. Walker (Ind. 2009) 906 N.E.2d 852, 864; Wills v. Foster (Ill. 2009) 892 N.E.2d 1018, 1025-1029 (Wills).)[ 10 ] [ 11 ] A few of the states following the majority rule allow such recoveries when the plaintiff is covered by private insurance or Medicare, for which premiums are required to be paid, and limit recovery to the actual amount paid to providers when the plaintiff is covered by Medicaid for which no premium is required. (See Bozeman, supra, 879 So.2d at pp. 703-705; Rose, supra, 78 P.3d at p. 803; Wills, supra, 892 N.E.2d at pp. 1030-1031.)

The Virginia Supreme Court’s reasoning in Acuar, is representative of the majority view: “[Defendant] contends that the collateral source rule is not applicable . . . because [plaintiff] is not, and never will be, legally obligated to pay those portions of his medical bills that were written off, nor were those amounts paid on his behalf. According to [defendant], the amounts written off . . . are not benefits derived from a collateral source, and to allow [plaintiff] to recover such amounts . . . would create a double recovery or windfall in his favor. [¶] . . . [Plaintiff] maintains that, if [defendant's] position were adopted, she would derive a benefit from [plaintiff's] health insurance without having paid any consideration for [it], thereby creating a windfall for [defendant]. . . . [¶] . . . [¶] . . . [Defendant's] argument overlooks the fundamental purpose of the [collateral source] rule . . . to prevent a tortfeasor from deriving any benefit from compensation or indemnity that an injured party has received from a collateral source. . . . [T]he focal point of the collateral source rule is not whether an injured party has `incurred’ certain medical expenses. Rather, it is whether a tort victim has received benefits from a collateral source that cannot be used to reduce the amount of damages owed by a tortfeasor. [¶] [Plaintiff] is entitled to seek full compensation from [defendant]. [Citation.] . . . [Defendant] cannot deduct from that full compensation any part of the benefits [plaintiff] received from his contractual arrangement with his health insurance carrier, whether those benefits took the form of medical expense payments or amounts written off because of agreements between his health insurance carrier and his health care providers. Those amounts written off are as much of a benefit for which [plaintiff] paid consideration as are the actual cash payments made by his health insurance carrier to the health care providers. [They] constitute `compensation or indemnity received by a tort victim from a source collateral to the tortfeasor . . . .’” (Acuar, supra, 531 S.E.2d at pp. 321-323.)

Moorhead exemplifies the minority view that amounts written off by the health care provider pursuant to contract or law may not be awarded as damages under the collateral source rule: “Awarding [plaintiff] the additional amount of $96,500.91 would provide her with a windfall and would violate fundamental tenets of just compensation. It is a basic principle of tort law that `damages are to be compensatory to the full extent of the injury sustained, but the award should be limited to compensation and compensation alone.’ [Citation.] [Plaintiff] never has, and never will, incur the $96,500.91 sum from [defendant] as an expense. We discern no principled basis upon which to justify awarding that additional amount. [¶] . . . [¶] Additionally, we find that the collateral source rule is inapplicable to the additional amount of $96,500.91. The rule `provides that payments from a collateral source shall not diminish the damages otherwise recoverable from the wrongdoer. [Citation omitted]. The principle behind the collateral source rule is that it is better for the wronged plaintiff to receive a potential windfall [than] for a tortfeasor to be relieved of responsibility for the wrong.’ [Citation.] [Plaintiff] relies upon comment b to the Restatement (Second) of Torts § 920A, which provides in pertinent part: `If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance or by making advantageous employment arrangements, the law allows him to keep it for himself. If the benefit was a gift to the plaintiff from a third party or established for him by law, he should not be deprived of the advantage that it confers.’ . . . [¶] Clearly, [plaintiff] is entitled to recover $12,167.40, the amount which was paid on her behalf by Medicare and Blue Cross, the collateral sources. [Citation.] . . . [T]he issue is whether [plaintiff] is entitled to collect the additional amount of $96,500.91 as an expense. [Plaintiff] did not pay $96,500.91, nor did Medicare or Blue Cross pay that amount on her behalf. The collateral source rule does not apply to the illusory `charge’ of $96,500.91 since that amount was not paid by any collateral source. [Citations.]” (Moorhead, supra, 765 A.2d at pp. 790-791.) Moorhead relied in part on Hanif.(Moorhead, at p. 790.)

Finally, a few states take no position as to whether the written off or full amount of the plaintiff’s medical bills is a better measure of the reasonable value of the services rendered, but allow evidence of both to be presented to the jury. (SeeStanley v. Walker, supra, 906 N.E.2d at p. 858; Robinson v. Bates, supra, 857 N.E.2d at pp. 1199-1200.) But courts taking the majority view have criticized this approach on the grounds it undermines the evidentiary component of the collateral source rule by letting jurors know (or inviting them to speculate) that the plaintiff’s bills have been paid by a collateral source. (See Leitinger v. DBart, Inc. (Wis. 2007) 736 N.W.2d 1, 13-14.)

In our view, the trial court erred in reducing Yanez’s damages to the amounts actually paid by her insurers. Although the court reasonably relied on case law extending Hanif to the private insurance context, we find Hanif used overly broad language and the extension of its holding to private insurance by Nishihama and other cases is inconsistent with the collateral source rule. Consistent with the view taken by the appellate courts in a great majority of the jurisdictions that have considered the issue, we conclude the amounts written off by Yanez’s health care providers constitute collateral benefits of her insurance. Whether the full amounts billed by Yanez’s health care providers reflected the reasonable value of their services is a separate issue that was for the jury, not the court, to decide. Accordingly, we will reverse the judgment and remand the case to the trial court to enter a judgment consistent with the jury’s award of damages and to reconsider its award of costs accordingly.

As an initial matter, we agree with Justice Moore’s concurrence in Olsen that theHanif/Nishihama line of cases are difficult to square with the collateral source rule, at least as applied to private insurance cases. (Olsen, supra, 164 Cal.App.4th at p. 213 (conc. opn. of Moore, J.).) The problem stems from Hanif‘s analysis of the measure of tort damages for medical expenses. Hanif correctly states the traditional rule that a tort victim is entitled to recover “the reasonable value of medical care and services reasonably required and attributable to the tort.” (Hanif, supra, 200 Cal.App.3d at p. 640, italics added.) Focusing on a series of older cases applying this rule, Hanif observes that in each case the issue was whether the medical expenses actually paid or incurred were unreasonably high. (Id. at pp. 641-643.) Hanif generalizes from these cases as follows: “Implicit in the above cases is the notion that a plaintiff is entitled to recover up to, and no more than,the actual amount expended or incurred for past medical services so long as that amount is reasonable.” (Id. at p. 643.) From this, Hanif concludes the term “reasonable value of medical care” must be construed as a “term of limitation” barring tort victims from receiving in damages any sum greater than the amount actually paid for their medical care or for which they or an independent source incurred liability for payment. (Id. at p. 641.) In deference to the collateral source rule, Hanif contemplated only one exception to this rule—if there was “evidence . . . the low rate charged was intended as a gift to the plaintiff.” (Id. at p. 643.)

While Hanif impliedly recognized that a gift of services would have to be valued without regard to the amount incurred or paid, it failed to recognize other circumstances in which a below-value rate might be charged. In particular, Hanifdid not address or appear to contemplate situations in which patients covered by private health insurance are charged reduced rates by the provider for their care as an insurance benefit negotiated between the insurer and the health care provider. We need not decide in this case whether Hanif was wrongly decided on its own facts. Those facts are materially different from ours: the plaintiff tort victim inHanif had not purchased his Medi-Cal coverage by paying premiums and the rates Medi-Cal paid were not established or marketed as a benefit for him, but were set as a matter of legislative policy to balance the interests of providers with the availability of public funds. But, to the extent Hanif‘s holding has been assumed to extend beyond the Medi-Cal context, we do not find its analysis reliable. Because this court’s decision in Nishihama relied on Hanif to reduce a plaintiff’s jury award to the reduced rates paid by her private insurance, we must now reject that aspect of Nishihama‘s reasoning.

In addition to its analysis of the case law concerning the “reasonable value” measure of damages, Hanif (and Justice Fybel’s concurrence in Olsen) also relied on various statutory provisions as well as language from comment h to section 911 of the Restatement in support of the proposition that a tort plaintiff can recover no more than the amounts paid or incurred for medical care. (Hanif, supra, 200 Cal.App.3d at pp. 640-641; Olsen, supra, 164 Cal.App.4th at p. 215 (conc. opn. of Fybel, J.).) The cited statutory sections tell us that (1) damages in a tort action are meant to compensate the victim in money for the detriment caused by the defendant’s tort (Civ. Code, §§ 3281, 3333), but not to put the victim in a better position than he or she would have been in had the wrong not been done; and (2) economic damages are “objectively verifiable monetary losses,” including compensation for “medical expenses,” as opposed to non-economic damages, which are for subjective, nonmonetary losses (Civ. Code, §1431.2, subd. (b)). Based on these sources, Hanif concludes that, unless a gift is involved, an award of damages for past medical expenses in excess of their “actual[] cost” would, of necessity, constitute overcompensation. (Id. at p. 641.) Although this may be a correct inference for an uninsured individual paying directly for his or her own medical care, it is not true of the health care financing model that has evolved in this country, in which the cash paid or liability incurred to medical service providers is often not the entire consideration the providers receive in exchange for their services. As further discussed post, providers receive noncash, pecuniary consideration from their transactions with the patient’s private insurers, which allows and induces them to accept a reduced rate for their services. Making the amount paid or incurred for medical care an absolute ceiling on a plaintiff’s recovery for past medical care ignores this reality.[ 12 ]

Comment h to section 911 of the Restatement is also inapposite. It states in essence that when an injured person pays less than the market rate for services rendered to him by third parties, he can recover no more than the amount paid unless the low rate was intended as a gift. Section 911 deals with tort damages generally. Out-of-state cases addressing the same issue before us have questioned comment h’s applicability to valuing medical services financed by health insurance. (See Moorhead, supra, 765 A.2d at p. 795 (dis. opn. of Nigro, J.); Wills, supra,892 N.E.2d at p. 1028; Bynum v. Magno, supra, 101 P.3d at p. 1159; White v. Jubitz Corp, supra, 219 P.3d at pp. 581-582.) The Restatement comment addressing the collateral source rule seems more on point than comment h: “[Collateral-source benefits] do not have the effect of reducing the recovery against the defendant. The injured party’s net loss may have been reduced correspondingly, and to the extent that the defendant is required to pay the total amount there may be a double compensation for a part of the plaintiff’s injury. But it is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor. If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance . . ., the law allows him to keep it for himself. If the benefit was . . . established for him by law, he should not be deprived of the advantage that it confers. The law does not differentiate between the nature of the benefits, so long as they did not come from the defendant or a person acting for him.” (Rest.2d Torts, § 920A, com. b, p. 514, italics added.) Further, comment f to section 924 of the Restatement instructs: “The value of medical services made necessary by the tort can ordinarily be recovered although they have created no liability or expense to the injured person, as when a physician donates his services.” (Rest.2d Torts, § 924, com. f, p. 527.) To the extent that the rate discounts Yanez’s health care providers accepted for her care were benefits of Yanez’s health insurance, the Restatement, if anything, supports her position that she and not SOMA was entitled to reap their reward.

SOMA’s witnesses at the Hanif hearing all testified that the amounts the providers wrote off of Yanez’s bills were established pursuant to contracts between the providers and Yanez’s health care insurers, Aetna and Healthnet. It is readily apparent that these write-offs are an integral part of the consideration Yanez received for her (or her employer’s) premium payments. That consideration accrued to her in two principal forms. First, the write-offs reduced Yanez’s out-of-pocket costs for any deductible or copayment or coinsurance percentage she was required to pay, or for any medical services subject to the write-off that were not otherwise fully covered under her policies.[ 13 ] Thus, if the central purpose of investing in health insurance is to be protected from having to pay large medical bills, discounted provider charges deliver part of that protection.

Second, and equally important, the discounts reflect noncash, pecuniary savings in the cost of delivering health care services that are financed by Yanez’s premium dollars. This was explained in Stanley v. Walker: “[T]hese contractual discounts confer significant benefits upon medical service providers in addition to just the cash received in discounted payments. In exchange for medical services, providers receive not only the insurer’s payments, but also the pecuniary value of numerous additional benefits, among which are prompt payment, assured collectability, avoidance of collection costs, increased administrative efficiency, and significant marketing advantages. [¶] It is widely recognized that, by agreeing to reduced rates, providers gain significant administrative and marketing advantages, `including a large volume of business, rapid payment, ease of collection, and occasionally advance deposits.’ Lawrence F. Wolper, Health Care Administration: Planning, Implementing, and Managing Organized Delivery Systems 553 (4th ed.2004) . . . .” (Stanley v. Walker, supra, 906 N.E.2d at p. 863 (dis. opn. of Dickson, J.).) In other words, the measure of the collateral benefit Yanez purchased for her premiums includes not only the cash Aetna and Healthnet paid for her medical care but the financial, administrative, and marketing savings the providers obtained that induced and permitted them to accept a discounted rate of payment for their services to her.

Because of these marketplace realities, Hanif’s holding that, as a matter of law, the reasonable value of medical services can never be greater than the cash paid or liability incurred for them cannot sensibly be extended to the private insurance context. Rate discounts negotiated between health insurers and providers must be deemed collateral benefits which, under the collateral source rule, should accrue to the insured plaintiff, not the defendant. Therefore, the trial court erred by reducing Yanez’s economic damages for past medical expenses based on Hanif. To the extent the reasonable value of the provider’s services was greater than the discounted amounts paid or incurred for those services, Yanez was entitled to the entire amount as damages under the collateral source rule. Since the jury found that $44,519.01 in damages for past medical expenses was reasonable, she was entitled to that amount, without reduction.

By so holding, however, we do not mean to suggest that discounted rates negotiated between health insurers and providers are always or even usually below the reasonable value of the services they cover, nor that the undiscounted amounts billed by providers are necessarily closer to reasonable value than the discounted amounts the providers negotiate with private health insurers. The pricing of medical services is a subject of tremendous complexity, and disputes over fair pricing in the health field abound. (See, e.g., Reinhardt, The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy (2006) vol. 25, No. 1 Health Affairs 57 [suggesting, among other things, that both full and discounted charges established by hospitals for private payors tend to be significantly above true costs, in part to offset losses on Medicaid and uninsured patients]; Hospital Fair Pricing Act, Health & Saf. Code, § 127400 et seq. [requiring hospitals to establish fair pricing policies for uninsured low and moderate income patients].) But in this case, the jury heard evidence concerning the full amounts billed by Yanez’s providers and determined those amounts were reasonable. We are bound by that determination.

It is also true the jury did not hear evidence of the sharply discounted amounts Aetna and Healthnet actually paid to the providers. Jurors might not have found $44,519.01 to be a reasonable damage award for past medical expenses if they had been informed that Yanez’s health care providers had accepted $18,368.24 as full payment for their services. It could be argued that, in fairness, the jury as fact finder should have heard evidence of both the billed and discounted amounts since both are relevant to determining the reasonable value of the services involved. But that issue is beyond the scope of this appeal. First, no such request was made in the trial court. Instead, SOMA simply requested evidence of any unpaid amounts be excluded, while also readily conceding this position was legally untenable. SOMA clearly looked to a postverdict Hanif hearing as its remedy. More importantly, evidence Yanez’s providers had agreed to accept reduced amounts for their services would have run afoul of the collateral source rule since jurors would have had to be given some explanation for how the discounts came about. However unfair it may have been to prevent the jury from hearing that evidence, this court is not empowered to provide redress. The collateral source rule is based on Supreme Court authority. If modifications to that rule are called for as a matter of fairness and good policy, only our Legislature or Supreme Court may make them.

We believe the alternative that has developed in the trial and appellate courts of this state—holding postverdict Hanif hearings in which the trial court hears evidence of the discounted amounts paid by private insurers and reduces the jury’s verdict—lacks a sound foundation as a matter of law or policy.

The trial court believed it had no discretion to award Yanez her post-offer costs under Code of Civil Procedure section 998, or prejudgment interest under Civil Code section 3291, because her reduced damage award fell below her section 998 offer. Because Yanez’s original damages award must now be restored, we will remand the case to the trial court to also exercise its discretion under Code of Civil Procedure section 998 and to award prejudgment interest under Civil Code section 3291.

The judgment is reversed and the case is remanded to the trial court to (1) enter a new judgment reinstating the damages established by the jury’s verdict, (2) award prejudgment interest in accordance with Civil Code section 3291, and (3) exercise its discretion under Code of Civil Procedure section 998 whether to award plaintiff post-offer costs.

I concur:

Dondero, J.

BANKE, J.

I concur in the opinion and judgment, but do so reluctantly and because of the current legal landscape. I write separately to discuss in detail the confusion in the law on the measure of damages for past medical expenses.

A historical overview of the case law reveals the measure of damages, which is fixed by statute, has become entangled with the collateral source rule, a judicially created doctrine that precludes otherwise recoverable damages from being reduced by benefits the plaintiff receives from an independent source. With the exception of damages for gratuitously provided medical services, our Supreme Court has never affirmatively endorsed a measure of damages for past medical expenses nearly certain to result in an economic windfall to the plaintiff—that is, an award that exceeds the dollar amount actually paid or owed (and thus required to be paid in the future) to a provider. As the majority opinion observes, courts in a number of other jurisdictions have either expressly or implicitly adopted a measure giving rise to this result in the context at issue here. And as discussed herein, our high court has given some indication it may also be inclined to take a view of compensatory damages broader than reimbursing the plaintiff for actual monetary loss, and which, instead, places on the defendant the full economic consequences of his or her tortious conduct.

Giving priority to a broader view of compensatory damages here, however, calls into question, once again, the evidentiary aspect of the collateral source rule—and compellingly so, given the realities of present day medical billing and payment practices. The majority opinion suggests it may be time to reexamine this aspect of the rule. I agree and submit it is time to let properly instructed juries make damages awards for past medical expenses based on all the relevant evidence.

Early cases discussing the recovery of damages for past medical expenses often dealt with what was then a rule of pleading and proof, namely that a plaintiff could not prove “he has incurred a physician’s bill under an allegation that he had paid it,” and vice versa. (Donnelly v. Hufschmidt (1889) 79 Cal. 74, 76 [21 P. 546] (conc. opn. of McFarland, J.).) In Donnelly, for example, the plaintiff sufficiently alleged she had incurred medical expenses. The Supreme Court therefore held the trial court did not err in refusing to instruct the jury that “`nothing should be allowed plaintiff . . . for expenses incurred for nursehire, medicines, and doctor’s bills, unless actually paid‘ by her.” (Id. at p. 76, italics added.) The court confirmed, however, that an allegation the plaintiff has incurred medical expenses is sufficient to allow recovery: “The obligation to pay the surgeon for his services still rests on the plaintiff, and compensation for the detriment she has suffered could not be complete unless she was placed in a position to discharge herself from this obligation.” (Ibid.) Under this pass-through rationale there is, of course, no windfall economic recovery by the plaintiff, it being presumed the plaintiff will pay the debt owed the provider, and thus the damages awarded for incurred medical expenses will ultimately rest in the hands of the provider.

In McLaughlin v. Railway Co. (1896) 113 Cal. 590 [45 P. 839], the plaintiff alleged he had paid medical expenses. (Id. at p. 591.) But at trial, he testified only that he had “incurred an indebtedness therefor which was not paid.” (Ibid., italics added.) “[T]here is no doubt,” stated the Supreme Court, “under a proper pleading, the injured party may recover for such necessary medical expenses as he may have become liable to pay, though not in fact paid before suit [is] brought.” (Id. at p. 592.) However, evidence the plaintiff “had incurred a liability to pay [$750] was not admissible under the allegation of his complaint that he had expended such sum.” (Ibid., italics omitted; see also Kimic v. San Jose-Los Gatos etc. Ry. Co.(1909) 156 Cal. 273, 275-276 [104 P. 312] [allegation plaintiff had "`been compelled to pay . . . about [$1,000]‘ “in medical expenses sufficient to allow testimony that expenses to which plaintiff “had been put” were “`in the neighborhood of $500 or $600′”; and jury instructions, taken together and consistent with complaint, limited recovery to expenses “actually paid“], italics added.)

With pleading and proof issues raised by paid and incurred-but-not-paid medical bills largely resolved, the courts turned to issues involving the “reasonable value” of medical services. In Melone v. Sierra Railway Co. (1907) 151 Cal. 113, 115 [91 P. 522], for example, the Supreme Court considered a claim of instructional error where the jury was told it could award as one element of damage: “`Such sum as will compensate [the plaintiff] for the expense, if any, he has paid or incurred in the employment of a physician and the purchase of drugs during the time he was disabled by the injuries, not exceeding the amounts alleged in the complaint.’” (Ibid.) The defendant objected “the correct measure of damage in this regard is not the amount which [the plaintiff] may have paid or become liable for, but the necessary and reasonable value of such services as may have been rendered him.” (Ibid.) The court restated this as “[s]uch reasonable sum, in other words, as had been necessarily expended or incurred in treating the injury” and agreed “[s]uch, unquestionably, is the true rule.” (Ibid.) The court concluded the instructional error was harmless, however, since the “reasonableness of the expenses which plaintiff had incurred was not disputed.” (Ibid.; see also Nelson v. Kellogg (1912) 162 Cal. 621, 623 [123 P. 1115] ["the rule established both in this state and elsewhere in actions for damages for tortiuous injuries, is that recovery may include special damages properly pleaded, consisting of a liability, incurred but not paid, for reasonable and necessary expenses caused by the wrongful act complained of"].)

In numerous cases, the courts addressed the evidentiary significance of the amount paid or incurred on the determination of the “reasonable value” of medical services. In Townsend v. Keith (1917) 34 Cal.App. 564, 565-566 [168 P. 402], the Court of Appeal held the plaintiff was properly allowed to answer a question asking “what bills he had incurred.” (Id. at p. 565.) The court agreed with the defendant “the correct measure of damage is the necessary and reasonable value of the services rendered, rather than the amount which may have been paid for such services.” (Ibid.) “[N]evertheless,” said the court, “the amount paid for the services is some evidence as to their reasonable value.” (Ibid.) The court also agreed the jury instructions were deficient in not telling the jury “to limit its finding to the reasonable value of the expenses incurred.” (Id. at p. 566.) However, because the reasonableness of the expenses was not disputed, the instructional error was harmless. (Ibid.; see also Dewhirst v. Leopold (1924) 194 Cal. 424, 433 [229 P. 30] [rejecting argument no evidence was offered "to show that the amounts paid on account of medical treatment and attention were reasonable" because the "amount[] paid [itself] is some evidence of reasonable value” and where there is “no showing to the contrary such evidence must be held to be sufficient”]; Rogers v. Kabakoff (1947) 81 Cal.App.2d 487, 491 [184 P.2d 312] [evidence plaintiff paid amounts shown on statements of account was "some evidence of reasonable value" of medical services and sufficient to affirm judgment]; Shriver v. Silva (1944) 65 Cal.App.2d 753, 765-767 [151 P.2d 528] [no testimony hospital bills were "reasonable," but bills were admitted into evidence without objection, were itemized, and other witnesses testified to the seriousness of the plaintiff's injuries, providing sufficient basis to affirm judgment]; Latky v. Wolfe (1927) 85 Cal.App. 332, 346-347 [259 P. 470] [evidence of medical bills only, without "evidence of [reasonable] value of the services” or that plaintiff paid bills, not sufficient to affirm judgment].)

In Guerra v. Balestrieri (1954) 127 Cal.App.2d 511 [274 P.2d 443], the defendant challenged an instruction concerning the cost of medical care on the ground no evidence of the cost was introduced. The Court of Appeal again stated, “[t]he proper measure is the reasonable value of such services, not the amount paid or incurred therefor, although the amount paid or incurred would be some evidence of value.” (Id. at p. 520.) The court also agreed “[t]here should be some evidence concerning the value of professional services of a physician and surgeon” and acknowledged no such evidence had been presented. (Ibid.) However, the court held the defendant suffered no prejudice because the instruction “expressly limited the recovery for such items to the reasonable value thereof `not exceeding the cost to the plaintiff,’ and there was no evidence of any such cost.” (Ibid.) Since no evidence of cost had been introduced, reasonable value must have been the benchmark of the award. (Ibid.; see also Dimmick v. Alvarez (1961) 196 Cal.App.2d 211, 216 [169 Cal.Rptr. 308] [It is not "necessary that the amount of the [damages] award equal the alleged medical expenses for it has long been the rule that the costs alone of medical treatment and hospitalization do not govern the recovery of such expenses. It must be shown additionally that the services were attributable to the accident, that they were necessary, and that the charges for such services were reasonable.”].)

The assumption in these cases appears to have been that a provider might charge and a plaintiff might pay more than the “reasonable value” of the medical services—thus, the rule that a plaintiff can recover only the “reasonable value” of such services, regardless of the amount paid or liability incurred therefor. These early cases could not, of course, have foreseen what has transpired in our health care delivery system. As the majority opinion notes (maj. opn., ante, at p. 19), the concern that billed amounts may exceed the “reasonable value” of services provided is an acute one, given the realities of current medical billing and payment practices that force providers to anticipate significant write-offs.[ 14 ]

In addition to addressing the issue of “reasonable value,” the courts also occasionally dealt with the issue of whether the plaintiff had to have paid, or become liable for, the claimed medical expenses in order to recover damages. This issue, which is entirely separate from the issue of “reasonable value,” has been more problematic for the courts as an analytical matter. Clearly, the courts have been loath to deny damages for medical services required because of a defendant’s negligent conduct, the sentiment being the wrongdoer, rather than the hapless plaintiff or erstwhile medical care provider, should bear the economic consequence of his or her wrongful conduct. The courts have thus invoked presumptions of liability to permit recovery, allowed recovery where liability was contingent upon the recovery of tort damages, and ultimately allowed recovery where the plaintiff had no legal liability at all for the medical service. This is also the issue that has led to the analytical entanglement of the measure of damages and the collateral source rule.

Mathes v. Aggeler & Musser Seed Co. (1919) 179 Cal. 697 [178 P. 713] (Mathes), is one of the earliest cases discussing whether liability for medical services is a predicate to the recovery of damages for their reasonable value. The plaintiff in Mathes was injured as the result of an automobile collision, and the defendants challenged the damages awarded for hospital expenses on the ground “there was no direct evidence of any contract between the plaintiff and the owners of the hospital that she was to pay for such treatment.” (Id. at p. 700.) The Supreme Court rejected the argument, without citation to statutory or case authority. The court simply stated: “The law, of course, in the absence of evidence to show gratuitous service, would imply an agreement by her to pay the reasonable value. It was, therefore, proper for the plaintiff to introduce evidence as to the amount that would be a reasonable charge for the services.” (Ibid.)

Some cases involved minor plaintiffs, who historically were not legally accountable for expenses associated with their maintenance and well being. In McManus v. Arnold Taxi Corp. (1927) 82 Cal.App. 215 [255 P. 755], for example, the minor plaintiff’s father paid some, but not all, of the child’s medical expenses. (Id. at pp. 222-223.) The defendant accordingly challenged the award of damages for past medical expenses made directly to the child. (Ibid.) The usual rule, explained the Court of Appeal, was that the parent could sue to recover medical expenses paid or incurred for the child, and the child could recover only general damages, for example, for his or her own pain and suffering. (Id. at p. 223.) There were exceptions, noted the court, where the child “has paid or is legally bound to pay” the expenses or is under a guardianship, such that the child’s estate is legally liable for the expenses. The court also observed some jurisdictions viewed parents suing as guardians ad litem as having waived personal recovery, “such waiver operating in the nature of an emancipation” and allowing the child to recover. (Id. at p. 224.) Nevertheless, for reasons not pertinent to the discussion here, the appellate court refused to apply any of the exceptions and held the minor could not recover damages for his past medical expenses.

In Galwey v. Pacific Auto Stages, Inc. (1929) 96 Cal.App. 169 [273 P. 866], the defendant similarly challenged an award of damages to the minor plaintiff on the ground the mother “was liable for his necessities, including medical attention.” (Id.at p. 178.) The mother, however, “was not able to pay the expenses and . . . she made no promise to do so.” (Ibid.) Accordingly, the Court of Appeal upheld the award to the minor. “The services were necessary in order to save the life of the plaintiff, who would be liable for their reasonable value. (Civ. Code, [§] 36).”[ 15 ](Ibid.; see also Bauman v. San Francisco (1940) 42 Cal.App.2d 144, 162-163 [108 P.2d 989] ["The parents of a minor are normally responsible for medical and hospital care furnished the minor, and the cause of action to recover these items normally rests with the parents. But the child is also liable for the reasonable value of these expenses. Moreover, where the parents bring the action as guardians ad litem, and the bills have not been paid, and these expenses are pleaded, this constitutes a waiver of the parent's rights, and at least where contributory negligence of the child is not asserted as a defense, the child may properly recover these items."].)[ 16 ]

Other cases involved plaintiffs who, absent recovery in a lawsuit, were not otherwise liable for the cost of their medical care. In Reichle v. Hazie (1937) 22 Cal.App.2d 543 [71 P.2d 849] (Reichle), for example, the Court of Appeal considered the recovery of medical expenses by an indigent plaintiff treated at a county hospital. The record in the case indicated there were “two types” of patients from whom the county was supposed to seek reimbursement—” `any patient who is admitted fraudulently . . . and is able to pay his bill’” and any patient who recovered tort damages for his injuries. (Id. at p. 547.) Thus, when a patient could pay, it was “the duty of the county officials to collect such charges from him.” (Ibid.) When, however, a patient was “admitted to a hospital without an express contract to pay for his care and treatment,” the law, “`in the absence of evidence to show gratuitous service, would imply an agreement . . . to pay the reasonable value’ of the services rendered (Mathes[, supra,] 179 Cal. 697 . . .), subject to the limitations set forth in Goodall v. Brite.“[ 17 ] (Ibid.) The question of a tort damages recovery by an impecunious patient being “one of first impression,” the court could “see no good reason for denying the recovery of special damages where plaintiff was cared for in a public hospital when such recovery would be sustained had he been cared for and treated in a private hospital. Certainly there is just as sound reason in permitting such recovery where the money will go to a public institution to relieve the burden of public taxes as where it will go to a private institution to increase the profits of its shareholders.” (Id. at pp. 547-548)

Reichle, then, not only relied on the presumption of liability set forth in Mathes—based on an implied agreement to pay for the reasonable value of medical services received—it stretched that presumption to allow the recovery of damages for medical expenses on a more attenuated basis, since the plaintiff’s liability for medical expenses in Reichle was apparently only inchoate and depended upon whether he sued and recovered tort damages. There would be no windfall recovery by the plaintiff, however, since the hospital would ultimately receive the damages awarded for the medical services it had provided.[ 18 ]

In Purcell v. Goldberg (1939) 34 Cal.App.2d 344 [93 P.2d 578] (Purcell), the Court of Appeal addressed the recovery of medical expenses by a plaintiff who was covered by a health care plan, the provisions of which are not detailed in the opinion. The defendant challenged the damages award for past medical expenses on several grounds, including that the plaintiff was covered by the health plan. Citing Reichle, the Court of Appeal stated: “Nor was respondent precluded as a matter of law from recovering the amount of the medical fee incurred for the services of [the physician] merely because she belonged to an association with which he was connected, and which provided in its contract with its members that as such they were liable for the medical services only in case they recovered damages.” (Purcell, at p. 350.) Thus, as in Reichle, the plaintiff’s liability for the physician’s services was apparently inchoate and depended upon whether she sued and recovered damages.

The Supreme Court cited both Reichle and Purcell in a footnote in Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1 [84 Cal.Rptr. 173, 465 P.2d 61] (Helfend ), at the end of a string of case citations illustrating the proposition that the collateral source rule “embodies the venerable concept that a person who has invested years of insurance premiums to assure his medical care should receive the benefits of his thrift.” (Id. at pp. 9-10 & fn. 14.) The court’s use of a “see also” signal before the two case citations appears to acknowledge that whileReichle and Purcell may implicitly illustrate the operation of the collateral source rule, neither case mentioned it. Rather, both cases dealt with the issues before them as damages issues, i.e., whether the claimed medical expenses were legally recoverable damages. (Purcell, supra, 34 Cal.App.2d at p. 350; Reichle, supra, 22 Cal.App.2d at p. 547.) Moreover, both cases grounded their holdings on Mathes(Reichle cited to Mathes, and Purcell cited to Reichle), which also dealt with whether certain medical expenses were legally recoverable damages and in which the Supreme Court invoked a presumption of liability to uphold the damages award. (Mathes, supra, 179 Cal. at p. 700; Purcell, at p. 350; Reichle, at pp. 547-548.)

Finally, there are the cases in which plaintiffs received gratuitous medical services. One of the oldest is Kimball v. Northern Electric Co. (1911) 159 Cal. 225 [113 P. 156] (Kimball ), in which the mother of a teenager severely injured in a train accident sued as his guardian ad litem to recover damages, including for personal injuries. The defendant challenged the damages awarded for the reasonable value of nursing services provided by the mother (who was a registered nurse) on the ground the plaintiff was not obligated to pay for them. (Id. at pp. 231-232.) The Supreme Court upheld the award, again without citation to statutory or case authority. Observing the plaintiff did not live at home, the court stated “the mere fact of their relationship does not remove the presumption that he was bound by the acceptance of her services to pay a reasonable value for them.” (Id. at p. 231.) Thus, Kimball also was predicated on presumed liability for the reasonable value of the medical services the plaintiff received, untethered to any statutory or express contractual obligation, and without regard to whether it was likely the mother would demand payment from her severely injured son.

The Supreme Court also cited Kimball in Helfend as illustrating the difference between a medical provider attempting to recover directly from a tortfeasor (a scenario outside the collateral source rule) and a plaintiff recovering damages where “friends and relatives render assistance to the injured plaintiff with the expectation of repayment out of any tort recovery” (a scenario in which “the [collateral source] rule has been applied”). (Helfend, supra, 2 Cal.3d at p. 6, fn. 5.) But, again, while Kimball may implicitly illustrate the operation of the collateral source rule, it made no mention of it. Rather, the issue in Kimball was whether damages awarded to the son for the reasonable value of the nursing services provided by his mother were legally recoverable. The court held they were by presuming the son “was bound by acceptance of her services to pay a reasonable value for them.” (Kimball, supra, 159 Cal. at p. 231.)

In Fifield Manor v. Finston (1960) 54 Cal.2d 632 [7 Cal.Rptr. 377, 354 P.2d 1073] (Fifield Manor), the Supreme Court considered the attempt of a health care provider to recover the cost of medical services directly from a tortfeasor. The provider had entered into a “life-care contract” with one Ross, who died from injuries sustained in a car accident. The provider claimed a direct right of recovery from the defendant and, alternatively, a subrogated right under the life-care contract. (Id. at p. 634.) In rejecting any direct right against the tortfeasor, the court observed no case supported such a right of action and concluded “to so hold would constitute an unwarranted extension of liability for negligence.” (Id. at pp. 636-637.)

Of interest here is the court’s further observation, “[n]or is it true, as plaintiff argues, that because it paid for the medical care and treatment under its contract, the decedent’s estate has no cause of action for the cost of such treatment against the defendants. The fact that either under contract or gratuitously such treatment has been paid for by another does not defeat the cause of action of the injured party to recover the reasonable value of such treatment from the tortfeasor.” (Fifield Manor, supra, 54 Cal.2d at p. 637.) The Supreme Court cited to Purcelland Reichle (Fifield Manor, at p. 637) which, as discussed above, relied on the presumed obligation to pay for medical services the court articulated in Mathes(and in Kimball) and stretched that presumption to allow recovery where the plaintiff’s legal liability for medical services was inchoate and dependent on a successful lawsuit. (Purcell, supra, 34 Cal.App.2d at p. 350; Reichle, supra, 22 Cal.App.2d at pp. 547-548.) The Supreme Court did not discuss whether the life-care contract specified that Ross would be legally liable to pay for the medical services he received if he recovered damages for such. But even if that were the case, the court’s citation to Purcell and Reichle would not support its inclusion of gratuitously provided medical services among those for which Ross’ estate could seek damages for their reasonable value.

However, the court in Fifield Manor also cited Gastine v. Ewing (1944) 65 Cal.App.2d 131 [150 P.2d 266] (Gastine). The issue in Gastine was whether the plaintiff could recover damages for medical treatment provided by an unlicensed physician. (Id. at p.143.) The Court of Appeal assumed the plaintiff paid for the services. (Ibid.) Accordingly, whether payment of, or liability for, the medical expenses was a predicate to the recovery of damages was not an issue in the case. Nevertheless, in concluding the physician’s licensing status was not a barrier to recovery, the court cited to Purcell and Reichle, as well as several A.L.R. sections, including one specifically addressing the recovery of damages for the reasonable value of gratuitously provided medical services. That section stated: “`In a majority of the cases the position is taken that the [gratuitous] services were rendered for the benefit of the injured plaintiff, that the defendant, the wrongdoer, should not be permitted to profit by any gratuity extended to his victim, and that consequently the reasonable value of such services may be recovered.’” (Gastine,at pp. 143-144, quoting Annot., Damage—Personal Injuries—Gratuitous Care (1940) 128 A.L.R. 686.)

A little over a decade later, the Supreme Court decided Rodriguez v. Bethlehem Steel Corp. (1974) 12 Cal.3d 382 [115 Cal.Rptr. 765, 525 P.2d 669] (Rodriguez I), in which the court recognized a cause of action for loss of consortium by the spouse of an injured plaintiff and reversed a judgment dismissing the wife’s claim following the sustaining of demurrers without leave to amend. (Id. at pp. 387-408.) Of significance here is the court’s discussion of the damages recoverable by the plaintiffs on remand. The court held the wife could not recover the reasonable value of the round-the-clock nursing services she provided to her husband. (Id. at p. 409.) This was because, should the husband “prevail in his own cause of action against these defendants, he will be entitled to recover, among his medical expenses, the full cost of whatever home nursing is necessary.” (Ibid.) To allow the wife to recover for this medical service, as well, would “constitute double recovery.” (Ibid.) The court cited no authority, nor provided any analysis supporting, the husband’s recovery of the reasonable value of the gratuitously provided nursing expenses as compensatory tort damages.

After remand and trial, the defendants appealed from the judgment for the plaintiffs. Rodriguez v. McDonnell Douglas Corp. (1978) 87 Cal.App.3d 626 [151 Cal.Rptr. 399] (Rodriguez II). Among other things, the defendants challenged the award of damages to the husband for the attendant care provided by the wife. (Id.at pp. 660-662.) The Court of Appeal pointed out that in Rodriguez I, the Supreme Court had held the husband was entitled to recover “`among his medical expenses, the full cost of whatever home nursing is necessary.’” (Rodriguez II, at p. 662, quoting Rodriguez I, supra, 12 Cal.3d at p. 409.) The defendants nevertheless argued no recovery was proper because the husband had not paid or incurred liability for the nursing services; rather, they were provided gratuitously. (Rodriguez II, at p. 662.) The court rejected this argument, stating “[i]nsofar as gratuities are concerned, the rule appears to be in keeping with the collateral source rule rationale.” (Ibid.) The court also cited Fifield Manor for the proposition that “`[t]he fact that either under contract or gratuitously such [medical] treatment has been paid for by another does not defeat the cause of action of the injured party to recover the reasonable value of such treatment from the tortfeasor.’” (Rodriguez II, at p. 662, quoting Fifield Manor, supra, 54 Cal.2d at p. 637.)

Thus, in Rodriguez II, the Court of Appeal blurred, if not conflated, the measure of damages and the collateral source rule. The court elsewhere observed in its opinion, however, that, as to the wife, it was “not part of her duties as a wife to render 24-hour-a-day attendant care.” (Rodriguez II, supra, 87 Cal.App.3d at p. 661.) The situation therefore was arguably analogous to that in Kimball, where the Supreme Court held the mother-son relationship did “not remove the presumption that [the son] was bound by the acceptance of [the mother's nursing] services to pay a reasonable value for them.” (Kimball, supra, 159 Cal. at p. 231.)

This line of cases, beginning with Kimball and Mathes and culminating withRodriguez I and II, is analytically significant for two reasons. First, these cases indicate that whether the plaintiff is liable for claimed medical expenses has ultimately not been a very significant issue, and is an issue that has never barred the recovery of compensatory damages. Where medical services have been provided as a wholly gratuitous matter, these cases make clear the plaintiff need not have paid nor incurred liability for the services to recover compensatory damages for their reasonable value. (See Rodriguez I, supra, 12 Cal.3d at p. 409;Fifield Manor, supra, 54 Cal.2d at p. 637; Mathes, supra, 179 Cal. at p. 700;Rodriguez II, supra, 87 Cal.App.3d at p. 662; Gastine, supra, 65 Cal.App.2d at pp. 143-144.) Where medical services have been provided quasi gratuitously, i.e., with an expectation of payment if the plaintiff recovers damages, the plaintiff likewise need not have paid nor incurred liability for the services to recover compensatory damages for their reasonable value. (See Kimball, supra, 159 Cal. at p. 231;Reichle, supra, 22 Cal.App.2d at p. 547; cf. Helfend, supra, 2 Cal.3d at p. 6, fn. 5.) In all other cases, the plaintiff has paid or been expressly liable for the medical services, or the courts have presumed liability for the reasonable value of such services. (See Mathes, supra, 179 Cal. at p. 700; Kimball, supra, 159 Cal. at p. 231; Bauman v. San Francisco, supra, 42 Cal.App.2d at pp. 162-163; Reichle, supra, 22 Cal.App.2d at p. 547.) In short, by permitting the recovery of compensatory damages for gratuitously provided medical services and recognizing an implied obligation to pay the reasonable value of any non-gratuitously provided medical services, the courts have effectively made the plaintiff’s liability for medical services a non-issue for purposes of recovering compensatory damages for past medical expenses.

Secondly, this line of cases reflects that the courts have embraced a view of compensatory damages for past medical expenses broader than reimbursing amounts actually paid or owed to providers. If compensatory damages werelegally limited to such amounts, the law could not permit the recovery of such damages for the reasonable value of gratuitously provided medical services since, by definition, the plaintiff has neither paid nor incurred liability for such services. Thus, in order to permit the recovery of compensatory damages for gratuitously provided medical services, the courts necessarily had to adopt the view that compensatory damages not only provide economic reimbursement to the plaintiff for actual dollars expended or owed, but also are concerned with placing the full economic consequences of wrongful conduct on the defendant. (See Fifield, supra, 54 Cal.2d at p. 637, citing Gastine, supra, 65 Cal.App.2d at pp. 143-144.) This is, moreover, a matter of legally recoverable damages, and not a consequence of the collateral source rule. The collateral source rule does not create or give rise to damages not otherwise recoverable by statute. Rather, the collateral source rule precludes otherwise recoverable damages from being reduced by benefits received by the plaintiff from a collateral source. (See Helfend, supra,2 Cal.3d at p. 6 [Supreme Court has long adhered to doctrine that collateral benefits "should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor"]; Anheuser-Busch, Inc. v. Starley (1946) 28 Cal.2d 347, 349 [170 P.2d 448] [an action "against the wrongdoer for damages suffered is not precluded nor is the amount of damages reduced by the receipt by him of payment for his loss from a source wholly independent of the wrongdoer"].)

In Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, 637-644 [246 Cal.Rptr. 192] (Hanif), the Court of Appeal addressed the one scenario not addressed by the cases discussed above—where the plaintiff has paid, or incurred express liability for, an amount ostensibly less than the “reasonable value” of the medical services required because of the defendant’s tortious conduct.[ 19 ] Hanifconcluded that, in this context, the measure of damages is not the reasonable value of such services, but the lesser of the reasonable value of such services or the amount the plaintiff paid, or incurred liability, therefor. (Id. at pp. 643-644.)

As the majority opinion recounts, in Hanif, the minor plaintiff was hit by a car and severely injured. During trial, and over the defendant’s objection, the plaintiff introduced evidence the “reasonable value” of the physician services he received was $4,618 (whereas Medi-Cal paid only $2,823) and the “reasonable value” of hospital services was $27,000 (whereas Medi-Cal paid only $16,494). (Hanif, supra, 200 Cal.App.3d at pp. 638-639.) The differences in the amounts were written off by the providers following payment by the government, and there was no evidence the plaintiff was legally liable for the written off amounts. (Id. at p. 639) The trial court, sitting as the trier of fact, awarded the plaintiff the “reasonable value” of the medical expenses. (Ibid.) The defendant appealed, arguing the trial court had “erred in its application of the controlling measure of damages” and the plaintiff’s recovery for these medical services should have been “limited to the amount actually paid.” (Ibid.) The Court of Appeal agreed.

The court began by noting “there is no question here that Medi-Cal’s payment for all injury-related medical care and services does not preclude plaintiff’s recovery from defendant, as special damages, of the amount paid. This follows from the collateral source rule.” (Hanif, supra, 200 Cal.App.3d at pp. 639-640.) Thus, even though the plaintiff was a Medi-Cal beneficiary and could not be said to have been prescient in securing the government payments, the court had no difficulty applying the collateral source rule to this government benefit.[ 20 ] (See Lund v. San Joaquin Valley Railroad (2003) 31 Cal.4th 1, 9-10 [1 Cal.Rptr.3d 412, 71 P.3d 770] [the "`collateral source rule expresses a policy judgment in favor of encouraging citizens to purchase and maintain insurance for personal injuries and for other eventualities'"], quoting Helfend, supra, 2 Cal.3d at p. 10.)[ 21 ]

The court next stated there was no “question about the appropriate measure of recovery: a person injured by another’s tortious conduct is entitled to recover the reasonable value of medical care and services reasonably required and attributable to the tort.” (Hanif, supra, 200 Cal.App.3d at p. 640.) Rather, the question, said the court, concerned the “the application of that measure” and specifically “whether the `reasonable value’ measure of recovery means that an injured plaintiff may recover from the tortfeasor more than the actual amount he paid or for which he incurred liability for past medical care and services.” (Ibid.) It concluded “[f]undamental principles underlying recovery of compensatory damages in tort actions” compelled a “no” answer. (Ibid.) The court cited to sections 3281,[ 22 ]3282,[ 23 ] and 3333,[ 24 ] and Witkin (4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, § 842, p. 3137), and pointed out tort damages awards are compensatory in character and not intended to provide an economic windfall to the plaintiff. (Hanif, at p. 640-641.)

The Court of Appeal then stated “medical expenses generally fall into the category of economic damages, representing actual pecuniary loss caused by the defendant’s wrong.” (Hanif, supra, 200 Cal.App.3d at p. 641.) In support of this statement, the court cited section 1431.2, subdivision (b)(1). (Hanif, at p. 641.) Section 1431.2 was added to the Civil Code by Proposition 51 and modifies the common law doctrine of joint and several liability. (Evangelatos v. Superior Court(1988) 44 Cal.3d 1188, 1192 [246 Cal.Rptr. 629, 753 P.2d 585].) The statute uses the terminology “economic” and “non-economic” damages, leaving joint and several liability intact as to the former, but imposing only several liability, proportional to fault, as to the latter.[ 25 ] (§ 1431.2, subd. (a); Evangelatos, at p. 1192.) However, while Proposition 51 modified the nature and extent of a defendant’s liability for a plaintiff’s recoverable damages, it did “not purport to alter either the measure or total amount of damages that a plaintiff may recover for a particular tort.” (Evangelatos, at p. 1224; id. at p. 1230, fn. 1 (conc. opn. of Kaufman, J.).)

The Hanif court posited confusion as to the meaning of “reasonable value” may have arisen because of comments to BAJI No. 14.10 which explain the “reasonable value of medical and nursing care may be recovered although rendered gratuitously or paid by a source independent of the wrongdoer.” (BAJI No. 14.10; Hanif, supra, 200 Cal.App.3d at p. 641.) This, said the court, “merely restate[d] the collateral source rule,” which was “not an issue” in the case; rather, the issue was “the import of the term `reasonable value’ when applied to past medical services, to which neither BAJI No. 14.10 nor its comment provide any clue.” (Hanif, at p. 641.) However, as discussed above, the recovery of compensatory damages for the reasonable value of gratuitously provided medical services is a matter of legally recoverable damages, and not a consequence of the collateral source rule which precludes otherwise recoverable damages from being reduced by collateral benefits received by the plaintiff. Accordingly, the BAJI note is not simply a restatement of the collateral source rule; it also recites an established principle of recoverable damages. The court further stated “`[r]easonable value’ is a term of limitation, not of aggrandizement,” citing to section 3359.[ 26 ] (Hanif, at p. 641.)

The Hanif court thus concluded, “when the evidence shows a sum certain to have been paid or incurred for past medical care and services, whether by the plaintiff or by an independent source, that sum certain is the most the plaintiff may recover for that care despite the fact it may have been less than the prevailing market rate.” (Hanif, supra, 200 Cal.App.3d at p. 641.) The court followed this with citations toMelone v. Sierra Railway Co. (1907) 151 Cal. 113 [91 P. 522]; Townsend v. Keith(1917) 34 Cal.App. 564 [168 P. 402]; Castro v. Giacomazzi (1949) 92 Cal.App.2d 39 [206 P.2d 688]; and Guerra v. Balestrieri, supra, 127 Cal.App.2d 511. (Hanif,at pp. 641-643.) “Implicit in” these cases, said the court, “is the notion that a plaintiff is entitled to recover up to, and no more than, the actual amount expended or incurred for past medical expenses so long as that amount is reasonable.” (Id. at p. 643.) As discussed above, the principal concern in these cases appears to have been providers might have charged and plaintiffs might have paid more than the “reasonable value” of the medical services, and therefore regardless of how much the plaintiffs paid or incurred, they were limited to recovering the reasonable value of such services.

The Court of Appeal additionally pointed to a comment on “value” in the Restatement Second of Torts: “`When the plaintiff seeks to recover for expenditures made or liability incurred to third persons for services rendered, normally the amount recovered is the reasonable value of the services rather than the amount paid or charged. If, however, the injured person paid less than the exchange rate, he can recover no more than the amount paid, except when the low rate was intended as a gift to him.’” (Hanif, supra, 200 Cal.App.3d at p. 643, quoting Rest.2d Torts, § 911, com. h, pp. 476-477.)

The Hanif court thus held the trial court erred in awarding the plaintiff “the reasonable value” of the physician and hospital services he had received. (Hanif, supra, 200 Cal.App.3d at p. 644.) Because the defendant did not dispute the amounts paid by Medi-Cal were “reasonable,” the court did not reverse, but modified the judgment to award only those amounts as the recoverable damages for physician and hospital services. (Ibid.)

The Court of Appeal then turned to the minor plaintiff’s recovery of damages for the reasonable value of the home attendant care provided by his parents. (Hanif, supra, 200 Cal.App.3d at pp. 644-646.) The plaintiff had not, of course, paid or incurred liability for this medical service. Echoing the Restatement section and comment on “value” it had quoted earlier, the court stated “[i]t is established that `[t]he reasonable value of nursing services required by the defendant’s tortiuous conduct may be recovered from the defendant even though the services were rendered by members of the injured person’s family and without an agreement or expectation of payment. . . .’” (Id. at pp. 644-645, quoting 22 Am.Jur.2d Damages, § 207, pp. 288-289 & citing Rodriguez II, supra, 87 Cal.App.3d at p. 662.)

Thus, Hanif is a rather unique case. As to medical services for which a plaintiff has paid or expressly incurred liability, the court held compensatory damages are limited to the lesser of the reasonable value of such services or the amount the plaintiff paid or incurred liability therefor. Thus, in this context, the Court of Appeal gave priority to that aspect of compensatory damages that insures the plaintiff is reimbursed for actual economic loss. As to gratuitously provided medical services, however, the court agreed a plaintiff is entitled to recover the reasonable value of such services. In this context, the court necessarily gave priority to that aspect of compensatory damages that places on a defendant the full economic consequence of his or her wrongful conduct.

As the majority opinion recites, this court applied Hanif’s measure of damages analysis as to nongratuitous medical services in Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298, 306-307 [112 Cal.Rptr.2d 861] (Nishihama ). In Nishihama, the plaintiff presented evidence of the “normal rates” charged by the hospital for the care she received. However, pursuant to its contractual arrangement with the plaintiff’s health care plan, the hospital accepted a significantly lower amount as payment in full. The jury, unaware of the payment because of the evidentiary aspect of the collateral source rule, returned a verdict based on the “normal rates.” (Ibid.) The defendant appealed, arguing the trial court erred in permitting the jury to award damages based on the provider’s “normal rates” rather than on the amount paid. (Id. at p. 307.) The plaintiff argued she was entitled to an award based on the “normal rates” because the hospital had filed a lien under the state’s Hospital Lien Act (HLA). (Ibid.) The court rejected this argument, holding the extent of such a lien is limited to the amount a hospital is “entitled to receive” as payment for its services, which “turns on any agreement it has with . . . the injured person’s insurer.” (Id. at pp. 307-308.) The court further held the HLA does not create an independent cause of action in favor of hospitals; rather, the statutory lien is based on a “`debt owed by plaintiff to the [h]ospital.’” (Id. at p. 308, quoting Grauberger v. St. Francis Hospital (N.D.Cal. 2001) 149 F.Supp.2d 1186, 1191, vacated on unrelated ground by Grauberger v. St. Francis Hospital (N.D.Cal. 2001) 169 F.Supp.2d 1172, 1180.) The Supreme Court agreed with this construction of the HLA in Parnell v. Adventist Health System/West(2005) 35 Cal.4th 595, 600-609 [26 Cal.Rptr.3d 569, 109 P.3d 69] (Parnell).

Because the plaintiff owed no debt to the hospital, it having accepted the insurer’s payment as payment in full, the hospital had no valid lien. The plaintiff therefore could not rely on the HLA, and the Nishihama court held the trial court erred in allowing the jury to award damages based on the hospital’s “normal rates,” citingHanif. (Nishihama, supra, 93 Cal.App.4th at pp. 306, 309.) The court concluded the error was harmless, however, because “[t]here is no reason to assume that the usual rates provided a less accurate indicator of the extent of the plaintiff’s injuries than did the [insurer's] specially negotiated rates.” (Ibid.) Indeed, the court stated “the opposite is more likely to be true”—the hospital’s “normal rates” may more accurately indicate the extent of the plaintiff’s injuries. (Ibid.) Following Hanif’sapproach, the court modified the judgment to award as past medical expenses only those amounts paid by the insurer. (Nishihama, at p. 309.)

Hanif and Nishihama thus gave rise to the postverdict, damages reduction procedure known as a “Hanif/Nishihama” motion. (Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 1155 [46 Cal.Rptr.3d 780].) In Greer, the defendant argued the jury should not be allowed to hear evidence “that the reasonable value of the medical services exceeded the amount actually paid, since no one will be obligated to pay the difference,” the bills having been settled in full by the plaintiff’s employer. (Id. at p. 1154.) The trial court allowed the evidence, but with the proviso that if the medical expenses awarded exceeded the amount paid, it would entertain a postverdict motion for reduction pursuant to Hanif. (Greer, at p. 1154.) The defendant, however, failed to request a special verdict form that segregated out past medical expenses, and the trial court therefore refused to reduce the award. (Id. at pp. 1154-1155.) The defendant appealed, arguing the trial court initially erred in allowing evidence of the reasonable value of the medical expenses to be presented to the jury and further erred by failing to reduce the verdict. (Id. at pp. 1156-1157.) The Court of Appeal (the same court that decided Hanif) held the trial court did not abuse its discretion in allowing the evidence. (Greer, at p. 1157.) “The [trial] court’s ruling was correct. Nishihama and Hanif stand for the principle that it is error for the plaintiff to recover medical expenses in excess of the amount paid or incurred. Neither case, however, holds that evidence of the reasonable cost of medical care may not be admitted. Indeed, Nishihama suggests just the opposite . . . .” (Id. at p. 1157.) As for postverdict reduction of the award, the court held the defendant waived the issue by failing to request a verdict that segregated medical expenses. (Id. at pp. 1157-1158.) “[I]t was for all practical purposes, impossible to calculate a Hanif/Nishihama reduction.” (Id. at p. 1158.)

As the majority opinion further discusses, Hanif was subsequently discussed inOlsen v. Reid (2008) 164 Cal.App.4th 200 [79 Cal.Rptr.3d 255] (Olsen). In Olsen,the plaintiff introduced evidence her providers billed $62,475.81 for medical services. (Id. at p. 202.) The defendant sought to introduce evidence of the amounts actually paid by the plaintiff’s insurance carriers. (Ibid.) The trial court refused to allow this evidence, and instead reduced the jury’s $250,000 award for “`past economic loss, including medical expenses,’” by $57,394.24, supposedly the amount written off by the providers after receiving payment from the carriers. (Ibid.) The Court of Appeal reversed. The majority opinion concluded that regardless of whether a Hanif/Nishihama reduction might otherwise be permissible, the record did not allow it because “it was far from clear” what medical expenses were paid and what amounts were written off. (Olsen, at p. 203.)

Two concurring opinions expressed differing views on the Hanif/Nishihamapostverdict reduction procedure. The first concurring opinion, by Justice Moore, sounded “the bell of alarm” that Hanif had “divorced the collateral source rule from the complicated area of medical insurance.” (Olsen, supra, 164 Cal.App.4th at p. 204 (conc. opn. of Moore, J.).) She suggested Hanif did not see “the connection between `reasonable value’ and the long line of cases on the collateral source rule,” since Hanif “simply stat[ed], without analysis, that the collateral source rule did not apply.” (Olsen, at p. 210.) In her view, Hanif “changed the emphasis from a plaintiff’s entitlement under the collateral source rule [citations] to `a plaintiff is entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable.” (Olsen, at p. 210.) She observed our Supreme Court has not yet addressed the issue and that “[m]uch has changed since the collateral source rule first entered our jurisprudence,” including in the area of billing and paying for medical services and the enactment of legislation eliminating the collateral source rule in medical malpractice cases. (Id. at pp. 212-213.) She therefore would reject theHanif/Nishihama postverdict reduction procedure in cases involving private insurance, and leave it to the Legislature to make any further changes in the collateral source rule. (Olsen, at pp. 213-214.) What Justice Moore’s concurrence does not address is the analytical distinction between the measure of damages and the collateral source rule.

The second concurring opinion, by Justice Fybel, endorsed the reasoning of Hanifas “soundly based on California statutes—Civil Code sections 3281, 3282, 3333, and 1431.2, subdivision (b)(1)—and the Restatement Second of Torts, section 911, comment h.” (Olsen, supra, 164 Cal.App.4th at p. 215, fns. omitted (conc. opn. of Fybel, J.).) In his view, Hanif and Nishihama also correctly followed the collateral source rule “because the plaintiffs in those cases recovered all medical costs actually incurred, even though the costs were paid by others (e.g., a health plan).” (Olsen, at pp. 215-216.) What Justice Fybel’s concurrence does not address is the tension between that aspect of compensatory damages that insures the plaintiff is reimbursed for any actual economic loss, and that aspect of compensatory damages that places on a defendant the full economic consequences of his or her wrongful conduct.

Our Supreme Court has not addressed the measure of damages for past medical expenses where the plaintiff has paid, or incurred express liability for, an amount ostensibly less than the reasonable value of the services rendered, and specifically has not addressed the issue of medical expense write-offs in this context. Nevertheless, the court has decided several cases that bear mention in this regard.

The first is Fein v. Permanente Medical Group (1985) 38 Cal.3d 137 [211 Cal.Rptr. 368, 695 P.2d 665] (Fein). In Fein, the court upheld the validity of section 3333.1, subdivision (a), which was enacted as part of the Medical Injury Compensation Reform Act (MICRA). Section 3333.1 permits a defendant in a medical malpractice case to introduce evidence of collateral source benefits received by the plaintiff. The plaintiff, in turn, can introduce evidence of amounts he or she has paid (in insurance premiums, for example) to secure the benefits. (Fein, at p. 164.)

What is of interest with respect to the measure of damages, is the court’s observation that while section 3333.1, subdivision (a), allows the introduction of evidence of collateral source benefits, the statute “does not specify how the jury should use the evidence.” (Fein, supra, 38 Cal.3d at pp. 164-165.) “`Earlier drafts of section 3333.1, subdivision (a) required the trier of fact to deduct such collateral source benefits in computing damages, but—as enacted—subdivision (a) simply provides for the admission of evidence of such benefits, apparently leaving to the trier of fact the decision as to how such evidence should affect the assessment of damages.’” (Id. at p. 165, fn. 21, quoting Barme v. Wood (1984) 37 Cal.3d 174, 179, fn. 5 [207 Cal.Rptr. 816, 689 P.2d 446].) “Although section 3333.1, subdivision (a)—as ultimately adopted—does not specify how the jury should use such evidence, the Legislature apparently assumed that in most cases the jury would set the plaintiff’s damages at a lower level because of its awareness of plaintiff’s `net’ collateral source benefits.” (Fein, at pp. 164-165.) The court noted, however, the parties and trial court apparently had assumed, incorrectly, that section 3333.1, subdivision (a), required collateral source benefits to be deducted from a damages award. (Fein, at p. 165, fn. 21.) Not so, explained the court. The statute “simply authorizes the reduction of damages on the basis of collateral source benefits, but does not specifically mandate such a reduction.” (Ibid.; see also Hernandez v. California Hospital Medical Center (2000) 78 Cal.App.4th 498, 505-506 [93 Cal.Rptr.2d 97].)

Thus, under section 3333.1, subdivision (a), in determining the amount of damages for past medical expenses in a medical malpractice case, the jury can hear all the evidence relevant to determining the “reasonable value” of the medical services—both evidence of amounts charged by providers and amounts paid thereto by the plaintiff or collateral sources (and no doubt often accepted as payment in full). Because the statute does not specify how the jury is to evaluate or use such evidence, it also leaves open the possibility of damages awards for past medical expenses that exceed the amounts paid to providers (and accepted as payment in full), as well as awards that are less than initial provider billings. UnderHanif’s measure of damages analysis, however, a damages award exceeding amounts paid to and accepted by providers as payment in full would exceed what is legally recoverable.[ 27 ]

The second case of interest is Olszewski v. Scripps Health (2003) 30 Cal.4th 798 [135 Cal.Rptr.2d 1, 69 P.3d 927] (Olszewski). In Olszewski, the Supreme Court invalidated on federal preemption grounds two state statutes (former Welf. & Inst. Code, §§ 14124.791 & 14124.74) that allowed providers to file liens against tort recoveries obtained by Medi-Cal beneficiaries. (Id. at p. 826.) “While federal law requires the state Medicaid agency to obtain full reimbursement of Medicaid payments whenever possible [achieved by way of mandatory assignment of a beneficiary's right to recover damages for medical expenses from third parties], it strictly limits the ability of providers to obtain reimbursement for their services. Even though Medicaid payments are typically lower than the amounts normally charged for their services [citations], `[a] State plan must provide that the Medicaid agency must limit participation in the Medicaid program to providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual’ [citation].” (Olszewski, at p. 812.) Providers are thus prohibited from collecting any amounts from beneficiaries, except for very limited amounts defined in the federal statute. (Id. at pp. 812, 819.) Because the state lien statutes allowed providers to recover their “full customary charge” from beneficiaries, the court held the statutes directly conflicted with the federal statutory limitations on provider recoveries from Medicaid beneficiaries. (Id. at pp. 820-822, italics omitted.)

Of interest with respect to the measure of damages, is the court’s discussion of a policy directive issued by the Acting Director of the Medicaid Bureau that would permit additional provider recovery from a beneficiary’s tort recovery. “`Federal law would not preclude the practice of providers pursuing payment in tort situations in excess of Medicaid reimbursement’ as long as a state satisfies two conditions. First, the state must assure that Medicaid is made whole before the provider recovers any money. Second, the state must protect the assets of Medicaid beneficiaries by limiting provider recovery to the portion of the award specifically allocated for the beneficiary’s medical expenses.” (Olszewski, supra, 30 Cal.4th at pp. 821-822.) While the state lien laws met the first requirement, they did not meet the second because they did not limit recovery to the portion of recovery allocated to medical expenses. (Id. at p. 822)

The court therefore invalidated the state lien laws, but did so “reluctantly.” (Olszewski, supra, 30 Cal.4th at p. 826.) “By invalidating liens filed pursuant to section 14124.791, we give the third party tortfeasor a windfall at the expense of the innocent health care provider. Because the provider may no longer assert a lien for the full cost of its services, the Medicaid beneficiary may only recover the amount payable under Medicaid as his or her medical expenses in an action against a third party tortfeasor. (See Hanif[, supra,] 200 Cal.App.3d 635, 639-644 . . . [where the provider has relinquished any claim to additional reimbursement, a Medicaid beneficiary may only recover the amount payable under the state Medicaid plan as medical expenses in a tort action].) As a result, the tortfeasor escapes liability for the full amount of the medical expenses he or she wrongfully caused.” (Id. at pp. 826-827.)

The court “urge[d] the Legislature to remedy this anomaly in a manner consistent with federal law.” (Olszewski, supra, 30 Cal.4th at p. 827.) This exhortation suggests the court may not share Hanif’s view of the measure of damages, regardless of its citation to the case. As noted above, provider reimbursement from a tort recovery is permissible under federal Medicaid law if (a) Medicaid is made whole before the provider recovers any money and (b) the assets of Medicaid beneficiaries are protected by limiting provider reimbursement to that portion of a tort recovery specifically allocated to the beneficiary’s medical expenses. (Olszewski, at p. 822.) There is no suggestion the beneficiary must also be “liable” for the amounts recouped by the provider. Nor could there be such a requirement given the statutory mandate that Medicaid beneficiaries cannot be pursued for any amount above that paid by the government and any recoverable copayment. Thus, in advocating that providers be able to recover amounts exceeding Medicaid reimbursement from third party tortfeasors, the court seemed to be endorsing ameasure of damages not dictated by the plaintiff’s liability or the amount actually paid to and accepted by a provider as payment in full, but rather, reflecting the principle underlying the recovery of compensatory damages for gratuitously provided medical services—that compensatory damages also serve to place on the defendant the full economic consequence of his or her wrongful conduct.

The third case of interest is Parnell, supra, 35 Cal.4th 595. The plaintiff in Parnellwas injured in an automobile accident and received treatment at a community hospital. (Id. at pp. 598-599.) He had health insurance through a work-related plan which paid the hospital at “preferred provider” rates, which the hospital, in turn, accepted as payment in full. (Ibid.) The plaintiff subsequently sued the driver of the vehicle that hit the taxicab in which he was riding, and the hospital filed a lien to recover the difference between the “actual” cost of the medical services it provided and the amount it received from the plan. (Ibid.) The plaintiff then sued the hospital, challenging its lien. (Id. at p. 600.) As noted above, the Supreme Court agreed the lien was invalid, concluding the HLA does “not give a hospital an independent cause of action against [a] third party tortfeasor” (id. at p. 603) and “a lien under the HLA requires the existence of an underlying debt owed by the patient to the hospital.” (Id. at p. 605.)

The court reached this conclusion by examining the legislative history of the statute. “The HLA was originally enacted in 1961 to allow hospitals to recoup losses suffered when a patient `failed to discharge any portion of the hospital bill’ even though that patient had `collected upon a cause of action against another.’” (Parnell, supra, 35 Cal.4th at pp. 603-604, quoting Pope Enrolled Bill Rep. Mem. for Governor Edmund Brown on Sen. Bill No. 1140 (1961 Reg. Sess.) July 17, 1961, p. 1, italics added.) “The Legislature was therefore concerned with uninsured patients who failed to pay any part of their debt to the hospital and enacted the HLA to give hospitals the ability to collect on this debt.” (Parnell, at p. 604.) Because the hospital had accepted the amount paid by the plaintiff’s insurer as payment in full, his “entire debt to the hospital ha[d] therefore been extinguished.” (Id. at p. 609.) Because the plaintiff no longer owed a debt to the hospital for its services, the hospital could “not assert a lien under the HLA against [his] recovery from the third party tortfeasor.” (Ibid.)

The court observed its holding might “result in a significant hardship” for hospitals, and it had “no doubt,” as the hospital claimed, “`hospitals negotiate and enter into discounted rate agreements with the expectation that they will be entitled to recover additional funds from other payors who have an obligation to pay for the hospital’s services.’” (Parnell, supra, 35 Cal.4th at p. 611.) The court, however, could only construe the statutes “in accordance with the Legislature’s intent and controlling case law.” (Ibid.) As such, hospitals needed to look to the Legislature for a different outcome. (Ibid.) The court did not exhort the Legislature to take action to allow hospital liens on recoveries from third party tortfeasors for the difference between amounts billed and amounts accepted as payment in full, as it did in Olszewski. However, the court’s suggestion hospitals could look to the Legislature in this regard, despite having accepted payment from a collateral source as payment in full, again indicates the court may take a more expansive view of the measure of damages than Hanif. Indeed, the court appears to have viewed the plaintiff as having been indebted—or liable—to the hospital for the amount it initially billed, before applying all discounts, credits and payments (negotiated and made by the plaintiff’s health care plan), which “extinguished” the plaintiff’s “entire debt.” (Parnell, at pp. 599, 609.) The court also suggested hospitals could, in any event, contractually “preserve their right to recover the difference between usual and customary charges and the negotiated rate through a lien under the HLA.” (Id. at p. 611.)

The court concluded by noting that because its holding relied “solely on the absence of a debt underlying the lien,” it did not reach and was expressing no opinion on several issues, including “whether Olszewski[, supra,] 30 Cal.4th 798 . . . and Hanif[, supra,] 200 Cal.App.3d 635 . . . apply outside the Medicaid context and limit a patient’s tort recovery for medical expenses to the amount actually paid by the patient notwithstanding the collateral source rule . . . .” (Parnell, supra, 35 Cal.4th at p. 611, fn. 16.)

The fourth case of note is Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497 [87 Cal.Rptr.3d 299, 198 P.3d 86] (Prospect). The issue in Prospect was whether providers of emergency medical services who do not have contracts with health maintenance organizations (HMOs) can bill HMO members for the difference between what they bill the HMO for their services and what the HMO pays—in other words, whether emergency room providers can “balance bill” HMO patients. (Id. at pp. 503-504.) Given the statutory and regulatory controls on the delivery of emergency medical services and on the payments to providers by HMOs, the court held providers of emergency medical services who have direct recourse against HMOs cannot “balance bill” HMO members, but must resolve billing and payment disputes directly with the HMOs. (Id. at pp. 504-508.)

The court summarized the statutory and regulatory scheme as follows: Emergency room medical personnel are statutorily required to provide treatment necessary to stabilize a patient, without first inquiring into the patient’s ability to pay. (Prospect, supra, 45 Cal.4th at pp. 504, 507.) Emergency patients are statutorily required either “to agree to pay for the services or to supply insurance information.” (Id. at p. 507.) If emergency services are provided to an HMO member by an “out-of-network” provider, the HMO is statutorily required to pay for the services. (Id. at pp. 504, 507.) HMOs must have a dispute resolution mechanism accessible to noncontracting providers to resolve billing and payment disputes. (Id. at pp. 506-507.) In addition, some emergency services providers are statutorily entitled to sue HMOs directly over billing disputes. (Ibid.) “Interpreting the statutory scheme as a whole,” the court concluded emergency services providers who have direct recourse against an HMO must resolve payment disputes directly with the HMO. (Id. at p. 507 & fn. 5.) The provider cannot involve the patient in the billing dispute and cannot “balance bill” the patient for any amount above that paid by the HMO. (Id. at p. 507.)

In the course of its analysis, the court made several significant comments about medical billing and payment. It stated several times emergency room doctors are “entitled to reasonable payment for their services.” (Prospect, supra, 45 Cal.4th at pp. 502, 509.) It also recognized, however, “[b]y the very nature of things” legitimate disputes can arise regarding “how much the emergency room doctors may charge and how much the HMO must pay for emergency services.” (Id. at pp. 504-508.) Moreover, even though HMOs are required by regulation to pay the “`reasonable and customary value for health care services rendered based upon statistically credible information that is updated at least annually,’” how this amount is determined “can create obvious difficulties.” (Id. at p. 505.) “In a given case,” stated the court, “a reasonable amount might be the bill the doctor submits, or the amount the HMO chooses to pay, or some amount in between.” (Ibid.)

The court’s holding in Prospect is also of interest with respect to the “liability” an HMO patient “incurs” for emergency services provided by a non-network provider. As the court explained, emergency medical personnel cannot condition treatment on ability to pay. An emergency patient is not required to agree to pay the provider’s usual and customary charges, but can simply supply insurance information. And where the patient is covered by an HMO against which the provider has recourse, the HMO patient cannot be charged for any amount above that recovered by the provider from the HMO. An HMO patient’s “liability” for emergency medical services provided by an out-of-network provider is thus limited by virtue of a comprehensive statutory and regulatory scheme to the amount paid to the provider by the HMO—not unlike a Medi-Cal beneficiary’s “liability” for medical services is limited by a comprehensive statutory scheme to the amount paid to the provider by the government.

Having granted review in Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686 [101 Cal.Rptr.3d 805], review granted March 10, 2010 No. S179115, the Supreme Court is poised to address the question identified but not reached in Parnell—whether Olszewski and Hanif “apply outside the Medicaid context and limit a patient’s tort recovery for medical expenses to the amount actually paid by the patient notwithstanding the collateral source rule.” (Parnell, supra, 35 Cal.4th at p. 611, fn. 16.) The threshold issue that needs clarification, however, is the measure of damages for past medical expenses.

As discussed above, in every context except that addressed in Hanif, the measure of damages has been articulated as the reasonable value of the medical services required because of the defendant’s tortious conduct. Where the plaintiff has paid, or expressly incurred liability for, an amount exceeding the reasonable value of past medical services, recovery is limited to their reasonable value. Where the plaintiff is presumed to be liable for the reasonable value of such services, recovery is perforce for their reasonable value. And where the plaintiff receives gratuitously provided medical services, recovery may be had for their reasonable value. Whether this measure of damages, or the modified measure articulated inHanif, applies where the plaintiff has paid, or incurred liability for, an amount ostensibly less than the reasonable value of the medical services, would seem to depend on which view of compensatory damages is given priority—that focusing on reimbursing the plaintiff for actual economic loss, or that focusing on placing on the defendant the full economic consequence of his or her tortious conduct.

If priority is given to that aspect of compensatory damages focusing on reimbursing the plaintiff for actual economic loss, the measure of damages for past medical expenses must be as stated by Hanif—that is, the plaintiff is entitled to recover the lesser of the reasonable value of the medical services, or the amount he or she has paid, or incurred liability, therefor. As applied in Hanif, this measure resulted in a damages award for the amounts actually paid to the hospital and physicians by the government and which the government could recoup through assignment and lien rights. Putting aside the effect of the collateral source rule (which is necessary to analyze the threshold issue of the measure of damages), the plaintiff in Hanif thus recovered damages for the amount that would otherwise have passed through to the providers had they not been paid and because the providers were paid, would pass through to the payor. This result is consistent with the original rationale for allowing the recovery of damages for “incurred” medical expenses—to enable the plaintiff to pay the provider. And in such case, there is no windfall recovery by the plaintiff.

Even under the measure of damages articulated in Hanif, however, damages awards will vary significantly, depending on how the courts define the plaintiff’s “liability” for medical services. As subsequent cases, including this one, reflect, this determination can turn on a combination of sometimes highly complex factors, including who or what entity provided the medical services, who or what entity paid for them, statutory and regulatory controls on the providers and payors, and the contractual relationships between the providers, the plaintiff and payors. How courts come out on the “liability” issue will also reflect the divergent views of compensatory damages that have emerged in the case law, as well as the inherent tension between the two.

For example, in Hanif, the Court of Appeal concluded the minor plaintiff, a Medi-Cal beneficiary, was not “liable” for the amounts written off by the hospital and his physicians because state Medi-Cal and federal Medicaid statutes and regulations required the providers to accept government payment as payment in full and prohibited the providers from seeking additional amounts from the plaintiff. (Hanif, supra, 200 Cal.App.3d at pp. 639-640; see also Olszewski, supra, 30 Cal.4th at pp. 810-813, 817-820.) Arguably, a similar “liability” conclusion would follow under Prospect, as to an HMO member who received emergency services from an out-of-network provider. As discussed, the Supreme Court concluded inProspect that the statutory and regulatory scheme governing emergency care providers and HMOs does not require the patient to agree to pay the provider’s normal and customary charges, requires the provider to look to the HMO for payment, and prohibits the provider from seeking any additional amounts from the patient. (Prospect, supra, 45 Cal.4th at pp. 504-507.) This kind of “liability” analysis focuses on the actual dollars paid or owed (and required to be paid in the future) to the provider, thereby keeping the measure of damages focused on reimbursing the plaintiff for actual economic loss.

The court in Hanif did not indicate whether the plaintiff (or his parents) signed admission or intake paperwork agreeing to pay the providers’ usual and customary charges. But if they did, did the plaintiff thereby “incur liability” for the providers’ usual and customary charges—a “liability” which was subsequently discharged by a collateral source, i.e., the Medi-Cal program, through a combination of reduced rates and payment? Or, because the providers had previously agreed to participate in the Medi-Cal program, and thus obligated themselves to accept government payment as payment in full and to comply with statutory prohibitions against further recovery from beneficiaries, did that effectively vitiate any “liability” predicated on the providers’ standard admission or intake paperwork? Similarly, where the plaintiff has private health care insurance and signs standard admission or intake paperwork agreeing to pay the provider’s usual and customary charges, does he or she thereby “incur liability” for such charges—a “liability” that is subsequently discharged by the collateral source, i.e., the health care insurer, through a combination of reduced rates and payment? If the provider has entered into a preexisting contract with the insurer requiring the provider to accept payment at reduced rates as payment in full, does the plaintiff “incur” any real “liability” for the provider’s usual and customary charges?

In Holmes v. California State Auto. Assn. (1982) 135 Cal.App.3d 635, 637-638 [185 Cal.Rptr. 521] (Holmes), the Court of Appeal took the view that by signing the hospital’s standard admission paperwork, the plaintiff (a Medicare beneficiary) had “incurred” liability for the hospital’s full charges. (Id. at p. 639 [plaintiff "at the time of her admission to the hospital expressly undertook personal liability for the expenses about to be incurred"].) The court held the plaintiff was thus entitled to recover that full amount under the medical payments clause of an automobile policy providing the insurer would “`pay all reasonable expenses incurred by the insured [as the result of an automobile accident].’” (Id. at p. 637.) The court rejected the insurance company’s argument that the Medicare statutes and provider’s preexisting agreement with the government had “the effect of precluding” the plaintiff from “incurring” any hospital expenses within the meaning of the policy. (Id. at pp. 637-639.)

While Holmes is a first party insurance case, it nevertheless illustrates the view that by signing standard admission and intake paperwork promising to pay, a patient (indeed, even a Medicare patient) “incurs liability” for a provider’s usual and customary charges. (Holmes, supra, 135 Cal.App.3d at p. 639.) This is the analysis of “incurred liability” urged by plaintiff here. And, as noted in the majority opinion, it is also the view implicitly, if not expressly, taken by most other courts addressing damages and collateral source rule issues involving medical expense write-offs. (Maj. opn., ante, at pp. 11-14.)

Using the Holmes analysis to pinpoint the plaintiff’s “incurred liability” for past medical expenses, however, necessarily means that, in write-off cases, the damages award will almost invariably exceed the actual dollar amount paid or owed to the provider (or subject to recoupment by the payor).[ 28 ] Accordingly, this analysis of “incurred liability” is at odds with the view of compensatory damages focusing on reimbursing the plaintiff for actual economic loss. It also is at odds with the original pass-through rationale for allowing the recovery of damages for “incurred” medical expenses—to enable the plaintiff to pay providers what is owed and thus discharge his or her liability. And it inherently results in an economic windfall to the plaintiff. Moreover, this windfall not only consists of dollars for medical services that have not been, and never will be, paid for such services, but also dollars arising solely, and ironically, by virtue of tools intended tocontrol escalating medical costs—rate reductions and medical expense write-offs.

The Holmes analysis is consistent, however, with the view of compensatory damages focusing on placing on the defendant the full economic consequences of his or her tortious conduct. Nevertheless, except in the context of gratuitously provided medical services (which appear to be a very small percentage of the medical services for which tort recovery is sought), the California courts have never expressly endorsed a measure of damages that results in the recovery of dollars, and potentially very significant dollars, for past medical expenses that will never be passed on to a provider to pay for medical services (or be subject to recoupment by a payor), but instead, will be retained by the plaintiff as an economic windfall. Indeed, in Helfend, where the Supreme Court reaffirmed California’s adherence to the collateral source rule, the court suggested even those who gratuitously provide medical services reasonably expect re-payment from a tort recovery—again reflecting a pass-through rationale for the damages award, mitigating against an economic windfall. (Helfend, supra, 2 Cal.3d at p. 6, fn. 5; see also Kimball, supra, 159 Cal. at p. 231.)

If the view of compensatory damages focusing on placing on the defendant the full economic consequences of his or her tortious conduct is nonetheless given priority in this context—as the majority of courts appear to have done—there would seem to be no reason to engage in any excruciating analysis as to the “liability” the plaintiff “has incurred” for medical services. The measure of damages consistent with this view of compensatory damages is simply the reasonable value of the medical services required because of the defendant’s tortious conduct, because that measure places at the defendant’s door the full economic consequence of his or her wrongful conduct. And under that measure, the scope of the plaintiff’s “incurred liability” for medical services is immaterial—as evidenced by the recovery of damages for gratuitously provided medical services. (See, e.g., Rodriguez II, supra, 87 Cal.App.3d at p. 661; Gastine, supra, 65 Cal.App.2d at pp. 143-144.)

For years, the courts have charged juries with determining “[t]he reasonable value of medical . . . care, services and supplies reasonably required and actually given in the treatment of the plaintiff to the present time” (BAJI No. 14.10), or stated another way, the “reasonable cost of reasonably necessary medical care that [the plaintiff] has received.” (CACI No. 3903A.) Under such charge, juries have not been required to find, as a predicate determination, the extent of the plaintiff’s “incurred liability.” Rather, juries simply determine the “reasonable value” of past medical services based on the evidence presented at trial, and neither the provider’s billed amount (reflecting usual and customary charges), nor the amount paid to the provider, definitively fixes the amount of recoverable damages. This approach remains fully apropos today, given the realities and complexities of health care billing and payment practices. While there is a constituency that believes amounts paid by health care plans do not reasonably compensate providers (see, e.g.,Parnell, supra, 35 Cal.4th at p. 611), there is also a constituency that believes present day medical billing and payment practices have resulted in inflated charges that both anticipate a significant write-off and ultimately insure payment that adequately compensates the provider. (See citations at fn. 1, ante.) As it has always been, determining the “reasonable value” of past medical services is a consummate task for the jury.

Applying a standard “reasonable value” measure of damages in medical expense write-off cases will, of course, likely result in damages awards in line with the providers’ initial billings, which may be for amounts significantly greater than the “reasonable value” of the services provided. (See citations at fn. 1, ante; see alsoProspect, supra, 45 Cal.4th at p. 505.) But this result is not a consequence of the measure of damages. Rather, it is a consequence of the evidentiary aspect of the collateral source rule. As the majority opinion suggests (maj. opn., ante, at pp. 19-20), it is time to take a critical look at that rule, which generally bars evidence of amounts paid to providers.

In California, the evidentiary aspect of the collateral source rule is not an outright ban on such evidence, but leaves its admission to the sound discretion of the trial court. (Hrnjak, supra, 4 Cal.3d 725 at pp. 729-734.) The Supreme Court has expressed concern that “[e]ven with cautionary instructions, there is substantial danger that the jurors will take the evidence into account in assessing the damages.” (Id. at pp. 732-733.) Thus, “[a]dmission despite such ominous potential should be permitted only upon a persuasive showing that the evidence sought to be introduced is of substantial probative value.” (Ibid.)

In the ensuing decades since these concerns were first voiced, however, the courts have exhibited a markedly heightened regard for the ability of juries to deal with complex and sophisticated legal and factual problems, including heeding limiting instructions in connection with otherwise highly prejudicial evidence. (See, e.g., People v. Kelly (2007) 42 Cal.4th 763, 782-787 [68 Cal.Rptr.3d 531, 171 P.3d 548] [evidence of prior improper financial dealings with other women, of prior assault on a woman, and of rapes of three other women admitted in capital rape/murder case for limited purposes of showing identity, common plan or design and intent]; People v. Roldan (2005) 35 Cal.4th 646, 704-707 [27 Cal.Rptr.3d 360, 110 P.3d 289] [evidence of prior robbery admitted in capital robbery/murder case for limited purposes of showing identity, motive and intent]; Pisciterli v. Salesian Society (2008) 166 Cal.App.4th 1, 7-13 [evidence of cleric's prior felony sexual abuse conviction admitted in civil action against priesthood for failure to protect plaintiff against sexually predatory priest for limited purposes of impeaching witness and to show bias]; Rufo v. Simpson (2001) 86 Cal.App.4th 573, 597-599, & fn. 6 [evidence of Nicole Brown Simpson's telephone calls to battered women's shelter, diary entries and letter referring to prior incidents of domestic violence admitted in civil wrongful death and survival action for limited purpose of showing Nicole's state of mind about her relationship with O.J. Simpson].)[ 29 ]

If properly instructed juries can handle this kind of potentially prejudicial evidence in very serious—even life and death—cases, surely juries can consider, with proper instruction, evidence of amounts paid to health care providers on the issue of the “reasonable value” of health care services. (Cf. Gersick v. Shilling (1950) 97 Cal.App.2d 641, 649-650 [218 P.2d 583] [error in admitting evidence of payments by plaintiff's medical insurer and of disability benefits "cured" by instruction that plaintiff was entitled to recover damages for all expenses incurred and the amount of damages should not be reduced by the receipt of payments from sources wholly independent of the wrongdoer].)

The ensuing decades have also brought us the medical billing and payment practices that now make evidence of what providers are paid highly relevant on the issue of the “reasonable value” of medical services. The Supreme Court recognized as much in Prospect when it stated: “In a given case, a reasonable amount might be the bill the doctor submits, or the amount the HMO chooses to pay, or some amount in between.” (Prospect, supra, 45 Cal.4th at p. 505; see also citations at fn. 1, ante.) Thus, it seems beyond cavil that such evidence “is of substantial probative value.” (See Hrnjak, supra, 4 Cal.3d at p. 733.)

It is time therefore to trust juries to heed limiting instructions in this context, as in others, and to let juries hear all the relevant evidence on the “reasonable value” of medical services.[ 30 ]

By Steven G. Mehta

There is a common feeling amongst trial lawyers that the first moments of a trial are often the most important. Indeed, there is research that shows that the jury has made its mind up in voir dire. Well new research suggests that people make decisions very quickly and often those decisions are not on the merits; but instead on other superficial factors.

According to researchers Christopher Olivola from University College London and Alexander Todorov from Princeton University, voters’ choices are heavily influenced by superficial, nonverbal cues, such as politicians’ appearance. People such as voters (or in trials, a jury) make decisions about candidates’ (or parties’) competence based on their facial appearance. The researchers were able to reliably predict outcomes of votes based on facial appearances of the participants.

The researchers also addressed the fact that appearance is most likely to influence less knowledgeable voters who watch a lot of television. In essence the researchers discussed that because voters (or the case of a jury, the jurors) need to navigate their way through volumes of information about the candidate or the party, it is not surprising that they take unconscious “mental shortcuts” to make their final decision.

Based on a computer model, the researchers were able to manipulate the appearance of candidates, which affected the votes regarding competence. They found that facial maturity and physical attractiveness are the two main criteria used by participants to make competence judgments.

Olivola and Todorov explained that “Getting people to overcome the influence of first impressions will not be an easy task. The speed, automaticity, and implicit nature of appearance-based trait inferences make them particularly hard to correct. Moreover, often people don’t even recognize that they are forming judgments about others from their appearances.”

This research could be very helpful in understanding how juries may make their decisions. Just like voters, the jury has a huge amount of information to sift through in order to make its decision. There are already studies that show that the more attractive a person is the more likely that the jury will vote for that person. Moreover, studies have also shown that the more attractive people get higher verdicts.

In that light it is also helpful to explain this process to a party during mediation. The more that the parties realize that the trial process is less about the merits and more about a beauty contest, the more likely they will not want a jury to make the final decision regarding the supposed merits. Story Source:

Journal Reference:

1. Christopher Y. Olivola, Alexander Todorov. Elected in 100 milliseconds: Appearance-Based Trait Inferences and Voting. Journal of Nonverbal Behavior, 2010; 34 (2): 83 DOI: 10.1007/s10919-009-0082-1

By Steven G. Mehta

As most mothers are oft to say — there is nothing like a good first impression.  Well one of the first things in a good impression is a good handshake.  How do you do one and what do some people percieve about you based on your handshake?  Well I was thinking about these issues recently when a client I met for the first time mentioned that I had a good handshake during a mediation and that he knew we would have good results.

First, I thought, just based on the handshake.  Wait until I have said something. But later, I thought about the importance of the shake, and thought I would look for some research on the issue.

First, here is a nice description of the different types of handshakes and their possible meanings.

One of the main points about the handshake that was briefly mentioned in the video is that it is not just the handshake, but the eye contact and body language.  Is there good eye contact?  How does your body look?  Is it open to the other person or closed?  Does your body, eyes, and handshake, say welcome — or how long is this going to take?

Here is another view of how the handshake — when done wrong can affect you.  In addition, it shows some handshakes in real life.

One of the things that is not discussed in either of these clips is the issue of cultural variations on the handshake.  I will research these issues later.

Finally, here is a clip of the absence of a handshake and the message it sends.

By Steven G. Mehta

Why is it that at the end of the day, it is easier for you to snap at your spouse than the beginning?  Why do telemarketers advertise late at night, when you are tired?  Why is it hard to get out of the rut and change your routine?   The answer is that you only have so much self control.

Here is a link to a video that explains an experiment in self control and its implications towards everyday life.

Psychologists have discovered that self-control is an exhaustible resource. Any time you’re paying close attention to your actions, like when you’re having a tough conversation, negotiating something stressful, mediating,  or simply trying to focus, you only have so much self control in the gas tank.

According to the research, in most change situations, you’re substituting unfamiliar behaviors for old, comfortable ones.  That simple act burns self-control.

What implications for mediation and negotiation?  Well first, for many years, I have had chocolate chip cookies and other yummy — but less than heart healthy — snacks.  Little did I know that I was doing something psychologically towards helping change rather than having radishes.  Having food around can help people be more tolerant to change and difficult tasks.  They won’t just snap and stop working on the change (i.e. settlement).

This limited resource of patience may also explain why people might make more moves later in the day rather than earlier.  They may simply have ran out of willpower.

This concept is also very closely related to my prior post

To oversimplify the issue:  So now we know that if we want change in behavior, try do it early in the day; if we want someone to accede to our requests, do it later in the day, when they have less willpower.

By Steven G. Mehta

One of the most common things that people say when trying to understand how an action might affect another person is to say, “put yourself in the other person’s shoes.” Recent research, however, demonstrates that putting yourself in another’s shoes may not be the best way to understand how that person views your actions.

According to psychologist, Jeremy Dean, we normally try to work out how we are viewed by others by thinking about how we view ourselves, then extrapolating from that. The problem with this approach, says Dean, is that to varying degrees we all suffer from an ‘egocentric bias:’ we think we’re at the center of the world and everything is about us. We shouldn’t be blamed for this — it’s a natural consequence of the fact that we’re locked inside our own heads.

However, other people aren’t limited by our own perceptions of ourselves. They see us from an outside perspective. So why is it that we are so incorrect in judging how others view us. According to Dean, part of the reason that we get it wrong so often is that that we follow the advice to put ourselves in others’ shoes in order to understand their perspective.

According to the new research by researchers Eyal and Epley (2010), it may be better to use abstract thinking to get a better view of the way others see you. In one experiment, the researchers split their participants into two groups to compare their ability to view themselves from the outside. Participants were trying to judge how attractive they were to another person. The first group adopted the standard tactic of putting themselves in the other person’s shoes, while the second group was asked to imagine they would be rated by the other person in several months’ time.

People trying to put themselves in the other person’s shoes were awful at the task.

But when participants thought about their future selves, a technique that encourages abstract thinking, their accuracy increased considerably, although not perfect.

The reality is that we cannot see the forest from the trees when it comes to perceptions of how others view ourselves, says Dean. But allowing ourselves to think in broad terms and abstractly lets us realize that there is a forest and not just trees; and in turn, we have a better understanding of the trees.

This technique of abstract thinking may be helpful in the mediation context. Specifically, when a person has a hard time of evaluating the matter from another perspective, it might be helpful to have them first think about abstract concepts. For example, asking a client to think about the value of lawsuits in society, or the value of juries in society, might just start that person towards thinking about how a jury might react to his or her case.

Reference

Eyal, T. & Epley, N. (2010). How to Seem Telepathic: Enabling Mind Reading by Matching Construal. Psychological Science. DOI: 10.1177/0956797610367754.

By Steven G. Mehta

There is considerable debate amongst the mediation community as to whether a mediator can draft documents for the parties.  Some mediators say that doing so leads to them practicing law, whereas others say that they aren’t practicing law by merely being a scrivener.  The Wisconsin Bar recently published an ethics opinion on this very issue.  I thought that it might be interesting to review.  It provides a nice summary of many of the States’ opinions on this issue. The following is an excerpt of that opinion:

This article is briefly discusses the prohibitions under Wisconsin’s Rules of Professional Conduct for Attorneys (the Rules) on providing legal services to the parties of a mediation after the lawyer has served as mediator in that matter. More specifically, it addresses whether a lawyer who serves as a mediator for a divorcing pro se couple may, after a successful mediation, draft documents for the parties. In this article, “documents” refer to pleadings or other documents, such as marital settlement agreements, that are intended to be filed with the court hearing the divorce and to affect the rights of the parties. This issue has not been addressed in Wisconsin by ethics opinion or case law, but has been addressed in several other states.1 Guidance from other jurisdictions, however, is of limited value because of an unusual feature of Wisconsin’s Rules, as discussed below.

A lawyer’s ethical responsibilities when acting as a mediator or other third-party neutral are governed by SCR 20:2.4, which provides as follows:

(a) A lawyer serves as a 3rd-party neutral when the lawyer assists two or more persons who are not clients of the lawyer to reach a resolution of a dispute or other matter that has arisen between them. Service as a 3rd-party neutral may include service as an arbitrator, a mediator or in such other capacity as will enable the lawyer to assist the parties to resolve the matter.

(b) A lawyer serving as a 3rd-party neutral shall inform unrepresented parties that the lawyer is not representing them. When the lawyer knows or reasonably should know that a party does not understand the lawyer’s role in the matter, the lawyer shall explain the difference between the lawyer’s role as a 3rd-party neutral and a lawyer’s role as one who represents a client.

The Rules define the role of the third-party neutral as assisting persons who are not clients to reach a resolution of a dispute, and thus the mediator does not represent any party to the mediation. In the context of a family law matter, once any disputed issues between the parties are resolved in mediation, the parties will often look to the lawyer-mediator for assistance with the necessary documents to complete the divorce. Can the lawyer prepare these documents without violating the Rules?

To answer that question, it must first be determined whether the preparation of such documents is part of the mediation process or constitutes legal work beyond the scope of the mediation. While there appears to be no Wisconsin authority on point, this issue has been addressed in ethics opinions from other states.

For example, Utah Ethics Opinion 05-03 (2005) opined:

When a lawyer-mediator, after a successful mediation, drafts the settlement agreement, complaint, and other pleadings to implement the settlement and obtain a divorce for the parties, the lawyer-mediator is engaged in the practice of law and attempting to represent opposing parties in litigation.

Likewise, Ohio Ethics Opinion 2009-4 (2009) stated:

At issue is whether upon completion of a domestic relations mediation and preparation of a mediation report, a lawyer-mediator may prepare necessary legal documents, such as petitions, decrees, and ancillary documents, for filing by or on behalf of one or more of the parties to a domestic relations proceeding. Examples of these documents might be a Separation Agreement, Shared Parenting Plan, Petition for Dissolution of Marriage and Decree for Dissolution of Marriage, Ohio Child Support Guidelines Worksheets.

A domestic relations lawyer-mediator who goes beyond preparing the mediation report, which is required of the mediator by law and rule, into the preparation of necessary legal documents for filing by or on behalf of the parties to a domestic relations proceeding is engaging in a legal representation subsequent to the mediation.

These opinions reflect the generally agreed-upon consensus that the preparation of pleadings or other documents for filing in court constitutes the practice of law. While Wisconsin has no official definition of the practice of law,2 it seems very unlikely that the Wisconsin courts would take a different position on this issue. For example, in a recently released court of appeals decision, the court stated in a footnote that a nonlawyer county employee who prepared and submitted orders and accompanying affidavits for a judge’s signature on behalf of a county agency was engaged in the unauthorized practice of law.3

Given that the preparation of such documents almost certainly constitutes the practice of law and thus representation of one or more of the parties, the question becomes whether it is permissible for a lawyer-mediator to represent one or more of the parties to the mediation in the matter subsequent to the mediation.

The Comment, paragraph [4], to SCR 20:2.4 notes that conflicts arising from service as a third-party neutral are governed by Rule 1.12. SCR 20:1.12(a) reads as follows:

Except as stated in par. (d), a lawyer shall not represent anyone in connection with a matter in which the lawyer participated personally and substantially as a judge or other adjudicative officer or law clerk to such a person or as an arbitrator, mediator or other 3rd-party neutral.

Many of Wisconsin’s Rules are identical to their ABA Model Rule counterparts, but SCR 20:1.12 is different from ABA Model Rule 1.12 in one important respect. The prohibition contained in SCR 20:1.12(a) on acting as an advocate in a matter after having served in a adjudicative officer or third-party neutral is not, unlike ABA Model Rule 1.12 and the equivalent Rules of many states, subject to waiver by the parties, and this is why ethics opinions from other states will often note that a lawyer may provide representation subsequent to mediation with the consent of the parties. There is, however, no possibility in Wisconsin of circumventing the restriction of the Rule by seeking the consent of the parties involved in the matter.

SCR 20:1.12(a) serves as a complete ban on representation of one or more of the parties subsequent to the mediation and thus prohibits the preparation of such documents at the conclusion of mediation. However, it would not be unusual for parties in a divorce mediation to look to a lawyer-mediator for such assistance, and the question then becomes whether the lawyer-mediator can provide any assistance at the conclusion of the mediation.

First, neither SCR 20:2.4 nor SCR 20:1.12 prohibits the lawyer-mediator from providing a written report memorializing the agreement reached in mediation. Neither is the lawyer-mediator prohibited from referring the parties to resources for pro se individuals, such as courthouse-based assistance centers that may provide help with required forms. Thus, while the lawyer-mediator may not draft pleadings or other documents to be filed with the court on behalf of the parties to the mediation, the lawyer-mediator can provide the parties with a written summary of the mediation and direct them to other resources.

Further, SCR 20:1.12(c) provides as follows:

(c) If a lawyer is disqualified by par. (a), no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in the matter unless:

(1) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and

(2) written notice is promptly given to the parties and any appropriate tribunal to enable them to ascertain compliance with the provisions of this rule.

Thus, if the lawyer-mediator practices in a firm, conflicts arising from the role of mediator are normally imputed to every other lawyer in the firm. With the timely imposition of adequate screening measures, however, another lawyer may represent one of the parties.4 In a divorce, a lawyer may represent only one party because representation of both presents an unwaivable conflict of interest under SCR 20:1.7(b)(3). Such a conflict is unwaivable even if the lawyer’s representation is limited to preparation of documents.

The implications of this opinion goes further than into the context of family mediation.   What about in the context of civil litigation?  These opinions all discuss “pleadings and complaints.”  But what if the mediator only drafts the settlement document?  What if the mediator is only the scrivener and simply puts into words the terms set forth by the parties?  Also, what if the mediator provides a form document on which the settlement terms can be placed?  The language of the Wisconsin opinion obviously address very specific issues relating to family mediations.

Personally, I don’t think assisting the parties in putting the terms of the agreement together (especially when the parties are represented by their own counsel) is practicing law.  But I would be interested in hearing what you have to say.

By Steven G. Mehta

Many weeks during mediation, it appears that not a day will go by without having some overt demonstration of anger being shown by one of the participants during the mediation.  The question, however, is whether the anger has an effect on the negotiations.  Anecdotally, it cannot not have an effect.  The only issue is whether it can help to increase or decrease your negotiating position.

One study recently addressed this issue from a cultural perspective.  Researchers Hajo Adam and Aiwa Shirako evaluated whether culture affected how anger was percieved.  The research found that in a hypothetical negotiation scenario (Study 1) and a computer-mediated negotiation simulation (Study 2), expressing anger (relative to not expressing anger) obtained larger concessions from European/American negotiators, but smaller concessions from Asian and Asian American negotiators.  In both of the two studies, the anger was not appropriate to the circumstance.  However, when the anger was appropriate to the circumstances, Asian and Asian American negotiators made larger concessions to the angry opponent, and their concessions were as large as was typical for European American negotiators.  Across the board, the study found that anger elicited greater concessions from the Europeans and Americans.  This was in part based on the fact that expressions of anger are more accepted in the European and American culture.  The study also showed that expressions of anger can be very detrimental in negotiations with Asians.

The reality is that anger is a a very dangerous thing and the use of it can backfire more than it can create concessions.  Often, even in cultures that accept anger, it can lead to parties shutting down because of their emotional response to the anger.  This study proves that emotional reactions to the use of anger can have very real consequences to negotiations.

In my experience, the study may have it wrong as to the reasons for the concessions.  For example, with Euro/American participants, they are shocked by the use of anger.  They generally have one of two responses:  They shut down or they make greater concessions.  This could be because many Northern European cultures are not emotionally expressive cultures (as opposed to countries in Latin America or in the Middle East).   The Asian culture is also even more restrictive of emotional outbursts of anger.

There could also be a different effect when there is mediation versus direct negotiations.  Often the parties are more willing to express their anger to the third party mediator knowing that the full expression of that anger won’t be communicated to the other side.

It would be interesting to see the use of  anger with such emotionally expressive cultures and also to see how such anger worked in the context of a mediated case.

Research Source:

1. Hajo Adam1,
2. Aiwa Shirako2 and
3. William W. Maddux1

By Steven G. Mehta

It always fascinates me how the small things can make subtle differences in the way we make decisions.  I always think about these issues and how negotiators will make decisions.  One metaphor I recently thought about was the one of washing hands — I am washing my hands of it — That metaphor suggests that once you have washed your hands you will no longer worry about the matter.  Recently I came upon a study that shows a very interesting connection between washing hands and decision making.

Here are a few excerpts of an interview regarding the research:

MR. LEE:  Essentially people are focusing on the positive features of the chosen option and the relatively negative features of the rejected option. And as a consequence, they come to like the chosen option even more after they make the choice, compared to before they make the choice. This is called choice justification.

What our studies showed was that when people are not given a chance to wash their hands, they show this classic pattern, you know, as found in hundreds of previous studies. But once you give them a chance to wash their hands, they no longer have any choice justification tendency. They do not feel the need to say to themselves: I made a right choice.

FLATOW: Right, and you found that the act of washing your hands affects your choice. Does it make you rethink – or is it the act of just standing there, does it make you think about things, or does it make you focus on something else totally, like washing your hands, and that may affect your choice?

Mr. LEE: Right. It’s a very interesting thought. I think that it not only distracts you a little bit, I think that it does have this feeling of removing past concerns, and it allows you to sort of move on, and the reason is metaphorical connection.

Now, think back about the washing-away-your-sins metaphor. Psychologically what seems to be happening is that the physical experience of removing germs or dirt or contaminants on your hand is used to provide a basis for an abstract kind of experience, removing residues from your past immoral behaviors. So that’s in the case of morality.

Now, in the case of choice, it seems that when people are washing away things, physically washing away things off their hands, they’re also abstractly washing away mental residues from their past decisions. So I think that that is what’s going on, and that’s why it has the power of freeing people from concerns about past decisions.

FLATOW: So you’re saying it is the actual, the water that’s important here. So if you were distracted by playing with a Rubik Cube or chopping vegetables for dinner that night, you would not expect the same reaction, the same…

Mr. LEE: We would not expect the same reaction. You’re absolutely right. And in fact, in the honor group that did not wash their hands, in some ways they were distracted because they were looking at a bottle of hand soap, evaluating the, you know, how attractive they found the bottle of hand soap and so forth. So they were distracted by other thoughts.

FLATOW: So are you saying that this morality factor, is that built into us, washing our hands of something, or is it something that we learn and we pick up as we get older?

Mr. LEE: I think that there’s – chances are that people learn it, because the human mind works like this. There are thoughts that are intangible, they are very difficult to grasp. Morality is a complex phenomenon, and it seems that in the past few years there’s been increasing research suggesting that for complex ideas, abstract thoughts like these, we rely on the physical experience to help us make sense of them.

FLATOW: So don’t wash your hands.

Mr. LEE: It depends on the goal, though, because if all of a sudden our goal changes to a short-term goal of having a fair assessment of different options available on your table, then remember the original pattern of choice justification is that you focus on the positive features of the chosen option and the relatively negative features of the rejected option.

In other words, you have a more biased view of these available options. Washing your hands allows you to have a more accurate, fair assessment of these options. So if that’s the goal, washing your hands would do you a favor.

FLATOW: So if you’re not sure about your decision, and you want to rethink it, then you should go wash your hands.

Mr. LEE: I think so, to the extent that you have not committed yourself to a certain choice, because choice justification kicks in when you feel that you have committed yourself to certain, to one option already. Just like, you know, I’m going to buy this car now, and you start thinking to yourself, oh yeah, this car really is more attractive and the power and efficiency and so forth, right. But if you haven’t made that decision yet, I don’t think that choice justification, the mental work, has started occurring.

Too see the full interview, click on NPR here.

This research has some interesting consequences on mediation and negotiation research.  What if you had a person who was having buyer’s remorse after signing papers for a deal.  Part of the negotiation process is making sure that the client doesn’t second guess the decision and try to break the deal later.   How would washing hands work in that context?

As noted by the author, perhaps you might avoid washing hands when the decision is solid in the person’s mind, but try to encourage it when the decision isn’t.

I have also used other physical acts such as packing away written materials into an envelope and sealing it as a small way of trying to get people to have closure.  Perhaps there may be other ways also.

By Steven G. Mehta

For those of you interested in nursing home cases, a Sacramento Jury just awarded  $28 million to the family of an elderly person.  See the whole story at the Sacramento Bee.

By Steven G. Mehta

There have been several studies over the years that show that slight physical contact between two people interacting is good for the connectivity of the person.  However, I just saw an article that reflects that touching might increase risk taking.  Here is an abstract of the article:

We show that minimal physical contact can increase people’s sense of security and consequently lead them to increased risk-taking behavior. In three experiments, with both hypothetical and real payoffs, a female experimenter’s light, comforting pat on the shoulder led participants to greater financial risk taking. Further, this effect was both mediated and moderated by feelings of security in both male and female participants. Finally, we established the boundary conditions for the impact of physical contact on risk-taking behaviors by demonstrating that the effect does not occur when the touching is performed by a male and is attenuated when the touch consists of a handshake. The results suggest that subtle physical contact can be strongly influential in decision making and the willingness to accept risk.

To see the full article, click here

This research could have some interesting implications for female mediators.  It suggests that they should be conscious of “touch” because it could inadvertently affect the decision makers.  The good news, however, is that women have certain powers that men will never have and that science is only now learning about.

By Steven G. Mehta

Yesterday, I had a conversation with a District Attorney (DA)who was about my age about his shock at a new DA who wanted to lead the entire homocide unit within 3 years, and he expected to get a homocide case straight out of law school.  (This was a shock to my friend because you have to at least been with the DA’s office at least 6 years before you are assigned a homocide, and have to first do misdeameanors to cut your teeth.)  This discussion got me thinking about the Millennial generation — the Generation after GenX.  This generation has started to grow and get into the work force, and I have been increasingly thinking about how to interact with such generation.  In communicating with each person, you must take them individually, but you can also learn lessons on how to adapt to that person’s style if you wish to have better communications.  As negotiators, you have to be able to understand the audience so that you can present better to them.

As such, I decided to look into some information regarding millenials.  Here is an excerpt of an article I saw on the topic in pyschology today by Ronald Riggio, PH.D.

Part of successful leadership is adapting your leadership style or behaviors to address the qualities and needs of the followers – a component of the highly-effective transformational leadership. The emerging group of workers – who most are calling the “Millennial Generation” – born between 1980 and 2000, are a different breed than the generation before them (Generation X) and the Baby Boomers before them.

Here are the ways in which Millennials differ from their predecessors:

They are Technologically Savvy. Obviously. They grew up with PCs, the Internet, and i-phones. They embrace, rather than resist, new technology (as opposed to Boomers). AND, they are interconnected.Bully an employee and you will end up on eBosswatch, Rate My Boss, or another on-line “evaluation system” – and their 840 facebook friends will instantly know all about it, too.

They Play Well With Others. (Good in teams). Millennials are so networked that they are never truly alone. They can collaborate and aren’t afraid to ask others for assistance (as opposed to the do-it-alone, Gen Xers).

They Want the World (and They Want it Now). Millennials are hopeful, and cautiously optimistic. They are “civic-minded” and want to change the world and make it a better place, but they are impatient about it. Millennials grew up volunteering in school and elsewhere, so they are committed to social causes and to righting the world’s ills.

They Want Recognition and to Be Taken Seriously. Doted on and empowered by their parents, Millennials want their ideas to be heard. They want to participate in decisionmaking, and they don’t believe much in the authority hierarchy or in the idea of having to have “put in time” or “earn your stripes.”

They Want Employee-Centered and “Fun” Workplaces. With the tough job market, Millennials are realizing that they need to be creative, flexible, and innovative to support themselves. But, the thought of spending their lives in a traditional corporate environment is seen as a fate worse than death. Google and other cutting-edge organizations realize this and have developed creative, fun, and employee-centered environments to attract and retain the most talented Millennials.

So, how do you manage and lead Millennials?

Take into account their needs. Realize that they are creative and good at multi-tasking, but they need structure. In their creative hubbub, they might get lost without it. Take advantage of their tech-savviness and their ability to work together well.

Importantly, Millennials are idealistic and have a strong sense of what they want their leaders to be. In short, they want their leaders to be heroes (superhero movies are box-office winners with Millennials), who have integrity, and a sense of fairness and concern for employees. Leading the Millennial Generation successfully is going to be the key to success in the near future.

There are a variety of resources and an emerging body of research on Millennials. There is a great deal of attention to Millennials from colleges, libraries, and in the career and recruitment literature because most Millennials are still in school or just emerging into the workplace.

Here is a video from BNET that shows how to work with Millennials.

I also thought you might like to see a video created by Millennials regarding the same topic.

With this information, what are your thoughts as to how to communicate with millenials?

By Steven G. Mehta

How people view the negotiation can seriously affect the results that you achieve.  My wife and I have very different views about negotiation.  I thrive on it; she on the other hand views it as a necessary process.  I love the swap meet and the art of negotiating at garage sales, she prefers to not attend the garage sale at all and simply go to the mall.  That, however, might be her preference on shopping and not on negotiation.  A new study, however, verifies that the way people percieve negotiation will affect the outcome.

A recent paper evaluated a variety of studies on attitudes towards negotiations.  The studies revealed that when people know that they are about to negotiate, they view the impending negotiation as either a threat or a challenge. The study found that people who viewed the negotiation as a challenge fared better than the people who viewed it as a threat.  Threat percievers experienced more stress from the negotiation, and as a result made worse deals.  Part of the reason that they made worse deals is that they were less willing to take aggressive stances.  Obviously, this paper was limited in qualification in financial terms and not non-economic terms.

This study confirms a basic and fundamental principle regarding improving in anything.  Practice makes perfect.  The more people will practice at a negotiation, the better they will feel about the specific negotiation.  Moreover, practicing in all different environments, including the swap meet and garage sales, will help negotiators learn how to make tough calls during the mediation.

Further, the more that you negotiate, the less stressed you will be and the more willing you will be to take risks that just might pay off.

Finally, war gaming your specific important negotiation is also important.  You can play out the specific negotiation and see how the reaction may be.  You can test out hardball tactics, or what certain concessions might likely obtain in return.   In my book, I have written about wargaming, and you can learn more about practicing and preparation.  See, 112 Ways to Succeed in Any Negotiation or Mediation.

Research Source:  K. O’Connor, J. Arnold, & A. Maurizio (2010) The prospect of negotiating: Stress, cognitive appraisal, and performance.  Journal of Experimental Social Psychology.

By Steven G. Mehta

Just for fun, I thought you might like the argument clinic.  Here it is:

By Steven G. Mehta

I have started to read some material written by Jonah Lehrer, a contributing editor at Wired and author of Proust Was A Neuroscientist and the book How We Decide.  He has found some interesting research on different ways that we make decisions and how we come to such decisions.

In one of his posts on his blog, he discusses the research on how to prevent performance anxiety.  He described a study conducted by Daniel Gucciardi and James Dimmock, psychologists at the University of Western Australia, who studied 20 experienced golfers with handicaps ranging from zero to 12 as to what would help them perform better under pressure.  The researchers set three separate conditions. In the first, the golfers were told to fixate on specific components of their swing, such as “hips” or “straight wrist”. The second condition consisted of the golfers focusing on irrelevant words, such as “blue” or “white”. In the third, the golfers were told to focus on general aspects of their intended movement, or what the psychologists refer to as a “holistic cue word”.  Rather than evaluating their swing, they were told to think of things such as “smooth” or “balanced”.

The researchers found some very interesting results: First, anxiety only interfered with performance when it was combined with self-consciousness. Nervous golfers who thought about the details of their swing hit consistently worse shots. In other words, “thinking too much,” was detrimental to the swing.  The golf swing, like other things, is best performed on autopilot.  This was not a major breakthrough in the research, in my mind.

But the second finding was much more compelling.  The second result was that there was a way to ward off choking. When the expert golfers contemplated a holistic cue word, their performance was no longer affected by anxiety. Because the positive adjectives were vague and generic, those things that they were focusing on didn’t overrule their automatic brain and instinctual performance.

According to Lehrer, “this research suggests that the [motivational] pictures might actually work, at least to the extent they allow us to fixate on the cliche in capital letters. Thinking about “determination” won’t make us more determined, but it just might keep us from choking.”

Now how does a golf swing help us become better mediators or negotiators?  The same concept applies in mediation and negotiation.  Much of what mediators and lawyers do is based on instinct and feel.  There is no set rule of what must be done in a specific circumstance.  There is no rule that when a party screams that they are going to walk unless the other side capitulates that you must use maneuver number 36.

In fact, when I have conversations with many mediators and attorneys regarding mediation, one of the biggest fears is the fear of failure.  Other fears include the fear of making the wrong move, the fear of alienating the other side, the fear of not being liked, the fear that the client won’t do business with you again.  All of those fears help a party to choke in the middle of mediation.

Just as in golf, it won’t be that you don’t do anything at all or not swing, it will be that you make a move or take action that could create impediments to settlement – or in golf, that you might slice the ball, or hit the ball badly.

To take the football analogy, even if there are set plays.  The quarterback on the field must have the flexibility to call an audible.  Mediators and negotiators are calling audibles all day long.  When a party makes such a demand, the mediator cannot respond with a conscious decision process that goes through all the various options and negotiating techniques in the span of half a second.  Something must be done, and it must be done now.  In that same regard, mediators and negotiators are like athletes.  They must have the tools already in place.

Thinking of a specific negotiating strategy, or worrying what the party will think if you do something, or worrying if the party will approve of this action, or worrying if you will settle the case, and many other specific thoughts regarding the mediation process will not help you in the negotiation.  Indeed, even thinking about those actions before hand can be detrimental to the process.

Just as I have written in prior posts about being mindful and clearing your head, it is important to not focus on the specific negotiating strategy or techniques right before a mediation.  Instead, if you focus on abstract ideas such as “peace,” “resolution,” “closure,” and focus on the end result “settlement,” you just may find that you will get better results.

By Steven G. Mehta

I have for a long time been thinking about how to create a window in a windowless environment.  Perhaps I have seen too many science fiction movies where you can change the scene at will.  I even joked with my friend and told her that I could live by the beach with a HD videoscreen that will be mounted against my wall as a window that shows images of the ocean.

The reason for wanting to create such an environment is simple.  Everyone wants a window — including in mediation.  People enjoy the diversion of the window and often in long days the window gives people a soothing way out.

Well I just found a magnificent tool that allows you to create a window in ANY room.  Have a look.

The end result is awesome, but it does cost some major bucks, time, and effort, as well as some electronic know how.  But the time is coming soon where it will be totally mainstream and I will have my window in my windowless conference rooms.  Meanwhile, I must say, that I must go and I bid you to live long and prosper.

By Steven G. Mehta

What will a mother in Missouri, a parent in California, and a mediator in San Francisco do with the case of embryonic mediation? A news story out of the San Francisco Chronicle reported on the story of a couple in California that contractually gave embryos to a midwestern couple for adoption/donation.  Here is the story:

The Pleasanton family and suburban St. Louis family who have been battling for control of two frozen embryos have agreed to suspend their lawsuits against each other in favor of mediation.

Both sides are expected to meet with a private mediator in three weeks in California.

“The hope is they can sit down and talk like adults and come up with a solution to the problem,” said Kathryn Jamboretz, the spokeswoman for Patrick and Jennifer McLaughlin of Kirkwood, Mo.

“Neither of these families is really wealthy,” she continued. “The idea is to not run up huge legal bills and to sit down at the table to talk face-to-face.”

The unusual legal dispute stems from four frozen embryos that were donated – or as both religious families consider it, put up for adoption – by Edward and Kerry Lambert of Pleasanton. The embryos were left over from an in-vitro fertilization procedure that produced their son in 2007.

Kerry Lambert and Jennifer McLaughlin connected via a Web site designed to facilitate embryo donation rather than have them discarded or donated to science.

The couples signed a contract in February 2009 granting custody to the McLaughlins. It included an unusual clause that if the embryos weren’t used within a year, the Lamberts could revoke the agreement.

The McLaughlins, already parents to five children through adoption, had twin daughters using two of the embryos on Jan. 8. Jennifer McLaughlin said she delayed deciding what to do with the other two embryos until she saw how raising seven children would go.

She has since decided she wants to give birth to the last two, but in the meantime heard from the Lamberts that they wanted to give the two embryos to a different family. The Lamberts have declined to talk to the media, and it’s unclear why they decided to reclaim the embryos.

The embryos are being stored at a San Ramon fertility clinic until a decision is reached.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/04/15/BARD1CVCJT.DTL#ixzz0lGwUk7na

It seems — much like many legal disputes — the law seems to be clear and ambiguous at the same time. (based on the news story).  More than a year has gone by.  It is possible that the Missouri couple could argue that the contract is an all or nothing proposition — meaning that once they started to have two of the children the contract couldn’t be revoked.   There are many laws that might apply.  Missouri, California, or possible Federal interstate commerce.

But the more important question in my mind is what is going on in the clients’ heads.  Does the religious issue have something to do with this new change in position?  What are the reasons for Missouri family wanting 9 children?

Also, does the spokesperson’s comment about money guide us as to the real issues?

So, if this was the mediation brief and you were about to mediate the case, what would you do to prepare for this mediation?

By Steven G. Mehta

There has been a new case in California regarding mediation confidentiality.  The gist of the case is to create an exception to confidentiality for communications between an attorney and her client — especially for purposes of malpractice claims.

Here is the full text of the case.

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

JOHN PORTER et al.,

Plaintiffs and Appellants,

v.

STEVEN WYNER et al.,

Defendants and Respondents.

B211398

(Los Angeles County

Super. Ct. No. BC347671)

APPEAL from an order of the Superior Court of Los Angeles County. Warren L. Ettinger, Judge. Reversed and remanded.

Sauer & Wagner, Gerald L. Sauer and Laurie B. Hiller for Plaintiffs and Appellants.

Robie & Matthai, Kyle Kveton & Leah K. Bolea; Wyner & Tiffany, Steven Wyner and Marcy J.K. Tiffany for Defendants and Respondents.

___________________________

Introduction

Plaintiffs and appellants John Porter and Deborah Blair Porter (the Porters) appeal an order granting a motion for new trial in favor of defendants and respondents, Steven Wyner and Marcy Tiffany (Wyner Tiffany) following a jury verdict that (1) awarded Mrs. Porter $211,000 in back wages and the Porters $51,000 for breach of an attorney fee agreement; and (2) rescinded a release the Porters gave Wyner Tiffany regarding tax advice.

Wyner Tiffany had previously represented the Porters in a separate lawsuit brought by the Porters against the Manhattan Beach Unified School District and the California Department of Education. The instant lawsuit arose as a result of Wyner Tiffany’s failure to follow through on a promise that was allegedly made to the Porters during a mediation of that underlying action wherein Wyner Tiffany promised to pay the Porters certain proceeds from their attorneys’ fees. Though Wyner Tiffany initially objected to the admissibility of the communications made during the mediation of the underlying lawsuit, they later withdrew the objection. At trial, evidence of the communications between Wyner Tiffany and the Porters with respect to the promises made at the mediation were admitted. Approximately a month after the trial court entered judgment, it granted a motion for new trial because it believed the then newly decided case of Simmons v. Ghaderi (2008) 44 Cal.4th 570 (Simmons), mandated such a result.

Appellants claim the trial court erred in granting the new trial, as the communications between an attorney and its client do not fall within the purview of mediation confidentiality. Wyner Tiffany contend the trial court properly granted their motion for a new trial because the jury’s consideration of confidential mediation communications created an irregularity in the proceedings statutorily mandating a new trial. Wyner Tiffany also cross-appeal, contending the trial court erred in ruling their motion for a judgment notwithstanding the verdict (JNOV) was moot.

We reverse the order granting a new trial and remand the matter back to the trial court to rule on the JNOV.

FACTS

1. Underlying Action

Wyner Tiffany are partners in a law firm that focuses on educational rights of disabled students. In 1999, the Porters retained Steven Wyner, then a sole practitioner, to assist in obtaining special education services for their son. Wyner filed a lawsuit in the federal district court (the underlying action) on behalf of the Porters and their son against the Manhattan Beach Unified School District (District) and the California Department of Education (Department). The district court dismissed the underlying action, but that dismissal was reversed by the Ninth Circuit Court of Appeals. (Porter v. Board of Trustees of Manhattan Beach (9th Cir. 2002) 307 F.3d 1064.)

After the reversal, Wyner obtained for the Porters a partial summary adjudication on liability and the appointment of a special master to oversee the Porter child’s education.

2. Mediation and Settlement

Wyner Tiffany then brought a second motion for partial summary judgment on the Porters’ behalf. Just before the second motion for partial summary judgment was to be heard in April 2005, the parties in the underlying action participated in a private mediation conducted by a retired judge.

The District and the Department were represented by their individual counsel of record and by attorney Robert Feldhake, acting as chief negotiator for the defense. Nineteen persons, excluding the mediator, signed a confidentiality agreement prepared by the mediation service. The confidentiality agreement expressly provided that the provisions of California Evidence Code sections 1115 through 1128 and 703.5 would apply to the mediation.

At the conclusion of the mediation session, the District and the Department signed a stipulation for settlement in which they agreed to fund up to $1,131,650 for the education of the Porters’ son, to be overseen by the special master, and to pay $5,600,000 for general damages, special damages, attorney fees and costs. Although it was not separately broken out in the stipulation, Wyner Tiffany and the Porters came to an understanding that $1,650,000 of the settlement would be allocated to attorney fees and costs. The stipulation for settlement did not include any provision waiving mediation confidentiality for purposes of enforcement, and proposed provisions for waiving mediation confidentiality were crossed out in the printed form.

3. Negotiation of Definitive Settlement Documents

Over the next three months, the parties negotiated over the form of the definitive settlement agreement.

A. Retention of Tax Attorney

A few days after the mediation meeting, Wyner Tiffany became aware of a possibility that the settlement proceeds the Porters were to receive might be taxable, and they so informed the Porters. Wyner Tiffany recommended that the Porters retain Robert Wood, an attorney who specialized in providing tax advice on litigation payments, to help structure the settlement. The Porters expressed their agreement, and, in early May 2005, Wyner Tiffany retained Wood to provide advice on minimizing the tax consequences of the settlement.

B. Agreement to Share Responsibility for Tax Attorney’s Fees

In July 2005, the Porters signed an agreement whereby, in exchange for Wyner Tiffany paying one half of Wood’s fees, the Porters agreed to release Wyner Tiffany from liability for any tax advice given the Porters. Wyner Tiffany funded Wood’s initial retainer.

4. Formal Settlement

In early August 2005, the parties to the underlying action executed a formal settlement agreement encompassing the terms negotiated at the mediation meeting. Under the definitive settlement agreement, the District and the Department agreed to deposit $1,131,650 in the special master’s fund, pay $1,580,000 into a special needs trust being established for the Porters’ son, pay $2,370,000 into an existing Porter family trust and pay Wyner Tiffany $1,650,000 for attorney fees and costs.

Paragraph 19 of the settlement agreement recited: “Upon the full execution of this Agreement, the Parties, and each of them, waive the terms and provisions of that certain Judicial Arbitration Mediation Service Confidentiality Agreement (California), dated April 26, 2005. The Parties acknowledge and agree that the terms and provisions of this Agreement are not confidential.”

The Porters and Wyner Tiffany in the underlying action signed the settlement agreement as parties. Wyner signed at the end of the agreement on behalf of Wyner & Tiffany under the words, “APPROVED AS TO FORM.”

The district court approved the settlement, including the payment of attorney fees, and issued a stipulated dismissal of the underlying action.

The settlement sums were deposited and paid by Wyner Tiffany in the underlying action as stipulated.

5. Subsequent Attorney-Client Dispute

After the underlying action was concluded, a dispute arose between the Porters and Wyner Tiffany over several matters, including Wyner Tiffany’s failure to reimburse the Porters for the attorney fees and costs the Porters had previously paid and Wyner Tiffany’s alleged rendering of incorrect tax advice to the Porters regarding settlement proceeds. The Porters also claimed Wyner Tiffany failed to pay Mrs. Porter for services she rendered as a paralegal in the underlying action out of the $1,650,000 Wyner Tiffany received in the settlement.

Wyner Tiffany asserted they were not required to reimburse the Porters for attorney fees and costs the Porters previously advanced because the amount Wyner Tiffany received under the settlement was less than the amount they could have claimed under a contingency fee provision in their retainer agreement. Wyner Tiffany further asserted they were not required to pay Mrs. Porter’s fees as a paralegal from Wyner Tiffany’s portion of the settlement because Mrs. Porter had been fully compensated for her loss of wages in the settlement.

PROCEDURAL HISTORY

1. Complaint and Cross-Complaint

In February 2006, the Porters filed the present action against Wyner Tiffany in the superior court. A second amended complaint asserted claims including legal malpractice, breach of fiduciary duty, constructive fraud, negligent misrepresentation, breach of fee agreement, rescission, unjust enrichment and liability for unpaid wages.

Wyner Tiffany filed a cross-complaint against the Porters. The cross-complaint purportedly included a claim by Wyner Tiffany against the Porters for breach of the tax advice and release agreement under which the Porters had promised to pay one-half of attorney Wood’s fees and costs.

2. Objections Based on Mediation Confidentiality

Wyner Tiffany moved to strike all allegations in the second amended complaint concerning communications at the mediation of the underlying action. That motion was denied by the trial court.

Wyner Tiffany also objected during discovery to the disclosure or use of any information relating to the mediation of the underlying action. The trial court denied the motion to compel further response solely on the ground that Wyner Tiffany’s existing responses and objections were sufficient.

At the beginning of trial, Wyner Tiffany brought a motion in limine asking the trial court to bar the admission of any evidence subject to mediation confidentiality.

The Porters opposed the motion to exclude such evidence. They maintained that all signatories to the settlement agreement had expressly and voluntarily waived mediation confidentiality and that Wyner had executed the settlement agreement on Wyner & Tiffany’s behalf. The Porters argued that even if Wyner Tiffany had not waived mediation confidentiality, it would be unjust, when there is a claimed breach of duty arising out of the attorney-client relationship, to allow a client or an attorney to bar the other from producing pertinent evidence.

The Porters urged the trial court to apply section 958 to preclude application of mediation confidentiality to communications between attorney and client. The Porters additionally contended that Wyner Tiffany had waived the mediation “privilege” pursuant to section 912 by producing without coercion during discovery documents “prepared for the purpose of, in the course of, or pursuant to” the mediation, such as Wyner’s handwritten mediation notes and his copy of the stipulation for settlement. The Porters further claimed Wyner Tiffany had relied on the very documents they were seeking to protect in pleadings filed with the court, such as a response to a separate statement in support of a motion to compel further responses to written discovery.

3. Withdrawal of Motion in Limine

In a conference with the judge prior to trial, counsel for Wyner Tiffany withdrew the motion in limine, stating the withdrawal was “[b]ased on the arguments that were made and raised by the [Porters] in their opposition, including the issue of waiver by all participants, and the waiver in the final settlement agreement.” The court therefore allowed counsel to reopen discovery to allow witnesses to answer questions to which objections had been interposed based on mediation confidentiality, “[s]ince [respondents] have waived it and since we all agree.”

4. Trial and Verdict

At trial, the Porters testified to communications that occurred with respect to, in the course of or pursuant to the mediation and introduced documentary evidence of mediation communications.

Both Wyner and Tiffany were called by the Porters as adverse witnesses during the Porters’ case-in-chief. Wyner Tiffany were questioned by the Porters’ counsel regarding mediation negotiations. Wyner Tiffany were then examined by their own counsel in rebuttal to the Porters’ claims and in support of Wyner Tiffany’s cross-complaint. Wyner testified his notes of the mediation expressly indicated the Porters made an initial settlement demand and such amount included Mrs. Porter’s lost wages. Wyner also testified that, several days after the agreement to settle at the mediation, he and Mrs. Porter discussed with tax attorney Wood the advisability of her reporting some of the settlement as income to the Internal Revenue Service. Tiffany testified that the settlement agreement covered all of the claims brought by the Porters, which included Mrs. Porter’s loss of wage claim.

In March 2008, the jury returned a verdict awarding the Porters a total of $262,000, plus interest. The jury found that Wyner Tiffany owed Mrs. Porter $211,000 in back wages for her services as a paralegal and the Porters $51,000 for breach of the attorney-client fee agreement. The jury also determined the tax advice and release agreement between Wyner Tiffany and the Porters should be rescinded. The jury found, however, that Wyner Tiffany did not breach any fiduciary duty and were not liable to the Porters for constructive fraud, negligent misrepresentation or unjust enrichment.

As to the cross-complaint, the jury found the Porters did not breach the tax advice and release agreement regarding their obligation to pay attorney Wood’s fees and costs.

The trial court entered a judgment based on the verdict in June 2008.

5. Motions for New Trial and JNOV

About a month later, in July 2008, the California Supreme Court issued its opinion in Simmons, supra, 44 Cal.4th 570, and Wyner Tiffany moved for a new trial on ground that they were prevented from having a fair trial because of an irregularity in the proceedings. In support of the motion for new trial, Wyner Tiffany cited Simmons, arguing evidence concerning mediation in the underlying action was improperly placed before the jury. At the same time, Wyner Tiffany filed a notice of motion for JNOV, and presumably a motion was filed afterwards indicating the points and authorities in support thereof, but it was not made part of the record on appeal.

Based on Simmons, the trial court granted the motion for new trial. The court orally stated the Simmons case “makes it mandatory for me to grant a motion for new trial,” adding, “I don’t need to go into any of the other matters because I think they are all subsumed under the rationale of the California Supreme Court.” The court’s minute order stated simply that the motion for new trial is granted “pursuant to Simmons” and ordered the judgment set aside and vacated.

6. Appeal and Cross-Appeal

The Porters timely appealed from the order granting a new trial and setting aside and vacating the judgment. Wyner Tiffany cross-appealed from the trial court’s ruling that their motion for judgment notwithstanding the verdict was moot.

CONTENTIONS

In their appeal, the Porters contend Simmons provides no proper ground to order a new trial and that the grant of a new trial was procedurally improper on numerous additional grounds. They further contend that substantial evidence supported the jury’s verdict with respect to their claims for breach of contract and for rescission.

On cross-appeal, Wyner Tiffany contend the trial court should have granted their motion for JNOV as to Mrs. Porter’s wage claim against Wyner Tiffany, the Porters’ claim for rescission and refund of attorney fees and costs, Wyner Tiffany’s claim for breach of contract against the Porters and a claim Wyner Tiffany asserted for conversion of documents and electronic records against Mrs. Porter.

STANDARD OF REVIEW

Orders granting a new trial generally are reviewed under the deferential abuse of discretion standard. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 859.) However, “any determination underlying any order is scrutinized under the test appropriate to such determination. [Citations.]” (Ibid.) When a trial court grants a motion for new trial based on an error of law occurring in the trial, the determination is reviewed de novo. (Id. at p. 860; Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th 109, 130.) Where a trial court grants a new trial solely upon an erroneous concept of legal principles applicable to the case, its order is appropriately reversed. (Maher v. Saad (2000) 82 Cal.App.4th 1317, 1323.)

“A motion for judgment notwithstanding the verdict may be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence in support. [Citation.]” (Sweatman v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68.) We review the record to ascertain whether substantial evidence supports the jury’s verdict and the trial court’s decision, i.e., whether the plaintiffs proved every element of their cause of action. (Stubblefield Construction Co. v. City of San Bernardino (1995) 32 Cal.App.4th 687, 703; see also OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 845.)

DISCUSSION

Appeal

I. The Communications Between An Attorney And Client Are Not Within Mediation Confidentiality

Section 1119, subdivision (a) provides that evidence of anything said or admissions made “for the purpose of, in the course of, or pursuant to,” the mediation process is not admissible or subject to discovery in any civil action. The same limitations apply to any writings prepared pursuant to or in connection with a mediation proceeding. (§ 1119, subd. (b).) Further, all communications, negotiations, or settlement discussions by and between participants in the course of a mediation is to remain confidential. (§ 1119, subd. (c).) “Neither a mediator nor anyone else may submit to a court or other adjudicative body, and a court or other adjudicative body may not consider, any report, assessment, evaluation, recommendation, or finding of any kind by the mediator concerning a mediation conducted by the mediator, other than a report that is mandated by court rule or other law and that states only whether an agreement was reached, unless all parties to the mediation expressly agree otherwise. . . .’ (§ 1121.) These protections continue to apply even after a mediation ends. (§ 1126.)

Our Supreme Court has declared: “The legislative intent underlying the mediation confidentiality provisions of the Evidence Code is clear. . . . [T]he purpose of confidentiality is to promote ‘a candid and informal exchange regarding events in the past. . . . This frank exchange is achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes.’ [Citations.]” (Foxgate Homeowners’ Assn. v. Bramalea California, Inc. (2001) 26 Cal.4th 1, 14.) The court has also explained that “confidentiality is essential to effective mediation, a form of alternative dispute resolution encouraged and, in some cases required by, the Legislature. Implementing alternatives to judicial dispute resolution has been a strong legislative policy since at least 1986.” (Ibid.; see also Rojas v. Superior Court (2004) 33 Cal.4th 407, 415 (Rojas).)

A review of the legislative history for section 1152 (offer to compromise), on which section 1119 is based, underscores the Legislators’ understanding and intent regarding the scope of confidentiality of settlement discussions. “Under existing law as set out in the Evidence Code, offers to compromise a claim made by a party to an action are not admissible into evidence to prove liability of that party.” (Sen. Quentin Kopp, letter to Governor Deukmejian re SB 450, Aug. 26, 1987, italics added.)

The purpose, policy and intent behind mediation confidentiality is to protect the free flow of communication and ideas (e.g. demands/offers) that form the basis and structure of a successful resolution process. The confidentiality that is accorded mediation was never intended to protect communications or agreements between a client and his own counsel should a conflict arise between them. The attorney-client privilege, codified in section 954, already provides the necessary protection. Section 958, through its waiver procedure, allows a client to seek appropriate recourse should something occur that places him and his attorney on a conflict course. It provides that there is “no privilege” that covers “a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship.” (§ 958.)

If the mediation confidentiality sphere were to be extended to the attorney-client relationship it would render section 958 a nullity. The mediation process and its attendant confidentiality would trump the attorney-client privilege and preclude the waiver of it by the very holder of the privilege. This would create a rather anomalous situation wherein a well established and recognized privilege and waiver process is thwarted by a non privileged statutory scheme designed to protect a wholly different set of disputants. We do not believe that legislative intent, existing evidence code statutes, and case precedent surrounding the mediation process were meant to abrogate section 958.

To expand the mediation privilege to also cover communications between a lawyer and his client would seriously impair and undermine not only the attorney-client relationship but would likewise create a chilling effect on the use of mediations. In fact, clients would be precluded from pursuing any remedy against their own counsel for professional deficiencies occurring during the mediation process as well as representations made to the client to induce settlement. The confidentiality aspect which protects and shrouds the mediation process should not be extended to protect anything other than a frank, candid and open exchange regarding events in the past by and between disputants. It was not meant to subsume a secondary and ancillary set of communications by and between a client and his own counsel, irrespective of whether such communications took place in the presence of the mediator or not.

To support this conclusion, we turn to the definition of mediation, found in section 1115, subdivision (a). It provides, “ ‘[m]ediation’ means a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement.” Indeed, the California Law Revision Commission, when it drafted the mediation confidentiality provisions in the Evidence Code, advised the Legislature and the Governor that it sought to “clarify[] the application of mediation confidentiality to settlements reached through mediation” because “[c]larification is critical to aid disputants in crafting agreements they can enforce.” (Recommendation: Mediation Confidentiality (January 1997) 26 Cal. Law Revision Com. Rep. (1996) p. 409, italics added.) The communications at issue here are not communications between disputants and a mediator. The disputants in a mediation process are not the attorney and his client; they are the parties who file the lawsuit. A mediation is not conducted to resolve a dispute between a lawyer and the client the attorney represents. The communications in the attorney-client relationship like the ones at issue in this case fall outside those to which the confidentiality applies.

In our view, communications between an attorney and their client cannot be considered “for the purpose of, in the course of, or pursuant to, . . .” a mediation. (§ 1119, subd. (a).) Communications between a client and an attorney are made to facilitate the passing of critical information about the facts of a case to a lawyer who can sort out their legal significance and use them to advocate his client’s behalf. The discussions between them are made for the sole purpose of resolving the party’s lawsuit in a manner that is as advantageous as possible to the client.

If a broader definition were given to the words “for the purpose of a mediation” it is difficult to determine where the demarcation line might be drawn as to those communications between an attorney and his client that are for mediation and those that are not. Indeed, mediations are fluid, and a variety of unpredictable matters may become relevant and used by an attorney in a mediation as a means to resolve a particular dispute. In a mediation, something a client told an attorney months or years earlier might become relevant when the opposing side begins to reveal its strategy and the attorney is called upon to refute its significance or strength as evidence. As a result, an attorney might bring up all types of communications a client had with him in the course of a mediation. If communications between an attorney and his counsel are considered “for the purpose of mediation,” virtually every discussion between an attorney and his client during the course of representation could be considered as falling within that definition because any discussion may be used for a mediation purpose down the line. For the same reason, such communications cannot be considered to be “pursuant to a mediation.” (§ 1119, subd. (a).)

Likewise, communications between an attorney and his own client cannot be considered to be “in the course of” a mediation, and as such prohibited from disclosure by section 1119. If this were to occur, attorneys advising their clients to enter into mediation would be obligated to advise them of the effect, consequence and ramification of the confidentiality shroud. In certain circumstances this would enable confidentiality to be used as both a sword and shield by an attorney during the representation process. Specifically, a client who embarks upon the mediation process would face losing any recourse against his attorney for any breached side agreements, representations and deficiencies that might take place or come to light during the mediation.

Aside from the attorney-client communications, testimony was also introduced at trial about the communications between and among the mediation participants. Mrs. Porter herself testified in direct examination concerning the Porters’ meeting with the mediator and with lead opposing counsel during the mediation. Mrs. Porter testified that the Porters met with the mediator and the mediator at one point during the mediation and were told that Wyner in the underlying action were concerned about a “double-dipping” issue relating to her lost earnings claim. She testified that afterwards, Wyner advised her to resolve this issue by dropping her lost earnings claim. She claimed he assured her she would be paid out of the attorney fee recovery and that she waived her lost earnings claim after receiving this assurance from Wyner. The Porters introduced contemporaneous notes Mrs. Porter had made that tracked the course of mediation. Mrs. Porter also testified regarding various spreadsheets that were used during the mediation, which reflected the offers and counteroffers both sides made during the negotiations.

However, because we have concluded that the mediation confidentiality statutes only apply to disputing parties and not to a client and his attorney, even though conversations took place with the mediator or opposing counsel present, it still leads to the result that they need not have been excluded from trial. Wimsatt does not compel a different result. The issues in Wimsatt were similar to those presented here: the client in a legal malpractice action alleged that just before a mediation was to occur, his attorneys breached their fiduciary duty by lowering the amount of the client’s settlement demand without the client’s consent or knowledge. (Wimsatt, supra, 152 Cal.App.4th at p. 144.) The communications at issue referred to an alleged $1.5 million settlement demand made by the plaintiff’s attorney to at least one of the defendant’s attorneys. (Id. at pp. 147, 158.) The attorney was successful, in part, in securing a writ of mandate requiring the trial court to vacate a denial of a protective order sealing the communications as within the purview of mediation confidentiality. (Id. at pp. 148-149.) When determining that many of the statements should have been subject to a protective order, the Wimsatt court held that “[t]he stringent result we reach here means that when clients . . . participate in mediation they are, in effect, relinquishing all claims for new and independent torts arising from mediation, including legal malpractice causes of action against their own counsel. Certainly clients, who have a fiduciary relationship with their lawyers, do not understand that this result is a by-product of an agreement to mediate.” (Id. at p. 163.) However, Wimsatt did not hold that that the mediation confidentiality rule bars every communication with a party’s attorney simply because the communication took place during a mediation. In Wimsatt, the court determined that statements in mediation briefs and emails should be protected from disclosure, but that statements made by counsel regarding the settlement value of his client’s case, were not covered by mediation confidentiality because the moving party had failed to show there was a readily identifiable link to the mediation confidentiality.

In this case, Porter and Wyner did not demonstrate to the trial court that each of the communications admitted at trial had an identifiable link to mediation confidentiality. This step was never undertaken since they withdrew their objection to all potentially confidential evidence before trial began. Even if we were to analyze the statements now, the critical conversations admitted in this case were that Wyner advised Porter to drop her lost earnings claim that he assured her she would be paid out of the attorney fee recovery, and that she waived her lost earnings claim after receiving this assurance from Wyner. Those statements were not made in the presence of the mediator; they were discussions solely between an attorney and his client. That Porter and Wyner were able to reach a side agreement about paying her fees may have facilitated a final resolution of the underlying case between the Porters and the District, but any discussions about that side deal were not between disputants to the mediation.

The trial court granted its motion for new trial based on the Simmons case, but in light of our analysis, we find it does not compel that result. In Simmons, our Supreme court determined that the doctrine of estoppel does not create an exception to mediation confidentiality. In that case, a settlement allegedly was reached during mediation with the plaintiffs on a defendant doctor’s behalf. When the defendant was informed the case had settled, she declared she was revoking her consent and refused to sign the settlement agreement. (Simmons, supra, 44 Cal.4th at p. 575.) Plaintiffs then sought to enforce an alleged oral settlement. (Id. at p. 576.) During pretrial proceedings, in the course of arguing that no enforceable contract was formed during mediation, the defendant had stipulated to, and submitted evidence of, events that had occurred during mediation. (Id. at pp. 574, 576.) However, at trial the defendant for the first time asserted that the mediation confidentiality statutes precluded the plaintiffs from proving the existence of an oral settlement agreement. (Id. at p. 577.)

A divided Court of Appeal panel held the defendant estopped from claiming mediation confidentiality because she had presented evidence of occurrences at the mediation and failed to object to plaintiffs’ use of such facts during pretrial motions. (Simmons, supra, 44 Cal.4th at p. 577.) The California Supreme Court reversed and held that the mediation confidentiality statutes must be strictly enforced. (Id. at p. 581.)

The Supreme Court noted the Court of Appeal majority had relied on the doctrine of estoppel ostensibly to “ ‘prevent a litigant from tardily relying on mediation confidentiality to shield from the court facts which she had stipulated to be true and had extensively litigated without raising such a bar.’ ” (Simmons, supra, 44 Cal.4th at p. 582.) But the Supreme Court agreed with the dissenting appellate justice that “ ‘[b]y focusing on estoppel, the majority in essence [was] attempting to create a new exception to the comprehensive scheme.’ ” (Ibid.) The court declared, “Except in cases of express waiver or where due process is implicated, we have held that mediation confidentiality is to be strictly enforced.” (Id. at p. 582.)

Though we understand where the trial court might have been worried that the present facts were similar to the Simmons case given that the Wyner and Tiffany withdrew any objection to the mediation privilege before trial began, it provided no ground to order a new trial.

Here, the communications between the Porters, on the one hand, and Wyner and Tiffany, their attorneys, on the other hand were not within the purview of the mediation confidentiality statutes in the first instance. We recognize that the broad policy of mediation confidentiality is to be strictly enforced and implied exceptions have not been met with acceptance by the California Supreme Court. However, the communications that have been denied protection here do not fall within the statute and no exception has been created. Quite the contrary, here we simply decline to extend the confidentiality component to a relationship neither envisioned nor contemplated by statute.

Cross-Appeal

Wyner Tiffany’s cross-appeal asserts that this court should direct the trial court to enter judgment in their favor as to various claims asserted by the Porters and by Wyner Tiffany in their cross-complaint. Wyner Tiffany argue that Mrs. Porter premised a specific claim upon her alleged oral agreement during mediation to waive the claim based on certain assurances. Accordingly, Wyner Tiffany urge, the Porters are precluded from disclosing even the existence of this purported agreement if evidence of occurrences during mediation is excluded. The Porters rejoin that, even if this court discounts the evidence pertaining to the mediation, substantial evidence wholly unconnected to the mediation supports the jury’s verdict and precludes a JNOV.

In light of our determination that the evidence of communications between the Porters and Wyner Tiffany was properly admitted at trial to prove up their “side” agreements, we find that the competing arguments regarding the motion for JNOV are off the mark on both sides. The issue at this point is whether Wyner Tiffany are entitled to JNOV, given an examination of the trial record, including the evidence of attorney-client communications.

Because the Porters’ additional claims did not rely exclusively on evidence subject to the mediation confidentiality provisions and because a substantial portion of Wyner Tiffany’s showing in support of their cross-appeal relies on evidence of discussions and communications during the mediation meeting itself and during negotiations over the form of the definitive settlement agreement, matters subject to mediation confidentiality, we find the JNOV should be addressed in the first instance by the trial court.

Unlike Simmons, in which the court found the mediation confidentiality statutes made inadmissible all evidence of an oral contract and no possibility existed that the plaintiffs could prove the only claim they had asserted, we are faced with a different context. The trial court in Porters’ current case must address the admissibility of evidence within the scope of mediation confidentiality under the principles we have referenced out in this opinion, and determine whether the Porters proved their case. If they did, JNOV should be denied; if they did not, JNOV should be granted.

DISPOSITION

The order granting a new trial is reversed. The cause is remanded to the trial court to rule on the JNOV based upon a review of the entire trial record including admissible attorney-client communications. The parties are to bear their own costs on appeal.

CERTIFIED FOR PUBLICATION

BIGELOW, P. J.

I concur:

RUBIN, J.

Flier, J., Dissenting

I respectfully dissent.

The “critical conversation[]” (see maj. opn., p. 16) (hereafter sometimes the “Wyner-Porter conversation”) in this case was when Wyner told Porter to drop her lost earnings claim and when, as part of that same conversation, Wyner assured Porter that she would be paid out of the attorney fee recovery; Porter then waived her lost earnings claim.

The only reason the Wyner-Porter conversation took place was because a mediation was taking place and efforts were being made to settle the case in this mediation. In other words, the Wyner-Porter conversation took place because there was a mediation and this conversation represented an effort to bring the mediation to fruition.

Evidence Code section 1119, subdivision (a) provides in relevant part that “[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible.” The purpose of the Wyner-Porter conversation was to move the mediation along, it took place in the course of the mediation and it was pursuant to the mediation because that was the only reason the conversation took place.

The majority opinion concludes that Evidence Code section 1119, subdivision (a) does not apply because “[c]ommunications between a client and an attorney are made to facilitate the passing of critical information about the facts of a case to a lawyer who can sort out their legal significance and use them to advocate [on] his client’s behalf.” (See maj. opn., p. 14.) This is true as a general proposition but this is not what happened during the Wyner-Porter conversation. Porter was not giving Wyner the facts of the case; Wyner and Porter were discussing whether Porter should drop her loss of earnings claim in return for the promise that Wyner would cure the resulting deficiency from his fees. And the mediation was the only reason this conversation was taking place.

The majority opinion states that it will be difficult to draw the lines between those attorney-client communications that are for the purpose of a mediation and those that are not and that “something a client told an attorney months or years earlier might become relevant” during the mediation. (See maj. opn., p. 14.)

Three things can be said about this conclusion.

First, it is not hard to draw the line in this case when it comes to the Wyner-Porter conversation; it satisfies all three alternatives (for the purpose of, in the course of, and pursuant to a mediation).

Second. Mediation confidentiality does not attach to evidence simply because it is used in the mediation. “Evidence otherwise admissible or subject to discovery outside of a mediation or a mediation consultation shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation or a mediation consultation.” (Evid. Code, § 1120, subd. (a).)

Third. A statement made months or years prior to the mediation is not very likely to have taken place for the purpose of, in the course of, or pursuant to a mediation. That such a statement might become relevant in the mediation does not mean that it is covered by mediation confidentiality.

The majority opinion states that if mediation confidentiality were to be extended to the attorney-client relationship it would render Evidence Code section 958 a nullity. (See maj. opn., p. 13.) Section 958 provides that “[t]here is no privilege under this article as to a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship.” Mediation confidentiality is not a privilege.

Finally, the majority opinion states if mediation confidentiality is applied to attorney-client communications. “clients would be precluded from pursuing any remedy against their own counsel for professional deficiencies occurring during the mediation process as well as representation made to the client to induce settlement.” (See maj. opn., p. 13.) In other words, what if the lawyer commits malpractice during the mediation itself?

“The Supreme Court has repeatedly resisted attempts to narrow the scope of mediation confidentiality. The court has refused to judicially create exceptions to the statutory scheme, even in situations where justice seems to call for a different result. Rather, the Supreme Court has broadly applied the mediation confidentiality statutes and has severely curtailed courts’ ability to formulate exceptions.” (Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 152.) Assuming that legal malpractice in mediation is to be addressed, this should be left to the Legislature.

With reference to the last point, it is noteworthy that the court’s majority opinion sweepingly exempts all client-lawyer communications from mediation confidentiality. In my opinion, such a drastic exception must be made by the Legislature under carefully crafted statutory standards.

FLIER, J.

By Steven G. Mehta

The legal and ADR might just have a new tool to use in their conflict resolution toolbox.  I recently wrote an article about this in the Daily Journal.  I thought you might like to see the content of the article…

Los Angeles Daily Journal, Friday March 26, 2010

Let A Global Audience Decide Your Dispute

By Steven G. Mehta

It is 8:30 a.m. in Department 9 ¾  of the Los Angeles Superior Court.  John Smith, an attorney for seventeen years arrives in the courtroom yawning slightly.  The Court clerk asks him for two business cards, which he obligingly gives even though he only has two business cards left in his wallet.  He sits down and now waits for the judge to appear so that he can attend the case management conference.  Another routine hearing on another employment dispute in which he is representing an employer in a case brought by a disgruntled former employee claiming wrongful termination.

The Judge quickly leaves her chambers and sits down at her chair.  “Good Morning counsel,”  she says.  “Good morning, your honor,” respond all the attorneys in the room.

The judge then calls the calendar saying, “The matter of Potter versus TMOM, Inc..”    John Smith approached the counsel table and identified himself, “Good morning your honor.  John Smith for the defendant.”   At the same time, the opposing counsel, a new attorney from the plaintiff’s office also identified herself.”

“Counsel.  I have reviewed your file,”  said the Judge.  “You have both agreed to alternative dispute resolution, Correct?”  Both attorneys answered “Yes.”

So far, this hearing was just another routine hearing with routine orders.  But what the judge was about to do was going to change the attorneys’ views of alternative dispute resolution for a long time to come.

The judge continued.  “I am then ordering you to both submit your dispute to sidetaker.com.”

“Excuse me, your honor,” said Mr. Smith. “Sidetaker.com.  What is that?”

“Sidetaker.com is a website where you can submit your dispute to anonymous third parties who will then vote on your dispute and will give you feedback to help you see a different perspective,” said the Judge.

“The site’s message “Let The World Decide Who’s At Fault.”  You wanted a jury trial counsel, well now you have one,” said the judge.

This story is fiction and has not happened in a courtroom – yet.  But what an amazingly interesting site.  What if all disputes in court used this site to find out what third parties think about their dispute?

Sidetaker.com let’s you air out your differences anonymously.  No matter the dispute. Sidetaker.com lets you get a third party perspective and get an indication of whether other people with agree with you or not.

Currently, many of the disputes that are on sidetaker.com are of a personal nature, such as disputes between spouses, neighbors, co-workers, and friends.  Take for example, one couple.  She claims that her husband attended a two day bachelor party in Las Vegas.  After that, he has acted suspiciously.  She believes he cheated.  She has now called all of his friends.  She stated, “When he got back, I could tell he was being nicer than he usually is but he was also fumbling over what he was saying when I asked him what went on. he said none of the guys did anything. He said he didn’t even talk to a single girl.”  He, on the other hand, claims that nothing happened  He further states that it was wrong to call his friends.  He said, “I never lie to my wife. We did a hell of a lot of drinkin’ up there but we never fooled around with any girls. I confessed I danced with a few and we hung out for a while but I never saw them after like 10 o’clock…and what really could happen before that?”

Well, according to Sidetaker.com, 55% of the over 2400 responses agreed with the wife.   Here is a comment from a male user: “Usually, when you can tell a difference in attitude, it’s a pure sign of wrongdoing. I’d have to say he did something wrong;”  Another man commented as follows: “You got caught! I can’t believe you couldn’t come up with a more believable excuse than what you did…Sorry but I’m going to side with Nikki. Admit it because it’s much harder to keep a lie going than it is to tell the truth.”

The fascinating thing about sidetaker.com is that it is an automatic and quick mock jury.  I remember having mediated a premises liability case where a woman tripped and fell in a hole  The actual accident had been videotaped and broadcast on youtube.com.  There had been many comments from viewer describing different perspectives relating to the accident.  I was able to print out those comments and use them during the mediation to assist the parties to evaluate the case and re-evaluate their extreme positions.

Sidetaker.com does a similar thing, but with voting.  The obvious problem with sidetaker.com for legal disputes is that the parties may not submit their dispute voluntarily.  But that is where – in this hypothetical world – a court could require the parties to submit the dispute.  The parties would get fascinating feedback about the dispute.  Many times, the parties’ extreme position could get tempered because of the comments made by the users.  Just as with focus groups, the comments of the thousands of jurors could help one or both sides realize that their dispute is not cut and dry and that there is room for compromise.  Otherwise, if they don’t decide the dispute, then perhaps one of those thousands of anonymous users will be on their jury.

Often, disputes end up in litigation and in trial because the one or more of the parties fervently believe that they are right and that there is no other way of seeing the matter besides their own.  Focus groups, mock juries, and sidetaker.com can help clients and attorneys better understand the different perspectives.  By understanding those perspectives, they will be better armed in being able to resolve their disputes short of costly and divisive trials.

Well, the story was fictional.  The website is real.  The concept is hypothetical.  But the principal is sound.  Hopefully, the resolution of disputes will be easier with sidetaker.com

By Steven G. Mehta

For some time now, I have tried to practice the concept of being mindful or meditation before starting a mediation.  I started thinking about meditation and mediation about two years ago as a result of hearing how some people viewed it as the reason for their success.

I have frequently written about how being mindful in mediation can help resolve problems.  Recently, I saw some research in the field of marriage and family therapy that bears directly on the profession of mediation.  That research advocates the teaching of mindfulness in Marriage and Family Therapy (MFT) training and classes.

In fact, Virginia Tech is one of few universities to integrate mindfulness meditation into its MFT program curriculum, according to Eric McCollum, professor of human development and MFT program director in the National Capital Region. “Mindfulness meditation helps students improve their ability to be emotionally present in therapy sessions with clients,” he explained. “It helps beginners, who can sometimes feel overwhelmed, stop focusing on themselves and think more about others.”

This concept is one that our mediation and legal ducators should include.  MFT training is very similar to some of the concepts applied by mediation practitioners.

According to McCollum,  mindfulness meditation involves deliberately focusing one’s attention on present experience — thoughts, physical sensations, emotions — and doing one’s best to stay present with those experiences without judging them or avoiding the difficult aspects.

For novice therapists (or in our case mediators), another advantage is that mindfulness meditation helps them to switch out of problem solving into being more present, more empathetic, and more compassionate, all important aspects of the therapeutic process, said McCollum.

It is interesting to see some of the comments from students in McCollum’s program.  If we simply changed the people from therapists to mediators, the results could be quite transforming to our profession.  Here are some of the comments.

Rachel Cramer, an MFT student from Arlington, Va., explained how mindfulness meditation has helped in her interaction with clients. “Thinking back on starting out in the therapist’s chair, one of the hardest things for me was to learn to be quiet. Although I thought I understood active listening intellectually, the actual practice of listening without trying to form a response or a counter-argument or an intervention, and just to sit and take in what the other person was saying peacefully, was a huge challenge for me. I think that is where the practice of mindfulness was the most helpful to me. Just having the experience of quieting my inner cacophony in a disciplined way gave me an experience to draw on when sitting with a client.

“In a strange way,” Cramer continued, “mindfulness practice helped me get to the point where I could be most quiet and centered when hearing the most difficult things. Without the exposure to mindfulness practice in my first techniques class, I’m not sure I could really have learned to ‘sit with someone’s pain’ just as a witness, without trying to fix the unfixable. This experience also shaped my use of mindfulness, or at least quiet and measured breathing, as a way to help clients slow their own processes down. Slowing them down made a lot more sense to me after I had experienced the value of this myself.”

In McCollum’s program, mindfulness meditation begins in the first year of clinical training. As a course requirement (but not graded), students keep weekly journals which are read by the instructors over the course of the semester and then returned to them.

Thirteen students gave permission for McCollum to use their journals for a research paper.  According to the paper, several themes arose from these journals.  Again, as a mediation practitioner, these themes were directly  relevant to mediation.

The study and research found that, just as with Cramer, mindfulness helped students be present in their sessions.  This was commonly referred to as being “centered.” The students felt that they were calmer in general and specifically in their therapy sessions. Some of them used brief periods of formal practice to allow themselves to set aside thoughts and feelings associated with the previous session or with their lives outside of the clinic and focus their attention on what was happening in the current client session.

Others results were that the clients appreciated the student’s enhanced “presence.” Not surprisingly, the students reported explicitly experiencing a sense of compassion and acceptance. As they came to accept themselves in the therapist role, they were better able to accept their clients.

“Our findings suggest that mindfulness meditation may be a useful addition to clinical training,” said McCollum.  Interestingly, the study also interviewed actual practitioners after they commenced their careers.  Here is what one had to say:

“When I first thought back about the mindfulness experience, I wasn’t sure how much it still applied. I thought, ‘I don’t practice daily, and I don’t use it as often as I should.’ Then I realized that I was wrong. I do practice daily and I do use the experience often. However, it’s no longer a conscience practice. It’s something I’ve incorporated into who I am and how I deal with the struggles and frustrations I face every day. When I look back and who I was before the mindfulness experience, I realize how I ‘became’ the stress I experience. I would think about how stress had affected me in the past and how it would affect my future. I would get more frustrated and more irritated… Now, while I experience as much stress as I did before, I am more aware of my present experience and the stress seems outside of who I am. I worry less about how I have experienced it in the past and how it will impact my future. I am also not negative about the experience. I’m aware of it, I notice it, and for the most part, I’m able to let it go.”

This practice could and should be something that can be incorporated into every mediation training program. Mediation practitioners, just as therapists, undergo a lot of stress.  Just yesterday, one lawyer thought that my role as a mediator was both that of a facilitator, negotiator, and therapist.

So at the end of this, I would like to call all mediation and legal practitioners and trainers to consider incorporating this concept into their daily lives and their practice.  I have seen it work in my practice, and from direct research, it appears to have worked in the therapy setting.  Of course, additional research from the client’s perspective might be helpful.  But why not just take a moment and think about it.

Journal Reference:

Eric McCollum et al. Using Mindfulness Meditation to Teach Beginning Therapists Therapeutic Presence: A Qualitative Study. Journal of Marital and Family Therapy, (in press); See also, ScienceDaily. Retrieved April 9, 2010, from http://www.sciencedaily.com/releases/2010/04/100407144705.htm

By Steven G. Mehta

Going to vacation for me is always a fascinating experience.  The week before the vacation you go crazy to try and get ready for vacation, and the week that you return is crazy trying to catch up.  But that week or two that you are gone is blissful.  And you feel that it is all worth it to take that torture for the week before and after.

Well as you can guess by the lack of my posts for the last week or so, I have been on vacation.  Thinking of vacation and the packing and unpacking, though, made me think of the effects of the saying “pack up your troubles and move along….”

Well I found some research that proves that you can actually pack up your troubles.  A new study from the Rotman School of Management suggests you might want to stick something related to your disappointment in a box or envelope if you want to feel better. In four separate experiments researchers found that the physical act of enclosing materials related to an unpleasant experience, such as a written recollection about it, improved people’s negative feelings towards the event and created psychological closure. Enclosing materials unrelated to the experience did not work as well.

“If you tell people, ‘You’ve got to move on,’ that doesn’t work,” said Dilip Soman, a professor of marketing at University of Toronto, Rotman School of Managment, who co-wrote the paper with colleagues Xiuping Li from the National University of Singapore and Liyuan Wei from City University of Hong Kong. “What works is when people enclose materials that are relevant to the negative memories they have. It works because people aren’t trying to explicitly control their emotions.”

Well packing your troubles or losses or desires regarding litigation works also.  Recently, I had the experience of seeing how packing the troubles can work in mediation.  In a recent slip and fall case, a client found it difficult to comprehend the difference between her injury and the fact that there was very bad liability for her case.  One party simply was unwilling to let go of the case.  she felt she was getting a very “unfair deal.” I helped her pack her negative feelings away  by doing two things.

First, I took her brief that she had been holding on to during the mediation and gave her an envelope in which to put that brief.  At the right time, I asked her to let go of the case.  I asked her to put the brief away and pack it in the envelope; which she did.

Then I explained to her that she could take all the documents that her attorney had sent her in the case (discovery, depositions, etc.) and pack them into one box and then have a bonfire with them or shred them.

I asked her to visualize at the same time how that would feel to shred those troubles.

As she started to visualize that process, I could also see her physically letting go of the case in her mind and moving towards resolution and settlement.

Little did I know that there was research on this issue.  But I am glad that I found that research because it also helps to understand why that concept worked.

So the next time you have a client that is unwilling to let go, maybe you should ask him to pack his troubles away.

Journal Reference:

1. Xiuping Li, Liyuan Wei, Dilip Soman. Sealing the Emotions Genie: The Effects of Physical Enclosure on Psychological Closure. Psychological Science, 2010;