Case Law Update: The Eighth Circuit Upholds the Nebraska Hospital Medical Liability Act

Earlier this year, the United States Court of Appeals for the Eighth Circuit upheld the constitutionality of the Nebraska Hospital Medical Liability Act (“Act”). Specifically, the Eighth Circuit affirmed the lower court’s reduction of the plaintiff’s damages, awarded by the jury, from $17 million dollars to the Act’s statutory limit–$1.75 million dollars. Since 1976, the Act has limited Nebraska’s health care providers’ medical malpractice liability by limiting the amount of damages a plaintiff could potentially recover. See Neb. Rev. Stat. §44-2801 et al. (2017). As of December 31, 2014, the maximum amount recoverable is $ 2.25 million dollars.

In Schmidt v. Ramsey, a baby was born at a hospital with severe brain damage. 860 F.3d 1038 (8th Cir. 2017). The baby’s mother (S.S.) sued the midwifery practice where she received her prenatal care, the certified nurse-midwife who treated her, and the hospital where her baby was born. S.S. settled her claims against the midwifery practice and the certified nurse-midwife, but her claim against the hospital went to trial. After a two-week trial, the jury found in favor of S.S. and returned a verdict for $17 million dollars. The hospital moved to amend the judgment by reducing the amount of damages to the Act’s statutory limit, which was $1.75 million for claims occurring between 2004 and 2014. The United States District Court for the District of Nebraska granted the hospital’s motion, reducing the jury award by almost 90 percent. S.S. appealed the district court’s ruling, arguing that (1) the hospital was not a qualified health provider as defined in the Act and the damage cap violated: (2) her right to a jury trial under the Seventh Amendment to the United States Constitution, (3) the Takings Clause of the Fifth Amendment to the Constitution, (4) the federal constitutional right of access to courts, (5) the Equal Protection Clause of the Fourteenth Amendment to the Constitution, and (6) her Fourteenth Amendment right to substantive due process.

The Court held that the hospital was a qualified health provider under the Act because it satisfied the requirements under § 44-2824(1) of the Act by filing proof of financial responsibility and paying into the Excess Liability Fund. More significantly, the Court held that the plain language of the Act supported the conclusion that the opt-out notice requirement was “not a requirement for qualification under the Act, but rather a requirement imposed on those already qualified.” Schmidt, 860 F.3d at 1044. Regarding the Seventh Amendment claim, the Court determined the Act did not usurp the historical role of the jury because the Act’s damage cap applied after the jury had already decided liability and assessed damages. S.S. next argued the Act’s damage cap violated the Fifth Amendment by “limiting the collectible amount of adjudicated compensation only after a jury places a fair value on the property deprivation that plaintiffs have suffered.” Id. at 1046. The Court dismissed this argument, stating “a person has no property and not vested interest in any rule of the common law or a vested right in any particular remedy.” Id. S.S. further argued that the Act’s damage cap violated the federal constitutional right of access to courts by discouraging attorneys from taking complex medical malpractice cases and thus diminishing injured plaintiffs’ ability to access the court system. The Court dismissed this claim because S.S. did not produce any evidence supporting her theory. Finally, the Court held that the Act’s damage cap did not violate the Equal Protection Clause nor the Due Process Clause of the Fourteenth Amendment.

Since its enactment, the Act has been upheld by the Nebraska Supreme Court , the United States District Court of the District of Nebraska , and the Eighth Circuit. The Eighth Circuit’s ruling in Schmidt is a significant win for Nebraska’s health care providers and strongly indicates the Act is here to stay.

Sean T. Nakamoto

^{1 Gourley ex rel. Gourley v. Nebraska Methodist Health System, Inc., 265 Neb. 918 (2003).
2 Schmidt v. Bellevue Medical Center L.L.C., No. 8:13CV143, 2015 WL 7574760 (Nov. 25, 2015).
3 Lozada v. United States, 974 F.2d 986 (8th Cir. 1992).}