Healthcare Neutral ADR Blog : New Jersey Healthcare ADR Lawyer & Attorney : Healthcare Neutral : Richard Webb : New York Metropolitan Area

       The "first filed action" rule says that when lawsuits over the same dispute are filed in different states, the courts in both states will give the "first filed" action the exclusive right to go forward. Often described as a matter of "comity," the rule furthers the practical goals of certainty and efficiency within our federal system. However, as a matter of policy, the rule can be seen as unfavorable towards alternative dispute resolution. Counsel faced with the possibility of litigation in an unfriendly jurisdiction will often race to be the "first to file" a lawsuit rather than pursuing mediation. Not so in New Jersey anymore.

       Last week, the Appellate Division of the Superior Court of New Jersey ruled that the "first filed action" rule applies when a party demands mediation or arbitration, as contractually obligated, and the other party later files a lawsuit in a different jurisdiction. In CTC Demolition Company, Inc. v. GMH AETC Management/Development LLC, et al (Docket No. A-3703-10T4), Judge Clarkson S. Fisher, Jr., wrote for a unanimous panel:

"Although the creation of the first-filed rule may have presupposed that the interplay of its principles would relate solely to which of two lawsuits should proceed to disposition, the proliferation of mediation and arbitration as an alternate but highly-favored method for resolving disputes since the first-filed rule's development, suggests the legitimacy of CTC's argument that its demand for mediation should be treated like the filing of a complaint.

...once mediation was demanded to occur in New Jersey, the later institution of the Pennsylvania action represented an untoward attempt to move the situs of this dispute, giving rise to special equity that warrants a disregarding of the Pennsylvania action."

       This is great news for ADR in New Jersey, and hopefully elsewhere. Although this case was remanded to the trial judge for findings of fact on which of the parties' contracts applied to this dispute (raising the possibility that the contract providing for mediation would be held not to apply at all), the Court's holding on the first-filed action rule is clear. At least where the parties' agreement requires mediation before arbitration (or, presumably, litigation), a demand for mediation in New Jersey will trump a later filed lawsuit in another jurisdiction.

[Image:Brown filing cabinet, March 9, 2007, via Wikipedia Commons]

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       Garth Brooks was just awarded $1 million in a breach of contract lawsuit against his hometown hospital. Brooks alleged that the hospital reneged on its promise to build a women's health center in honor of his late mother, towards which Brooks contributed $500,000. Brooks asserted the hospital agreed to build and name the project when he made the contribution. The hospital said the donation was unconditional, and his requests for the naming rights came later. The women's center was never built, and the hospital told Brooks they intended to use his money for other construction projects.

       Apparently, the jury believed Brooks' side of the story. They ruled that the hospital must return Brooks' $500,000 donation and pay him another $500,000 in punitive damages. Brooks is a home town hero, generally regarded as a likable guy and was trying to do a good thing on behalf of his beloved, deceased mother. Just how did the hospital decide to go to trial on this one?

I don't know. I wasn't there, I don't know those involved and it may be that there's more to this story. If so, I hope someone will comment to fill us in.

       It appears, though, that the hospital suffered from what Randall Kiser calls "decision error." Speaking at a meeting of the New Jersey State Bar Association's Dispute Resolution Section this week, Kiser delivered a tour de force review of his empirical research and recommendations for effective pretrial decision-making by lawyers and their clients. As described in his book, Beyond Right and Wrong, The Power of Effective Decision Making for Attorneys and Clients, "decision error" occurs when the result a party achieves after trial is inferior to the other party's last offer of settlement before trial.  

       Using this definition, it appears likely that the hospital's election to go to trial in the Garth Brooks case was a decision error. The more interesting question is how this decision was made. Randall Kiser offers a multitude of potential explanations, but without being on the inside, one can only speculate. My take away from the Garth Brooks case and Randall Kiser's work is that mediation offers the perfect mechanism to reduce decision error. If all of the factual assumptions, legal theories and cost benefit analyses of both parties are subjected to the crucible of a thorough mediation process, the chances of a decision error will be greatly reduced.

       Randall Kiser's research shows that in only 15% of cases, the result after trial falls somewhere between the last best settlement offers of both parties. This means that one of the parties is wrong  (i.e., makes a decision error) in 85% of all cases that go to trial. Among other things, mediation should get both parties to more accurately measure the true value of their side of the case, and thereby reduce the potential for decision error. Future posts will examine some elements of bad decisions the mediator can help to fix.

[Image: Garth Brooks, Marshall of OSU Homecoming Parade, October 17, 2009, by Fletcherspears]

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       Healthcare reform measures and the prevailing wisdom of industry visionaries tell us that the way we pay our doctors must change. In a nutshell, we're told that doctors paid on a "piecemeal" basis: have an incentive to order and do more work (at greater cost); treat the immediate condition rather than the whole patient; and are disconnected from any responsibility for the real, total cost of their patients' care. Thus, the push towards "accountable care" calls for remaking doctors' compensation models to discourage piecemeal work, reward patient satisfaction and instill awareness of total system costs. Government agencies, health insurers and hospitals that regularly deal with doctors' compensation are anxious to put this theory into practice.

 But be careful what you wish for.

        At least some evidence shows that patient satisfaction doesn't indicate the best medical care. Writing at KevinMD.com, Kevin Pho, M.D. acknowledges that patient satisfaction scores are a good way to identify ways to improve the patient experience, and that "happy patients" are far less likely to file malpractice claims. He also recognizes that patient satisfaction generally translates into higher revenue for hospitals. On the other hand, studies do not indicate a strong correlation between patient satisfaction and quality of care. In fact, the compulsion to make patients happy by "giving them what they want" may run counter to both quality and cost considerations.

       Another serious challenge to the prevailing wisdom comes from David Shaywitz, M.D., PhD, writing at The Health Care Blog (1/17/12). He questions whether it is appropriate and in the best interest of patients for doctors to be thinking about society's healthcare costs?

"The cornerstone of medicine, the most fundamental principle, in my mind, is the absolute, rock-solid belief that your doctor is your unqualified advocate and will work as hard as possible to provide you with the best medical treatment possible, as if you were a member of her own family...

 

Perhaps (and it pains me to say this), physicians have something to learn from our colleagues in the law.  It could be that we are better served by an adversarial system of some kind, where at least you can trust your doctor, rather than by a system in which physician’s role is to assess not only your disease but your relative value to society.

We’re not there yet, but when I read about the supposed moral imperative to be responsible stewards of the public healthcare dollar – yes, I worry.  And so should you."

 

I think David Shaywitz is right.

       So what does this mean for the prevailing wisdom? It may mean that the prevailing wisdom is as much about how to maximize payment under the coming ("reformed") system as it is about improving patient care. Could we be substituting a new set of flawed incentives for the old flawed incentives? As conflicts arise in the competition over the ever-shrinking pie, the players need to steer clear of false assumptions. The process of sorting out the allocation of limited dollars will be hard enough without paying for dubious improvements. 

[Image: Wish, November 22, 2009, by Jessica Tam]

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       The New Jersey State Bar Association's Dispute Resolution Section is offering a three part series of programs on decision making entitled "Judgments: How We Reach Them And How We Can Improve Them." The series will open with a presentation on January 24, 2012 by Randall Kiser, the principal analyst at DecisionSet and an expert on attorney-client decision making. He is the author of two books, Beyond Right and Wrong: The Power of Effective Decision Making for Attorneys and Clients, and How Leading Lawyers Think: Expert Insights Into Judgment and Advocacy.

       Randall Kiser's work first got my attention in 2008 when the study underlying his first book was released and covered by The New York Times. Most notably, his study revealed that in 85 percent of the cases that went to trial, the final outcome after trial was outside the last zone of settlement determined by the parties prior to trial. (In my view, this means that mediation offers much better odds than going to trial.)

       Participants in this program will explore whether our customary means of evaluating disputes is impeding or facilitating their resolution. The program will be offered at the NJSBA's Law Center in New Brunswick at 6:00 p.m., and will include dinner and 1.5 CLE credits. It is a great opportunity to hear a nationally recognized authority address a topic that is central to our professional lives, but not well understood. Pre-registration is available on the NJSBA website.

       Subsequent programs in this series will focus on decision making in the contexts of arbitration (February 28) and mediation (March 27). Details on these programs will follow in upcoming posts.

[Image: Deep In Thought, by Ben Pollard, March 16, 2008]

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