Curry v. Hillcrest Clinic, Inc.

RODOWSKY, Judge. Before us are cross-petitions in an action initiated under the Health Care Malpractice Claims Act (the Act), Maryland Code (1974, 1989 Repl.Vol., 1994 Cum.Supp.), §§ 3-2A-01 through 3-2A-09 of the Courts and Judicial Proceedings Article (CJ). The principal issue presented by the claimant’s petition concerns default procedures in arbitration when malpractice claims are asserted against multiple defendants. We shall hold that, where a common basis of liability had been alleged against two defendants, one of whom failed to answer, a finding in favor of the non-defaulting defendant that the common basis of liability is not proven inures to the benefit of the defaulting defendant.

On the health care provider’s petition the principal issue concerns possible prematurity in the filing of the claimant’s notice of rejection of an adverse award. We shall hold that the claimant’s notice was effective. The claimant is Lydia T. Curry (Curry). The defaulting health care provider is Hillcrest Clinic, Inc. (Hillcrest).

The co-defendant health care provider who timely answered is Dr. Sheo P. Sharma (Sharma). We distill from Curry’s arbitration complaint that Hillcrest operated an abortion clinic in the Baltimore Metropolitan area where Sharma directed and con ⁴¹⁶ trolled the staff. In March 1988 Curry, then approximately seventeen weeks pregnant, presented at the clinic for the purpose of obtaining an abortion. In the course of an attempted abortion Sharma allegedly perforated Curry’s uterus and colon.

The abortion was successfully completed the next day at Johns Hopkins Hospital where the physicians “repaired, the uterine defect, fashioned a Hartman’s Pouch, and completed a rectosigmoid colostomy.” Curry filed a complaint with the Health Claims Arbitration Office (HCAO) against Sharma and Hillcrest. Each count of her complaint alleged that “[t]he clinic is liable under the doctrine of respondeat superior for the actions of Dr. Sharma.” Sharma was served, appeared, and answered. 1 Hill-crest was served on March 5, 1990, but it did not answer. Section 3-2A-02(d) of the Act provides that “[e]xcept as otherwise provided, the Maryland Rules of Procedure shall apply to all practice and procedure issues arising under this subtitle.” The procedure upon default for failure to answer the complaint is not prescribed in the Act or in the rules adopted by the HCAO Director under CJ § 3-2A-03(b)(3). Consequently, Maryland Rule 2-613 governs such defaults.

That rule provides for an. order of default, notice of the entry of the order of default, a motion to vacate the order of default, entry of judgment, and “finality” of the default judgment. 2 ⁴¹⁷ Following Hillcrest’s failure to answer, the next step in the procedural overview of this action was the entry by HCAO, at Curry’s request, of an order of default. HCAO sent notice of the order of default to Hillcrest, which Hillcrest received, but Hillcrest filed no motion to vacate the order of default. Curry then prepared, and the HCAO Director signed, a paper writing titled “Order Entering Award by Default.” This document “ORDERED that an award of default is entered in favor of [Curry against Hillcrest] in an amount to be determined by the [arbitration] panel on the issue of [Curry’s] damages.” More than two weeks after the “award by default” Hillcrest moved to “set aside entry of default judgment.” The motion was denied by the chairwoman of the panel. Hillcrest’s motion did not contend that Sharma’s answer operated as a denial of liability for Hillcrest as well.

The contention that Hillcrest benefited from Sharma’s defenses was first raised in a motion in limine filed with the arbitration panel three days before the hearing on the merits. The panel deferred ruling on the motion in limine until the ⁴¹⁸ conclusion of the hearing. Hillcrest was permitted to participate in the hearing only with respect to possible damages. At the end of the arbitration the panel decided that Sharma was not negligent as to certain alleged conduct and that, although he was “negligent in failing to carefully and fully inform the subsequent treating physicians,” that “negligence was not the proximate cause of Ms. Curry’s injuries.” Under the panel’s findings, there was no liability on Sharma’s part.

With respect to Hillcrest, the panel further concluded as follows: “Given that Defendant Hillcrest’s Motion in Limine to Benefit from Sharma’s Defenses and to Limit Damages were orally granted at the hearing and that the panel found that Ms. Curry’s injuries were not the proximate [result] of negligence caused by Defendants, FINAL JUDGMENT OF NO LIABILITY IS ENTERED FOR DEFENDANT HILLCREST;” Curry filed with HCAO a notice of rejection of the award, and she brought an action to nullify the award in the Circuit Court for Baltimore County. Her complaint in court consisted of three counts. Count I, claiming against both Hillcrest and Sharma, repeated the allegations contained in Curry’s health claims arbitration complaint. Indeed, Curry alleged that she was entitled to a default judgment against Hillcrest in the circuit court on Count I because those allegations were verbatim the allegations of the arbitration claim.

Count II of the circuit court complaint claimed only against Sharma. Count III made allegations against Hillcrest, in addition to those set forth in Count I, for the purpose of asserting a negligence claim against Hillcrest that would be independent of, and distinct from, any negligence of Sharma. In the circuit court Curry preliminarily petitioned to vacate the panel’s award in favor of Hillcrest on the ground that the panel had exceeded its authority. See CJ §§ 3-2A-06(c) and 3-224(b)(3).

Curry contended that Sharma’s having prevailed on the merits in arbitration did not relieve Hillcrest of its ⁴¹⁹ default. Curry also moved for a default judgment based on Hillcrest’s default in arbitration. The circuit court vacated the award, stating that the defense established by a non-defaulting defendant inures to the benefit of a defendant in default “only when the answering defense extinguishes the Plaintiff s/Claimant’s entire right of action, such as a statute of limitations defense.” The circuit court would not rule, however, that Hillcrest was precluded from defending the malpractice action in the circuit court. That court also rejected the defendants’ motion to dismiss Curry’s “appeal” from health claims arbitration.

At trial on the merits before a jury in the circuit court the verdict was in favor of both Sharma and Hillcrest on all counts. Judgment was entered accordingly. Curry appealed to the Court of Special Appeals, and Hill-crest cross-appealed from the vacating of its award. Hillcrest also sought to dismiss Curry’s appeal.

Curry v. Hillcrest Clinic, Inc., 99 Md.App. 477 , 638 A.2d 115 (1994). That court held that Curry’s “appeal” to the circuit court was not to be dismissed as premature because Curry had substantially complied with the Act’s provisions for proceedings in a circuit court following an adverse award in health claims arbitration. Id. at 488-95 , 638 A.2d at 120-24 . The intermediate appellate court, although finding it unnecessary to decide whether Sharma’s defense inured to the benefit of Hillcrest, additionally stated that the force of that doctrine, relied upon by the panel’s chairwoman, was “questionable” in this State.

Id. at 496 , 638 A.2d at 124 . The Court of Special Appeals, by distinguishing Bailey v. Woel, 302 Md. 38 , 485 A.2d 265 (1984), rejected Curry’s contention that she was entitled to a default judgment against Hillcrest in the circuit court. Bailey held that a claimant who put on no case in arbitration, based on a tactical decision, had failed to comply with the Act’s condition precedent for instituting a medical malpractice action in the circuit court. The Court of Special Appeals noted that in Curry’s matter there had been a “full hearing, and, based on the evidence adduced, the panel made a determination of no ⁴²⁰ liability with respect to Sharma, and the Chairperson made a determination of no liability with respect to Hillcrest.” 99 Md.App. at 501 , 638 A.2d at 126 .

Thereafter this Court granted cross-petitions for certiorari that raise basically the same issues presented to the Court of Special Appeals. Because that court in a reported opinion had cast doubt on the viability in this State of the common law doctrine under which certain defenses by a non-defaulting defendant can inure to the benefit of a defaulting defendant, we considered the status of the doctrine to be a matter of public importance. In Part I, infra, of this opinion we shall address two issues that logically precede analysis of the default issues, which we address in Part II. Additional facts will be stated hereinafter, as required for an understanding of the particular arguments.

I A Hillcrest contends that the circuit court erred in denying the defendants’ motion to dismiss Curry’s circuit court complaint. The argument rests on CJ § 3-2A-06(a), the relevant portion of which reads: “A notice of rejection must be filed with the Director and the arbitration panel and served on the other parties or their counsel within 30 days after the award is served upon the rejecting party____” Hillcrest contends that Curry filed its notice of rejection with the Director before Curry had been served officially with the award, and that the sanction for this deviation from the ordained procedure is dismissal. What transpired in the matter at hand is not entirely clear from the record, and it is the subject of some dispute between the parties. The facts most favorable to Hillcrest’s preliminary contention are these.

The panel chairwoman signed two documents on February 15, 1991. One is entitled “Final Opinion and Order.” It states that “judgement[s] of no liabili ⁴²¹ ty” are respectively entered for Sharma and Hillcrest. That document makes no assessment or apportionment of costs. The second document is a preprinted form of HCAO entitled “Arbitration Panel Determination” (APD).

The APD contains a section headed “COSTS,” in which the chairwoman inserted, “split evenly between the parties (3).” Both documents were among the enclosures to a letter dated February 18,1991 from the chairwoman to HCAO. The “Docket Management Docket Cover” of HCAO records the filing of the opinion and order on February 21, 1991, the filing of Curry’s notice of rejection of award and the filing of a copy of her action to nullify on February 22, 1991, and the filing of the APD on February 25, 1991. 3 Hillcrest contends that there can be no award without assessing arbitration costs and making any apportionment of them. Hillcrest relies on CJ § 3-2A-05(f)(l) which states that “[t]he award shall include an assessment of costs, including the arbitrators’ fees.” Hillcrest also relies on a regulation of the HCAO Director promulgated as Maryland Regs.Code (COMAR), tit. 1, § 03.01.12.E which reads in relevant part as follows: “Form of Award. “(1) Within 5 days after the close of the hearing, the arbitration panel shall submit to the Director a written award that concisely states the following information: (a) [Relating to liability]; (b) [Relating to damages, if applicable]; (c) The arbitration costs and any apportionment made under § D above____” We shall assume, arguendo, that a document is not “the award” under CJ § 3-2A-06(a) until costs have been assessed ⁴²² and any apportionment thereof made. 4 Absent an effective notice of rejection and action to nullify, the award in a health claims arbitration may be filed with an appropriate circuit court and confirmed by that court, in which event the award constitutes a final judgment of that court. See CJ § 3-2A-05(i).

On the other hand, an effective notice of rejection and filing of an action to nullify can result in a trial of the malpractice action in a circuit court. In this respect filing a notice of rejection and an action to nullify in compliance with § 3-2A-06(a) and (b) is somewhat analogous to noting an appeal where the appeal is a de novo trial. Against the foregoing background, we agree with the analysis by the Court of Special Appeals that Curry substantially complied with the requirements of the Act for instituting an action to nullify in the circuit court. Further, Hillcrest’s position rests on a very restrictive reading of “within 30 days after the award is served” in § 3-2A-06(a).

The argument necessarily assumes that a notice of rejection filed before the commencement of the thirty day period is void so that, although it remains noted on the docket of HCAO, it has no efficacy that continues forward in time into the thirty day period. That was the result obtained under former Md.Rule 1012.a dealing with appeals to the Court of Special Appeals. See Eastgate Assocs. v. Apper, 276 Md. 698 , 350 A.2d 661 ⁴²³ (1976); Sapero & Sapero v. Bell Air Plumbing & Heating Contractors, Inc., 41 Md.App. 251 , 396 A.2d 317 (1979). A change in that former result was effected under Title 8 of the Maryland Rules, “Appellate Review in the Court of Appeals and Court of Special Appeals,” adopted effective July 1, 1988.

Now, under certain circumstances, a prematurely noted appeal to the Court of Special Appeals is not to be dismissed. Rule 8-602(d) provides: “A notice of appeal from a ruling, decision, or order that would be appealable upon its entry on the docket, filed after the announcement of the ruling, decision, or order by the trial court but before entry of the ruling, decision, or order on the docket, shall be treated as filed on the same day as, but after, the entry on the docket.” We have previously noted the legislative directive in § 3-2A-02(d) under which “the Maryland Rules of Procedure shall apply to all practice and procedure issues arising under” the Act, except as otherwise provided. It is consistent with that legislative directive to interpret filing “within 30 days after the award is served” in § 3-2A-06(a) to include a notice of rejection filed before service of the award on the rejecting party, if the notice of rejection is filed, as here, after the decision has been announced and if that notice of rejection remains uncountermanded on the docket at the time the award is formally served. For these reasons the circuit court correctly denied Hill-crest’s motion to dismiss Curry’s action to nullify.

B Curry suggests that the complaint on which the arbitration was tried alleged negligence by Hillerest employees that was separate from that of Sharma so that the panel chairwoman exceeded her powers when she ruled that Sharma’s defense inured to the benefit of Hillerest. We disagree. First, it is doubtful that this issue has been preserved. Curry’s motion for a default judgment in the circuit court ⁴²⁴ rested exclusively on classifying Hillcrest’s default as a deliberate one which fell within the rule of Bailey v. Woel, 302 Md. 38 , 485 A.2d 265 .

Further, whether Hillcrest by its default admitted actionable negligence on the part of employees other than Sharma is a matter of interpretation of the arbitration complaint. We have seen that Curry specifically expanded her allegations in circuit court beyond those pleaded in arbitration in an effort to assert as the basis for Hillcrest’s liability negligence that was independent of Sharma. The negligent acts or omissions alleged in the arbitration complaint were attributed to Sharma alone or to “the defendants,” with two exceptions. One of the latter allegations is that “Sharma and the staff’ were aware that the attempted abortion had resulted in serious bodily harm to Curry who was not told of the nature and extent of that harm.

The other allegation is that “Sharma and the [sjtaff’ were charged with follow up care. The panel chairwoman had heard Sharma’s evidence when Hillcrest’s motion in limine was granted. She ruled, in effect, that Hillcrest’s admissions, by its default, of the arbitration allegations had been negated by the actual proof. Inasmuch as the record of the arbitration is not before us, there is no way in which we can review whether Curry’s proof established negligence on the part of Hillcrest employees that was independent of Sharma.

The allegations, however, attribute to the staff the same conduct that is attributed to Sharma, and the entire panel, although finding negligence by Sharma in follow up care, nevertheless held that Sharma’s negligence was not a proximate cause of Curry’s injuries. Accordingly, the identical conduct attributed to Hillcrest’s staff was also either non-negligent or not a proximate cause of Curry’s injuries, insofar as the panel was concerned. From the fact that the entire panel decided that there was no liability on Sharma’s part it also follows that the chairwoman did not usurp the panel’s function in applying to Hillcrest the legal conclusion that flows from the panel’s finding. We discuss that governing legal doctrine in Part II. ⁴²⁵ II Curry’s argument that she should have been permitted to proceed to a damage inquisition against Hillcrest in the circuit court has two steps.

The first step requires error by the panel chairwoman in relieving Hillcrest of its default in arbitration. The second step requires characterizing that default as a failure to satisfy the Act’s condition of arbitrating, precedent to bringing a circuit court malpractice action. In the latter connection Curry submits that a health care provider who deliberately fails to arbitrate should be precluded from presenting a defense for the first time in the circuit court malpractice action, just as the injured plaintiff in Bailey v. Woel, supra, was precluded from presenting for the first time in circuit court a case of liability against a health care provider. Because Curry’s argument fails at its first step, we need not address the second step.

A Underlying the first step of Curry’s argument is the mistaken notion that the order of default in arbitration was a judgment of liability that could not be disturbed. Curry asserts that “[gjoing into the [arbitration] hearing, Curry had an award by default against Hillcrest, not just an order of default.” Brief for the Petitioner at 43. Curry further submits that “[a]n award, or judgment by default is a final determination as to liability. Himes v. Day, 254 Md. 197 , 254 A.2d 181 (1969).” Brief for Petitioner at 43.

Under Md.Rule 2-613, however, dealing with defaults by a defendant’s failure to plead, there is no judgment until damages have been assessed. See Rule 2-613(e). Consequently, Curry’s “award of default” had no legal effect beyond reiterating that an order of default had been entered and that a motion to vacate the order of default had been denied. Moreover, Himes v. Day on which Curry relies was decided under the procedure in effect prior to the 1984 revision of Title 2 of the Maryland Rules. ⁴²⁶ Banegura v. Taylor, 312 Md. 609 , 541 A.2d 969 (1988), is dispositive.

The defendant in that case had been served with a civil complaint alleging rape of the plaintiff. An order of default was entered in November 1984, and the notice of default sent by the clerk, but there was no response by the defendant. On January 4,1985, at the request of the plaintiff, the court entered a “judgment” of default. Thereafter on February 4, 1985 the defendant moved to strike the default “judgment,” but the motion was denied.

A judgment for substantial damages was entered against the defendant, who appealed to the Court of Special Appeals. In an unreported opinion that court “dismissed the appeal as to the judgment by default, finding it untimely, and affirmed the judgment as to damages.” Id. at 614-15 , 541 A.2d at 972 . This Court granted certiorari. Before us, the plaintiff argued “that the order of January 4, 1985, was a final judgment on the issue of liability, and that the time for appeal expired thirty days after its entry.” Id. at 618 , 541 A.2d at 973 .

Judge McAuliffe, writing for the Court, could not have made the correct procedure more plain. “If [plaintiff] were correct concerning the nature of the January 4 order, her analysis of the effect of the later motion to strike would be sound. Unnamed Atty. v. Attorney Griev. Comm’n, 303 Md. 473, 486 , 494 A.2d 940 (1985). She is wrong, however, in treating the order of January 4 as a judgment.

It was not a judgment—indeed it served no function at all and must be considered a nullity. [Plaintiff] in seeking that order, and the court in granting it, were adhering to a default procedure that existed under former Maryland Rule 310, but which was changed by the adoption of Rule 2-613, effective July 1, 1984. Under the former procedure, a default judgment could be entered for failure of a defendant to plead, and when entered, became a final and appealable judgment as to liability. Himes v. Day, 254 Md. 197 , 254 A.2d 181 (1969). “Under the current procedure, which was in effect when [defendant] defaulted, the order of default was correctly entered, but a judgment should not have been entered until ⁴²⁷ there had been satisfactory proof of damages. Rule 2-613(e).

The amendment to the rule was specifically designed to avoid