Newman v. Reilly

RODOWSKY, Judge. The plaintiff in this tort action was involuntarily committed to a mental disorder treatment facility on the certificate of two physicians and was released following the first admission hearing at the facility. Plaintiff alleged, inter alia, that the defendant, one of the certifying physicians, had not followed statutorily mandated procedures for an involuntary commitment. The merits of that contention turned on a relatively narrow question of statutory construction which was obscured, if not buried, by the layers of legal papers filed in proceedings in health claims arbitration and in circuit court.

There emerge for this certiorari review three issues concerning costs of defense incurred both in arbitration and in the circuit court and imposed as sanctions by the circuit court on both the plaintiff and his trial counsel. Those issues are: 1. Was the circuit court authorized to sanction conduct which occurred in health claims arbitration? 2. Did the continued prosecution of this claim in the circuit court justify assessing the cost of defense in the circuit court as a sanction? 3.

In any event, are the appellate courts prevented from reviewing the sanction imposed on trial counsel because the order for appeal filed in the circuit court in this case is ineffective as to trial counsel? We shall answer each question “No,” for reasons hereinafter stated. The challenged commitment extended from August 7 to August 11, 1983. 1 Plaintiff, Luke R. Reilly (Reilly), was ³⁶⁷ employed by the Maryland State Police, apparently as a police officer. He and his wife had been separated.

Prior to the involuntary commitment Reilly had manifested symptoms of depression and at times had spoken and acted in a manner at least suggestive of suicide. On August 7, 1983, at about 8:30 a.m., Reilly telephoned the offices of the professional association of which the defendant, Dr. George C. Newman, II (Dr. Newman), was a member. 2 Reilly left a message on the answering machine that he desired to speak to a Dr. Wooster, who was also a member of the professional association. Because Dr. Wooster was not working that day, Dr. Newman returned Reilly’s call at approximately 9:00 a.m. Reilly stated that he preferred to speak with Dr. Wooster and did not discuss with Dr. Newman whatever had prompted Reilly’s call to the doctors’ offices.

Dr. Newman replied that he would try to reach Dr. Wooster for Reilly. Dr. Newman placed a telephone call to Reilly at about 1:00 p.m. that same day, advising him that he had been unable to reach Dr. Wooster but that he had spoken to Reilly’s estranged wife and that he understood Reilly’s problem. Approximately twenty minutes before placing the telephone call to Reilly, Dr. Newman had telephoned the Hagerstown barracks of the Maryland State Police and arranged for the State Police to bring Reilly to Washington County Hospital. At approximately 2:00 p.m.

Dr. Newman “contacted” Dr. Ira L. Fetterhoff, a psychiatrist who had examined Reilly ³⁶⁸ for three hours on August 6, 1983. 3 Dr. Newman arranged for Dr. Fetterhoff to be at Washington County Hospital when the State Police arrived with Reilly. A third telephone conversation between Dr. Newman and Reilly occurred at about 3:00 p.m., just before the State Police “escorted” Reilly to Washington County Hospital. Neither party’s version of that conversation is in the record. When the police arrived at the hospital, Reilly remained on the parking lot.

From inside the building Dr. Newman was able to see him through a window. This was the closest contact Dr. Newman had with Reilly at the hospital. Dr. Fetterhoff went out to the parking lot and spoke with Reilly, saying: “ ‘You are going to Taylor Manor just for an evaluation. It’s only a five-day evaluation.

After five days, if everything is okay, you will be released and that will be the end of it.’ ” The police took Reilly to Taylor Manor. The admission note is not in the record. According to defendant’s characterization, it “indicate[d] that [Reilly’s] behavior was threatening to himself and others.” The procedure Dr. Newman undertook to follow for Reilly’s involuntary commitment was that prescribed in Md. Code (1982), §§ 10-613 through 10-617 of the Health-General Article (H-G). These sections comprise part III, “Involuntary Admissions,” of subtitle 6, “Admission Provisions,” of Title 10, “Mental Hygiene Law.” In Title 10, “ ‘[facility’ means any public or private clinic, hospital, or other institution that provides ... treatment ... for individuals who have mental disorders.” H-G § 10-101(e)(l).

One of the statutory requirements for an application for involuntary admission to a “facility” is that it be accompanied by certain certificates of either one physician and one psychologist, or of two physicians. 4 Drs. Newman and ³⁶⁹ Fetterhoff signed the certificates for Reilly’s involuntary admission. H-G § 10-616(a)(l)(i) requires that an involuntary admission certificate “[b]e based on the personal examination of the physician or psychologist who signs the eertificate[.]” (Emphasis added). 5 ³⁷⁰ “Any individual proposed for involuntary admission [is] afforded a hearing to determine whether the individual is to be admitted to a facility ... as an involuntary patient or released without being admitted.” H-G § 10-632(a). This hearing must “be conducted within 5 working days of the date of the initial confinement of the individual.” H-G § 10-632(b).

Reilly’s admission hearing was conducted on August 11 at which time he was released. Thereafter Reilly, through his trial attorney Daniel M. Zerivitz (Zerivitz), filed a claim with the Health Claims Arbitration Office (HCAO) under the Health Care Malpractice Claims Act, Md. Code (1974, 1984 Repl.Vol., 1988 Cum. Supp.), §§ 3-2A-01 through 3-2A-09 of the Courts and Judicial Proceedings Article (CJ). 6 The HCAO proceedings that followed were conducted only by the attorney member, who under CJ § 3-2A-05(c) “shall be chairman and ... shall decide all prehearing procedures[.]” A full three person panel was never convened in this case. The chairman directed the parties to submit a statement of issues.

Dr. Newman’s response included seven legal issues, the last of which was “whether Claimant’s conduct in bringing this action was in bad faith and without substantial justification, thereby entitling Defendant to costs, expenses and attorney’s fees pursuant to Rule 1-341 of the Maryland Rules?” 7 Rule 1-341 reads: ³⁷¹ “In any civil action, if the court finds that the conduct of any party in maintaining or defending any proceeding was in bad faith or without substantial justification the court may require the offending party or the attorney advising the conduct or both of them to pay to the adverse party the costs of the proceeding and the reasonable expenses, including reasonable attorney’s fees, incurred by the adverse party in opposing it.” The panel chairman also requested that the parties’ prehearing submissions identify expert witnesses. In response Zerivitz submitted a legal memorandum in which he argued that it was not essential to the plaintiff’s case to produce expert testimony on the “standard of care” issue, that is, on whether Dr. Newman’s evaluation of Reilly’s mental condition was negligent. In that analysis, Zerivitz referred to the Health-General Article, including § 10-616’s requirement for a “personal examination,” and urged “that no expert testimony is needed to determine whether or not these statutes were violated.” Zerivitz transmitted this memorandum to the panel chairman under cover of a letter dated October 23, 1986, the relevant part of which read: “Enclosed you will find a memo explaining the Claimant’s position with regard to the need for expert witnesses. At this time, Mr. Reilly wants his day in court, and I would therefore ask that the case go forward regardless of your reactions to this memo and anything that the Defendant may file.

At the very least, we ask that you allow Dr. Fetterhoff to take the stand. While it is true that at the present time he is not inclined to state an opinion regarding Dr. Newman’s actions, with any luck an opinion can be coaxed from him at the hearing. That is a possibility that should not be denied the Claimant.” The panel chairman disagreed with Zerivitz’s legal contention and ruled that expert testimony was required to prove a violation of the standard of care under the circumstances under which Dr. Newman acted. The panel chairman found ³⁷² that the only evidence from an expert on standard of care was from Dr. Fetterhoff who, on deposition, testified that “ ‘the commonly stated attitude that we hear over and over again is that when you’re in doubt ... that it’s safer to certify than not, in view of the fact that the State has, in effect, safeguards to prevent Shanghaiing people and all.’ ” The panel chairman entered summary judgment in favor of Dr. Newman.

There was no comment by the panel chairman concerning sanctions. Dr. Newman did not request the panel chairman to consider sanctions after summary judgment had been granted. Nor did Dr. Newman request that the HCAO convene the entire panel so that it could consider sanctions. Reilly rejected the award and filed a complaint in the Circuit Court for Washington County.

He alleged, inter alia, that Dr. Newman had “failed to conform to the standards set by [H-G] Sections 10-613 through 10-624” by failing “properly” to examine Reilly. The complaint further alleged “a conscious, willful, [and] intentional disregard for the rights of the Plaintiff” resulting in Reilly’s loss of freedom. Dr. Newman responded with a paper captioned “Motion to Strike or, in the Alternative, to Dismiss Action to Nullify Award.” The thrust of the motion was that Reilly’s failure to designate an expert witness for arbitration was a refusal to arbitrate in good faith. Cfi Bailey v. Woel, 302 Md. 38 , 485 A.2d 265 (1984) (refusal to present any evidence in arbitration is a failure to satisfy condition precedent to circuit court damage suit). 8 ³⁷³ Attached as exhibits to the motion were various papers from the HCAO proceedings which presented matter beyond the allegations of the complaint.

The circuit court did not exclude the new matter so that the motion was to be treated as one for summary judgment governed by Md. Rule 2-501. See Rule 2-322(c). Zerivitz, on Reilly’s behalf, answered the motion by a legal memorandum which presented alternative positions. It first submitted that the Health-General statutes “set out the standards by which the Defendant’s actions should be judged, and secondly, even if the statutes did not set out the standard of care, the facts are such that a layman could understand and determine whether or not the Defendant acted negligently.” In the course of oral argument on the motion Zerivitz pointed out that H-G § 10-616 “provides that before the doctor can sign that certificate he must personally examine the individual and determine that a mental disorder exists and that the individual needs inpatient care.” The circuit court ruled from the bench.

The court framed the issue to be whether the panel chairman was “in error in granting summary judgment, when confronted with the undisputed fact that there would be no expert testimony offered as to standard of care, correct diagnosis, or what constitutes a proper examination[.]” The judge did “not believe that any of those questions are the subject of lay testimony.” The circuit court ordered Reilly’s complaint dismissed and that order was entered on the docket on February 3, 1987. No appeal was noted within thirty days from that final judgment. On March 5, 1987, Dr. Newman moved that “Plaintiff or his attorney or both be ordered to pay Defendant[] the costs, reasonable expenses and reasonable attorney’s fees incurred by Defendant ] in opposing Plaintiff’s Statement of Claim filed in the Health Claims Arbitration Office and his Action to Nullify and Complaint filed in the Circuit Court for Washington County.” ³⁷⁴ The motion was accompanied by the time records of defense counsel, supported by affidavit and by various papers from the HCAO proceedings. 9 In opposition Reilly filed a legal memorandum which incorporated by attachment Reilly’s HCAO memorandum concerning the need for expert witnesses. Reilly’s memorandum again submitted that the trier of fact should have been allowed to use the requirements of the Health-General Article “as guidance to determine the standard of care under which Defendant Newman was to have acted.” The court, without further hearing, granted sanctions for the reasons stated in a written opinion. 10 The court found that “Reilly and his attorney initiated this claim before the Health Claims Arbitration Board either without any investigation and/or in total disregard of the necessity to prove the applicable standard of care and/ór a breach thereof or causation.” It found that the “sum and substance of the ³⁷⁵ Plaintiff’s claim seems to be summed up in [the] letter dated October 23, 1986” in which counsel for the plaintiff had written that “ ‘with any luck, an opinion can be coaxed’ out of Dr. Fetterhoff when he testifie[s] before the panel.” The court went on to say that it “finds as a fact that this proceeding from its inception was filed without substantial justification.

The Plaintiff’s claim is frivolous and devoid of merit without proof of a violation of the applicable standard of care or causation. He totally failed to present to the Arbitration Panel a good faith effort to establish his case. This court agrees with the Defendant[] that this suit should never have been filed, that it lacked justification from its inception and further that it was unsupported by any plausible legal argument.” Defense counsel’s time records aggregated 205.8 hours of services in arbitration and in the circuit court. The court applied $100 per hour as a reasonable rate and awarded attorney’s fees of $20,580 to which were added costs of $585.05 for a total award of $21,165.05.

At the foot of its opinion was the court’s order, dated April 1, 1987, “that a judgment in favor of the Defendant ] be entered against Luke R. Reilly in the amount of $10,-583.53 and against Daniel M. Zerivitz in the amount of $10,583.52.” 11 A docket entry dated April 2, 1987, reads: “Memorandum Opinion and Order of Court dated the 1st day of April, 1987, ORDERED that a judgment in favor of the Defendant ] be entered against Luke R. Reilly in the amount of $10,583.53 and against Daniel M. Zerivitz in the amount of $10,583.52. (Judge Corderman) filed; cc: Counsel of Recordf.]” Another docket entry dated April 3, 1987, reads: “Judgment entered in favor of George C. Newman, II ... against Luke R. Reilly in the amount of $10,583.53 and ³⁷⁶ judgment entered in favor of George C. Newman, II ... against Daniel M. Zerivitz in the amount of $10,583.52 this date[.]” On April 23, 1987, an order for appeal was docketed. It was signed by Zerivitz as “Attorney for Plaintiff” and reads: “Please enter an appeal on behalf of the Plaintiff to the Court of Special Appeals from the Judgment, in the above captioned matter, in favor of the Defendants, George C. Newman, II M.D., et al., dated April 1, 1987 and entered on April 2, 1987.” The three issues with which we introduced this opinion were presented to the Court of Special Appeals. It held that the circuit court had no authority to impose sanctions for conduct in health claims arbitration.

The court decided “that the trial judge was not clearly erroneous in concluding that the action to nullify the award was maintained in the circuit court without substantial justification and that he did not abuse his discretion in imposing the sanction authorized by Rule 1-341.” Reilly v. Newman, 74 Md.App. 281, 289 , 536 A.2d 1230, 1233-34 (1988). The intermediate appellate court also ruled that the order for appeal “made no mention of an appeal from the separate judgment entered against” Zerivitz. Id. at 288 , 536 A.2d at 1233 . Thus the Court of Special Appeals let stand the sanction of $10,583.52 imposed on Zerivitz.

As to Reilly, the court remanded for exclusion from the sanction imposed on him one-half of the cost of defense in the HCAO proceedings. We granted cross-petitions for certiorari. I The Court of Special Appeals separately considered and rejected Rule 1-341 and CJ § 3-2A-07(a) as potential authorizations for the circuit court to have imposed sanctions in this case for conduct in HCAO proceedings. It reasoned that Rule 1-341 by its terms applies “[i]n any civil action” and that under Rule l-202(a) “ ‘[ajction’ means collectively all the steps by which a party seeks to enforce ³⁷⁷ any right in a eourt[.]” Because HCAO arbitration is not a proceeding in a court, the intermediate appellate court held that Rule 1-341 does not apply to the HCAO proceedings.

Dr. Newman urges that the proceedings administered by the HCAO and the action to nullify in a circuit court be treated as one continuous enforcement, all parts of which comprise a “civil action” under Rule 1-341. He points out that in malpractice cases the time as of which diversity of citizenship is determined is the date of filing of the claim with the HCAO. See Rowland v. Patterson, 852 F.2d 108 (4th Cir.1988). He draws a variety of illustrations from provisions of the Health Care Malpractice Claims Act to demonstrate that, in cases of medical malpractice, “action” embraces HCAO arbitration.

The short answer to these contentions is that Rule 1-341 was adopted by this Court in the exercise of its rulemaking power under Maryland Constitution art. IV, § 18(a) which concerns “the practice and procedure in and the administration of the appellate courts and in the other courts of this State[.]” By CJ § 3-2A-03(a) the HCAO “is created as a unit in the Executive Department. It is headed by a Director appointed by the Governor with the advice and consent of the Senate.” The interpretation urged by Dr. Newman raises substantial questions concerning the constitutional power of this Court to regulate conduct before an executive agency. We therefore interpret Rule 1-341 not to include within the sanction power of a circuit court the power to sanction conduct in HCAO proceedings.

The Court of Special Appeals also correctly held that CJ § 3-2A-07(a) could not apply here. The statute provides: “If the arbitration panel finds that the conduct of any party in maintaining or defending any action is in bad faith or without substantial justification, the panel may require the offending party, the attorney advising the conduct, or both, to pay to the adverse party the costs of the proceeding and reasonable expenses, including rea ³⁷⁸ sonable attorney’s fees, incurred by the adverse party in opposing it. A determination made under this subsection shall become part of the panel award and subject to judicial review.” This statute confers the power on the panel, and not on the panel chairman. Dr. Newman never sought to have a panel convened for the purpose of entertaining an application for sanctions.

Thus, even though the determination made under § 3-2A-07(a) is “subject to judicial review,” the matter was not preserved. Before this Court Dr. Newman takes a somewhat different tack. He points out that under CJ § 3-2A-05(a)(l) “all issues of law shall be referred by the Director [of the HCAO] to the panel chairman.” Under CJ § 3-2A-02(c), “[e]xcept as otherwise provided, the Maryland Rules of Procedure shall apply to all practice and procedure issues arising under this subtitle.” Dr. Newman submits that § 3-2A-02(c) makes applicable in HCAO arbitration a power to sanction which is coextensive with that in Rule 1-341. Under Rule 1-341 the determination of sanctions is for the court.

Similarly, Dr. Newman submits, the panel chairman, acting alone, can apply § 3-2A-02(c)’s incorporation of Rule 1-341 without a full panel having been convened. The argument is that Dr. Newman made such an application to the panel chairman in the proposed issues submitted by him, that the panel chairman neglected to rule on the application, and that under those circumstances the circuit court could act on the application in Reilly’s action to nullify the award to the same extent as if the application had been explicitly denied by the chairman. Dr. Newman’s analysis presupposes two sources of sanction power in HCAO arbitration, one resting with the panel and conferred by § 3-2A-07(a) and the other resting with the chairman alone and derived from Rule 1-341’s assumed incorporation into § 3-2A-02(c). Both § 3-2A-02(c) and § 3-2A-07(a) were added to the Health Care Malpractice Claims Act by Ch. 640 of the Acts of 1986 which was effective July 1, 1986, and made applicable to “all cases ³⁷⁹ open” in the HCAO on that date.

See SEC. 2 of Ch. 640. If the reference in § 3-2A-02(c) to the Maryland Rules of Procedure includes Rule 1-341, and if the panel chairman acts as a judge acts under Rule 1-341, then nothing limits the chairman’s power of acting alone to the period before a panel has been appointed so that the chairman could act alone under the § 3-2A-02(c) power urged by Dr. Newman even after the full panel is selected. This interpretation creates a conflict between § 3-2A-07(a) and § 3-2A-02(c), particularly if the chairman were to reach one conclusion and the remaining two panel members reached the opposite conclusion. The language used in § 3-2A-07(a) reflects that the legislative purpose was to make the imposition or denial of sanctions in HCAO arbitration a matter for the panel and not simply for the chairman.

Sanctions may be imposed only if the “panel finds” misconduct. By specifying that “[a] determination made under [§ 3-2A-07(a) ] shall become part of the panel award and subject to judicial review,” the General Assembly has indicated that a “determination” to grant or deny sanctions is to be part of an award made by a panel. Because § 3-2A-07(a) more particularly expresses the legislative purpose with respect to sanctions than does the general reference to rules of procedure in § 3-2A-02(c), the conflict must be resolved in favor of the former, more specific statute. Accordingly, we agree with the conclusion reached by the Court of Special Appeals on this issue. 12 ³⁸⁰ II “In order to impose sanctions [Rule 1-341] requires the trial judge to find one or both of two predicates: ‘bad faith’ or ‘lack of substantial justification’.” Yamaner v. Orkin, 313 Md. 508, 509 , 545 A.2d 1345, 1345 (1988).

Here the circuit court found a lack of substantial justification. By the time Reilly’s claim was asserted in the circuit court, it was clear to Reilly and to Zerivitz that they were not going to get from Dr. Fetterhoff an opinion that Dr. Newman had violated the applicable standard of care, and there was no other expert even remotely in the picture to support the plaintiff’s claim. But the plaintiff’s point in pursuing the claim beyond arbitration was that the statutes governing involuntary commitments established a required procedural standard and that those statutes had been violated. Thus, depending upon what H-G § 10-616(a)(l)(i) meant by requiring a “personal examination,” Dr. Newman’s certification may or may not have complied with the statutes authorizing involuntary admission to a facility.

Dr. Newman’s only contacts with Reilly prior to the former’s certification of the latter’s need for inpatient care were the three telephone conversations on August 7, 1983. Reilly’s position was that those contacts fell short of the statutory standard. If a physician’s conversations with a voice on the telephone do not constitute a “personal examination,” then Dr. Newman arguably initiated an unauthorized seizure of Reilly’s person and committed the tort of false imprisonment. The circuit court, however, concluded that the plaintiff’s position “was unsupported by any plausible legal argument.” We disagree. “Rule 1-341 is not intended to penalize a party and/or counsel for asserting a colorable claim or defense.” Yamaner, 313 Md. at 516 , 545 A.2d at 1349 .

Yamaner cited favorably Legal Aid Bureau, Inc. v. Farmer, 74 Md.App. 707 , 539 A.2d 1173 (1988), a case in which the substantial ³⁸¹ justification for counsel’s recommending and pursuing an appeal from an adverse judgment of the District Court of Maryland was counsel’s interpretation of the relevant statutes. While the Court of Special Appeals in Legal Aid Bureau agreed with counsel’s interpretation, the test under Rule 1-341 is only that the legal position be “fairly debatable” to constitute substantial justification. See Yamaner v. Orkin, 310 Md. 321, 328 , 529 A.2d 361, 365 (1987) (whether order of circuit court was properly interpreted to have imposed sanctions on counsel was fairly debatable, as was the applicability of collateral order doctrine had counsel been sanctioned, so that there was substantial justification for immediate appeal). Thus, we need not decide here on the proper meaning of “personal examination.”