Fitzgerald v. Expressway Sewerage Const., Inc.

• Decision Date: 05 May 1999
• Docket Number: No. 98-1473,98-1473
• Citation: 177 F.3d 71
• Parties: Sean FITZGERALD, P.P.A., Cynthia A. Fitzgerald, et al., Plaintiffs, Appellants, v. EXPRESSWAY SEWERAGE CONSTRUCTION, INC., et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 71

177 F.3d 71

Sean FITZGERALD, P.P.A., Cynthia A. Fitzgerald, et al Plaintiffs, Appellants, v. EXPRESSWAY SEWERAGE CONSTRUCTION, INC., et al., Defendants, Appellees.

No. 98-1473.

United States Court of Appeals First Circuit.

Heard May 5, 1999.

Decided May 27, 1999.

John T. Landry, III, with whom Glynn and Landry was on brief, for appellants.

Drew M. Elinoff for appellees.

Before Selya, Circuit Judge, Kravitch, ^* Senior Circuit Judge, and Lipez, Circuit Judge.

SELYA, Circuit Judge.

This single-issue appeal pivots around the evidentiary implications of the collateral source rule. We conclude that, notwithstanding the rule, the trial court acted within its discretion in admitting evidence anent payments made by the plaintiffs' health-care insurer. Consequently, we affirm the judgment below.

The facts of the underlying incident are of little relevance to the issue on appeal, and we do not dwell on them. It suffices to say that, on August 6, 1994, six-year-old Sean Fitzgerald sustained injuries while riding on a parade float in Kingston, Massachusetts. Sean, joined by his parents, thereafter invoked diversity jurisdiction, see 28 U.S.C. § 1332, and sued the float's owner, Expressway Sewerage Construction, Inc., and its operator, Roy Vaughn. ¹ The substantive law of Massachusetts governed this suit. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). At trial, the judge admitted the disputed evidence over the plaintiffs' objection, and the jury subsequently returned a verdict absolving the defendants of liability. On appeal, the plaintiffs contend that this evidentiary ruling contravened the collateral source rule and constituted reversible error.

The Commonwealth's iteration of the collateral source rule is fairly typical. It provides, in the large, that compensation received from a third party unrelated to a tortfeasor-defendant (the collateral source) will not diminish an injured party's recovery from that tortfeasor. See Jones v. Wayland, 374 Mass. 249, 262, 373 N.E.2d 199, 207 (1978); Goldstein v. Gontarz, 364 Mass. 800, 809, 309 N.E.2d 196, 203 (1974). Implementation of the rule necessarily gives rise to an evidentiary analogue. See, e.g., Corsetti v. Stone Co., 396 Mass. 1, 16-17, 483 N.E.2d 793, 802 (1985). This analogue customarily bars the introduction of proof of collateral source payments made to a plaintiff. See id. ("Ordinarily, a defendant may not show that the plaintiff has received other compensation for his injury, whether from an accident insurance policy ... or from other sources.") (citations and internal quotation marks omitted). An exception takes hold, however, if evidence of payment from a collateral source is relevant to some other material issue in the case. See id. at 17, 483 N.E.2d at 802.

The case law sometimes confuses these interrelated principles, moving effortlessly from the substantive to the evidentiary strands of the collateral source doctrine, and back, with little differentiation. See generally Joel K. Jacobsen, The Collateral Source Rule and the Role of the Jury, 70 Or. L.Rev. 523, 525 (1991) (observing that most courts "assume, without appearing to give the matter much thought, that the collateral source rule functions both as a rule of evidence and as a rule of damages," and stating that "deeming the rule hermaphroditic merely obscures some of its more salient features and adds unnecessary confusion"). This blurring has potentially deleterious consequences in diversity cases, for those cases necessitate disentangling substantive rules from procedural ones. See Daigle v. Maine Med. Ctr., Inc., 14 F.3d 684, 689 (1st Cir.1994).

The question raised but not clearly answered by the case law is whether, in diversity cases, state evidentiary rules regarding compensation from collateral sources should displace the Federal Rules of Evidence. Compare, e.g., DeMedeiros v. Koehring Co., 709 F.2d 734, 740-41 (1st Cir.1983) (analyzing the evidentiary implications of certain collateral source payments under Fed.R.Evid. 403 in a diversity case), with McInnis v. A.M.F., Inc., 765 F.2d 240, 245 (1st Cir.1985) (suggesting in dictum, in a diversity case, that by adopting the Federal Rules of Evidence, "Congress did not intend [them] to preempt so-called 'substantive' state rules of evidence such as the ... collateral source rule"). Although the end result in this appeal in all probability would be the same under either approach, ² we see no valid reason to treat the evidentiary prong of the collateral source rule differently than any other state evidentiary doctrine. We explain briefly.

It is axiomatic that, when parties litigate a case in a federal court on the basis of diversity jurisdiction, state law supplies the substantive rules of decision. See, e.g., Blinzler v. Marriott Int'l Inc., 81 F.3d 1148, 1151 (1st Cir.1996); Daigle, 14 F.3d at 689. Whether damages in a tort suit are mitigable by payments originating with a third party depends, quite obviously, on substantive principles. Hence, the state-law collateral source rule supplies the rule of decision.

It is equally axiomatic, however, that federal evidentiary rules govern in diversity cases. See Fed.R.Evid. 101, 1101(b); Cameron v. Otto Bock Orthopedic Ind., Inc., 43 F.3d 14, 18 (1st Cir.1994). The applicability vel non of a specific rule of evidence depends on whether Congress intended the rule to obtain in a given context. See 19 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4512 (2d ed. 1996 & Supp.1999). If the federal evidentiary rule is "sufficiently broad to control a particular issue," the court must apply it. Daigle, 14 F.3d at 689.

So it is here: the Federal Rules of Evidence (and in particular Rules 401, 402, and 403) are malleable enough to deal with the principal evidentiary issues contemplated by the collateral source rule: relevancy and unfairly prejudicial effect. That ends the choice-of-law inquiry. See Wright et. al., supra § 4512 ("If a Federal Rule of Evidence covers a disputed point of evidence, the Rule is to be followed, even in diversity cases, and state law is pertinent only if and to the extent the applicable Evidence Rule makes it so.").

To sum up, the Massachusetts collateral source rule must be given full credit in this case as a rule of damages. The evidentiary implications flowing from that rule, however, are governed by the Federal Rules of Evidence. Thus, we disavow the McInnis dictum and proceed to examine the challenged ruling through a federal prism.

The parties agree that the Commonwealth's collateral source rule prohibits mitigating damages by the amount of first-party insurance proceeds received. Because proof of such payments is irrelevant to mitigation of damages (and, hence, inadmissible on that issue), the threshold question is whether evidence of these payments is relevant to some other contested issue in a particular case. Consequently, we focus on whether, in the circumstances at bar, such evidence tended to make the existence of some other fact "of consequence to the determination of the action more or less probable than it would be without the evidence." Fed.R.Evid. 401.

The defendants argue here, as they did below, that testimony by Sean Fitzgerald's mother (herself a plaintiff) on direct examination furnished a valid basis for admitting evidence of the insurance payments. Under questioning by her attorney, Mrs. Fitzgerald reported that Sean's medical bills and related expenses exceeded $20,000. The lawyer then asked her to "describe the impact that this accident to Sean has had on your family." She replied that the accident had imposed "quite a strain both emotionally and financially."

When embarking on cross-examination, defense counsel complained that this testimonial sequence created a false impression that medical expenses were causing financial hardship and sought leave to show the insurance payments as an antidote. To put matters into better perspective, the court kept the cross-examiner on a short leash, permitting him at first to probe no further than whether Mrs. Fitzgerald had meant that...