Mendoza v. McDonald's Corp.

• Court: Arizona Court of Appeals
• Writing for the Court: Norris
• Citation: Mendoza v. McDonald's Corp., 213 P.3d 288, 222 Ariz. 139 (Ariz. App. 2009)
• Decision Date: 07 July 2009
• Docket Number: No. 1 CA-CV 07-0903.,1 CA-CV 07-0903.
• Parties: Maria MENDOZA, Plaintiff/Appellant/Cross-Appellee, v. McDONALD'S CORPORATION, Defendant/Appellee/Cross-Appellant.

213 P.3d 288

222 Ariz. 139

Maria MENDOZA, Plaintiff/Appellant/Cross-Appellee, v. McDONALD'S CORPORATION, Defendant/Appellee/Cross-Appellant.

No. 1 CA-CV 07-0903.

Court of Appeals of Arizona, Division 1, Department E.

July 7, 2009.

Friedman Rubin & White By William S. Cummings and Richard H. Friedman and James A. Hertz, Bremerton, WA, and David S. Shughart, P.C. By David S. Shughart, Scottsdale, Co-Counsel for Plaintiff/Appellant/Cross-Appellee.

Brian Cave LLP By Jay A. Zweig, Phoenix, and Gallagher & Kennedy, P.A. By Jeffrey T. Pyburn and Mark A. Fuller, Phoenix, and Paul Hasting Janofsky & Walker LLP By Steven Thomas Catlett, Chicago, IL, Co-Counsel for Defendant/Appellee/Cross-Appellant.

OPINION

NORRIS, Judge.

¶ 1 This appeal arises out of a judgment entered on a jury verdict in favor of plaintiff-appellant Maria Mendoza and against defendant-appellee McDonald's Corporation on Mendoza's claim McDonald's breached its duty of good faith and fair dealing in handling her workers' compensation claim. On appeal, Mendoza argues the superior court misinstructed the jury on compensatory damages and respondeat superior, and, through certain erroneous evidentiary rulings, caused the jury to deny her claim for punitive damages. In its cross-appeal, McDonald's argues the issue of punitive damages should not have gone to the jury. As we explain below, we agree with Mendoza, disagree with McDonald's, and therefore reverse in part, vacate in part, and remand for a new trial on compensatory and punitive damages.

FACTS AND PROCEDURAL BACKGROUND¹

I. Mendoza's Workers' Compensation Claim and Proceedings Before the Industrial Commission of Arizona

¶ 2 On June 3, 1997, Mendoza injured her right arm when she tripped and fell while carrying a box of meat patties while working at a McDonald's restaurant. Three days later, Mendoza informed her manager she was not able to continue working. McDonald's directed Mendoza to obtain treatment at the emergency room at a local hospital. She was eventually referred to an orthopedic surgeon, Thomas E. Roesener, M.D., for further treatment. Dr. Roesener placed Mendoza on a no-work status, and McDonald's accepted Mendoza's workers' compensation claim. As a self-insured employer, McDonald's began paying Mendoza temporary total disability benefits.

¶ 3 Although Dr. Roesener initially believed Mendoza had suffered a strained right elbow and mild damage to her ulnar nerve, he also began to suspect Mendoza had injured her median nerve. In September 1997, based on her pain and on nerve conduction studies performed by another physician, Vito R. Del Deo, M.D., Dr. Roesener concluded Mendoza had injured her median nerve in the accident and was now suffering from carpal tunnel syndrome; he also concluded Mendoza had injured her radial nerve. Although Dr. Roesener believed the radial nerve injury was not then surgical and might resolve over time, he scheduled Mendoza for carpal tunnel surgery and sought McDonald's approval for that procedure. McDonald's, however, refused to approve the requested surgery, misinterpreting Dr. Del Deo's report as indicating Mendoza's carpal tunnel syndrome was not work related. In October 1997, Dr. Roesener advised McDonald's that Dr. Del Deo had not concluded the carpal tunnel syndrome was unrelated to the accident and warned that without surgery Mendoza could experience permanent dysfunction. McDonald's, however, continued to deny authorization for the surgery and, on November 19, 1997, sent Mendoza a notice of claim status denying the carpal tunnel surgery as "not work related" ("November 1997 notice of claim").

¶ 14 Despite its denial, on December 15, 1997, at McDonald's request, an orthopedic surgeon, Ronald B. Joseph, M.D., conducted an independent medical examination of Mendoza. Like Dr. Roesener, Dr. Joseph diagnosed Mendoza as having work-related carpal tunnel syndrome. He recommended at least four weeks of conservative, nonsurgical treatment and opined Mendoza could return to light-duty work, although he did not specify any specific light-duty work restrictions. If the conservative treatment was unsuccessful, he recommended endoscopic carpal tunnel surgery. Dr. Joseph also concluded Mendoza had injured the right radial nerve in the accident and suggested Mendoza might ultimately need radial nerve decompression.

¶ 5 Based on Dr. Joseph's examination, on January 14, 1998, McDonald's sent Mendoza a notice of claim status accepting Mendoza's claim for benefits; however, because Dr. Joseph had opined Mendoza could return to a light-duty status, McDonald's terminated her temporary total disability benefits as of January 13, 1998. Although McDonald's informed Mendoza it could provide light-duty work,² Mendoza did not return to work, relying on Dr. Roesener's continuing recommendation that she not do so. Mendoza sent a protest letter to the Industrial Commission of Arizona ("ICA"), which was received on February 5, 1998. The ICA treated Mendoza's letter as a request for a hearing on the denied authorization for carpal tunnel surgery and on McDonald's termination of her temporary total disability benefits. Accordingly, the ICA set a hearing on the issues. Mendoza and McDonald's each retained counsel to handle the ICA proceeding.

¶ 6 In the meantime, Dr. Roesener continued to recommend surgery for Mendoza's carpal tunnel syndrome. He also reiterated his belief she should not return to work before having the surgery.

¶ 7 Mendoza's attorney attempted to persuade McDonald's, through its counsel, to approve the carpal tunnel surgery, but McDonald's refused to do so. Although Jennifer Chargaulaf—the McDonald's employee assigned to handle Mendoza's claim, see supra note 2—personally believed, based on Dr. Joseph's examination, that Mendoza's carpal tunnel condition was work related, on advice of counsel, McDonald's took the contrary position in the ICA proceeding. It asserted, first, Mendoza was not entitled to carpal tunnel treatment because she had failed to timely protest the November 1997 notice of claim and, thus, McDonald's refusal to approve carpal tunnel surgery had become final³; and second, Mendoza's carpal tunnel condition had not been caused by the accident, despite the opinions provided by Drs. Roesener and Joseph.

¶ 8 In May 1998, McDonald's counsel deposed Mendoza through an interpreter. Before her deposition, Mendoza's attorney provided McDonald's counsel with medical records that disclosed Mendoza had injured her right arm in a 1991 work-related accident. Nevertheless, at her deposition Mendoza stated she had never had a prior problem with or been seen by a doctor for any treatment for her right arm before the accident at McDonald's.⁴

¶ 9 In late May 1998, after Mendoza's deposition, a hand surgeon, Mitchel A. Lipton, M.D., examined Mendoza at McDonald's request. According to a May 1998 claim file note prepared by Chargaulaf, McDonald's ICA counsel had set this examination "to support our denial." In requesting the examination, McDonald's ICA counsel had advised Dr. Lipton about Mendoza's 1991 industrial injury and informed him McDonald's wanted to know whether he could determine if the carpal tunnel syndrome was work related, given the June 1997 emergency room treatment record did not reflect Mendoza had injured her wrist in the accident and her carpal tunnel symptoms had not been diagnosed until Dr. Del Deo examined her in September 1997. After examining Mendoza, Dr. Lipton reached a "diagnostic impression" she had probable right carpal tunnel syndrome, although he recommended against surgery. He was unable to determine, however, whether Mendoza's carpal tunnel syndrome was related to the accident at McDonald's.⁵

¶ 10 Recognizing the medical evidence that Mendoza's carpal tunnel condition was not work related was "sparse based on [the] Dr. Joseph and Dr. Lipton reports," in July 1998, McDonald's decided to accept Mendoza's carpal tunnel syndrome as being work related, but refused to authorize the surgery Dr. Roesener had recommended. Instead, it insisted Mendoza first participate in the conservative nonsurgical treatment recommended by Dr. Joseph before it would authorize surgery.

¶ 11 Dr. Roesener, however, continued to recommend surgery instead of conservative care, which he believed would not be helpful. He also reported Mendoza was having increasing pain in her right wrist and noted she was beginning to experience symptoms that could represent a right radial nerve entrapment. In an effort to resolve the disputes over conservative care versus surgery and McDonald's termination of temporary total disability benefits, Mendoza's counsel proposed sending Mendoza to a different doctor,⁶ who would determine both an appropriate course of treatment and Mendoza's work status. McDonald's refused the offer.

¶ 12 In December 1998, Dr. Joseph, again at McDonald's request, saw Mendoza for another independent medical examination. Dr. Joseph diagnosed persistent right carpal tunnel syndrome, which he described as "severe, chronic," and also "probable right radial nerve entrapment." He recommended endoscopic carpal tunnel surgery, in part because traditional or "classical" carpal tunnel surgery might result in reflex sympathetic dystrophy ("RSD").⁷ He nevertheless stated RSD was also a risk even with endoscopic surgery. Based on Dr. Joseph's second examination, McDonald's offered to authorize endoscopic surgery. But, as it turned out, Dr. Roesener, as a matter of practice, did not perform endoscopic carpal tunnel surgery.⁸

¶ 13 In February 1999, Mendoza, through her lawyer, requested McDonald's approve the carpal tunnel surgery, either endoscopic or classical, and agree to treatment by any qualified surgeon, with the exception of Dr. Joseph because he was not her treating physician and would be a material witness in a lawsuit Mendoza planned to file against McDonald's accusing it of bad faith in the administration of her workers' compensation claim....