Murphy v. United States, No. 1:17-cv-00384 JAP/JHR

CourtUnited States District Courts. 10th Circuit. District of New Mexico
Writing for the CourtRichard K. Eaton, Judge
PartiesDENNIS MURPHY, Guardian Ad Litem for N.E.D., an incapacitated minor; JACOB DOTSON; DOMINIQUE BILLY, individually and as next friend of I.C. and S.D., minors, Plaintiffs, v. THE UNITED STATES OF AMERICA, Defendant.
Docket NumberNo. 1:17-cv-00384 JAP/JHR
Decision Date12 February 2021

DENNIS MURPHY, Guardian Ad Litem for N.E.D.,
an incapacitated minor; JACOB DOTSON; DOMINIQUE BILLY,
individually and as next friend of I.C. and S.D., minors, Plaintiffs,

No. 1:17-cv-00384 JAP/JHR


February 12, 2021


In its July 27, 2020 Findings of Fact and Conclusions of Law (Doc. 267) ("Murphy I"), this Court awarded damages for injuries to N.E.D., a minor child, resulting from Defendant's negligence. The Court's award, in substance, was $1,137,840.00 for past medical expenses,1

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$14,219,657.00 for future medical expenses, and $600,000.00 for non-medical damages.2 Murphy I at 15. Before the Court are two remaining issues concerning this award.

First, Defendant contends that it is entitled to an offset of the full amount of a settlement between Plaintiffs and PlayPower, Inc., a former defendant in a parallel state proceeding. For the reasons set forth below, the Court finds that Defendant is entitled to an offset of $600,000.00, which represents double recovery of non-medical damages covered by Plaintiffs' settlement with PlayPower.

Second, the parties disagree as to whether the trust protecting the award for future medical expenses should be reversionary in nature. That is, Defendant argues that, following N.E.D.'s death, any remaining principal should revert to the United States, rather than to N.E.D.'s estate. Subject to its instructions below, the Court directs that the award of future medical expenses, $14,219,657.00, be placed in a reversionary trust for the benefit of N.E.D., with any remaining principal after her death reverting to the United States.


On October 20, 2020, the Court held a closed oral argument on the issues of the potential offset and the type of trust in which the award for future medical expenses would be held.

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I. Settlement with Former State Court Defendant PlayPower

In February 2016, N.E.D. fell from playground equipment manufactured by PlayPower. Her father, Plaintiff Jacob Dotson, took her to the Gallup Indian Medical Center, where Defendant's negligence caused her to suffer an anoxic brain injury resulting in permanent and profound disability. On behalf of N.E.D., Plaintiffs brought suit in federal court against the United States under the Federal Tort Claims Act ("FTCA"), and in state court against PlayPower and the City of Gallup for common law tort claims of negligence, negligence per se, willfulness or recklessness of suppliers, and strict product liability. (Doc. 99-1.) Thereafter, Plaintiffs and PlayPower reached a confidential settlement. The amount of the PlayPower settlement was [Redacted] .

The release by Plaintiffs of PlayPower (the "Release") (Confidential Doc. 219-1), provides that it is only for non-medical damages.4 See Pls.' Post-Trial Mem. Opp. Gov't's Offset Claim (Doc. 252) (Jan. 31, 2020) ("Pls.' Br. Re: Offset") 7.

At the close of trial, the Court ordered that Plaintiffs' settlement with PlayPower, the accompanying release, and the Guardian Ad Litem report, be placed under seal on the record. (Doc. 266.) The parties submitted post-trial briefing regarding the United States' claimed offset of the total settlement amount against Plaintiffs' recovery.

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II. Reversionary Trust

The parties agree that the damages award for future medical expenses should be placed in trust for the benefit of N.E.D. The parties further agree that a New Mexico trust company, such as the New Mexico Bank & Trust, may act as trustee.

The parties disagree, however, as to what type of trust is appropriate. Plaintiffs argue that any unused trust principal should revert to N.E.D.'s estate in the event of her death. Defendant contends that a "reversionary trust" is warranted, where any unused principal reverts to the United States upon N.E.D.'s death. In support of its position, Defendant provided a sample trust instrument with its pre-trial briefing, outlining a reversionary trust by the terms of which the New Mexico Bank & Trust would act as trustee, and MediBill, Inc., a California company, would act as "administrator." (Doc. 159-1.)


Settlement agreements are contracts, and New Mexico courts interpret them according to contract principles. "A court is bound by the unambiguous language of a settlement agreement." Russell v. Russell, 1990-NMCA-080, ¶ 8, 111 N.M. 23, 26, 801 P.2d 93, 96.

In cases involving two successive tortfeasors, New Mexico law accounts for the possibility that a plaintiff may settle with one tortfeasor but not the other and, in so doing, recover damages for a portion of its injuries that may not later be recovered a second time. See Lujan v. Healthsouth Rehab. Corp., 1995-NMSC-057 ¶¶ 26-27, 120 N.M. 422, 429, 902 P.2d 1025, 1032 (emphasis added) ("[The plaintiff has] the burden to show what portion of the . . . settlement obtained from [one tortfeasor] reasonably is attributable to the original injury. Absent evidence affirmatively establishing such an amount, the entire [settlement] must be set off against any judgment obtained

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against [the successive tortfeasor]."). That is, if the settlement or accompanying release does not specify what damages the plaintiff has foregone in exchange for the settling tortfeasor's payment, the plaintiff bears the burden of showing that any damages it may obtain against the non-settling tortfeasor have not already been recovered. See id. (citing Sanchez v. Clayton, 117 N.M. 761, 768, 877 P.2d 567, 574 (N.M. 1994)).

In the context of the FTCA, tort plaintiffs suing the United States are barred from repeatedly seeking payment of damages from the United States for the same injury. See, e.g., Hull by Hull v. United States, 971 F.2d 1499, 1505 (10th Cir. 1992) ("[C]ourts cannot subject the government to ongoing obligations like . . . continuing payments . . . ."). The New Mexico Medical Malpractice Act bars the payment of a lump sum for future medical expenses. See N.M. STAT. ANN. § 41-5-7(D) (1978), amended by 1992 N.M. Laws ch. 33 (emphasis added) ("Payment for medical care and related benefits shall be made as expenses are incurred."). In circumstances such as these, the Tenth Circuit authorizes district courts in FTCA cases to fashion remedies, including reversionary trusts, by which periodic payments can be made to injured parties after the United States has discharged its one-time obligation. See Hull, 971 F.2d at 1505.


I. The United States Is Entitled to an Offset of $600,000.00 of the Award for Non-Medical Damages

The issue of whether Defendant is entitled to an offset depends on what damages were covered by the Court's award (set out in Murphy I), and by the settlement between Plaintiffs and PlayPower.

Plaintiffs characterize the settlement with PlayPower as one that covers only non-medical damages, whether caused by PlayPower's allegedly tortious conduct or by Defendant's

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malpractice in this case. See Pls.' Br. Re: Offset 7 ("Recognizing that Plaintiffs would be entitled to pursue their claims against the Government for a full recovery for medical and related expenses from the anoxic injury, Plaintiffs and PlayPower agreed to limit the PlayPower Settlement to non-medical damages."). In other words, Plaintiffs contend that there is no double recovery because the damages recovered from the United States are primarily medical damages,5 and the [Redacted] recovered from PlayPower is only for non-medical damages.

Plaintiffs base this argument on the language of the Release itself.6 See Release at 3; Pls.' Br. Re: Offset 7-8. Plaintiffs also argue that there is no reason to question the settlement, outside the language of the Release, because [Redacted] is reasonable compensation "for the non-medical damages resulting from the permanent and irreversible catastrophic brain injury suffered by [N.E.D.]." Pls.' Br. Re: Offset 9-10.7

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In addition, in the Release, PlayPower agreed to assign certain rights of indemnity to Plaintiff.8 See Release at 4. In their briefing and at oral argument, Plaintiffs have stated that they intend to pursue an indemnification claim against the United States, only if an offset is granted by the Court. See Pls.' Br. Re: Offset 8 ("[I]f the Government were successful in its claim for a full offset against the total amount of the PlayPower Settlement, PlayPower would have a viable claim for indemnity. Plaintiffs recognized the potential value of such an indemnity claim and, consequently, included the assignment of PlayPower's right to indemnity in the Release as additional protection for Plaintiffs.").

Defendant claims that an offset is warranted on two primary grounds.9 See Def.'s Sealed Br. Support Offset (Confidential Doc. 256) (Jan. 31, 2020) ("Def.'s Br. Re: Offset") 7-10. First, Defendant argues that, in accordance with Lujan, Plaintiffs have not adequately carried their burden of showing how much, if any, of the settlement amount is attributable to the injury allegedly caused by PlayPower, as distinct from the injuries proven against the United States. See Def.'s Br. Re: Offset 11 (citations omitted) ("In Lujan, the only contemplated apportionment of a settlement is between the original injury and the enhanced injury. . . . The subject Settlement Agreement made no such apportionment. . . . Absent evidence affirmatively establishing the amount attributable to

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the original injury, the entire settlement amount must be set off against any judgment obtained against the successive tortfeasor.").

Second, Defendant argues that the settlement does not effectively protect the United States from double recovery. Defendant specifically points to the "assignment" by PlayPower to Plaintiffs of PlayPower's right to seek indemnification against the United States:

There is nothing that stops the PlayPower Defendants (or Plaintiffs, if the assignment is valid) from seeking recoupment of the Settlement Amount from the

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