Rio Mar Associates, Lp, Se v. Uhs of Puerto Rico

• Court: U.S. Court of Appeals — First Circuit
• Writing for the Court: Selya
• Citation: Rio Mar Associates, Lp, Se v. Uhs of Puerto Rico, 522 F.3d 159 (1st Cir. 2008)
• Decision Date: 10 April 2008
• Docket Number: No. 07-1868.,No. 07-2005.,07-1868.,07-2005.
• Parties: RÍO MAR ASSOCIATES, LP, SE, et al., Defendants/Cross-Plaintiffs, Appellants, v. UHS OF PUERTO RICO, INC., d/b/a Hospital San Pablo Del Este, Cross-Defendant, Appellee, Myrella S. Fiorentino, Plaintiff, Appellee.

522 F.3d 159

RÍO MAR ASSOCIATES, LP, SE, et al., Defendants/Cross-Plaintiffs, Appellants, v. UHS OF PUERTO RICO, INC., d/b/a Hospital San Pablo Del Este, Cross-Defendant, Appellee Myrella S. Fiorentino, Plaintiff, Appellee.

No. 07-1868.

No. 07-2005.

United States Court of Appeals, First Circuit.

Heard March 4, 2008.

Decided April 10, 2008.

Jennifer S. Carroll, for appellants.

Gladys E. Guemarez, with whom Law Offices of Gladys E. Guemarez was on brief, for cross-defendants, appellees.

Eric A. Tulla, with whom Rivera, Tulla & Ferrer, Guillermo Ramos Luiña, Edward A. Moss, and Shook, Hardy & Bacon were on brief, for plaintiff, appellee.

Before BOUDIN, Chief Judge, SELYA, Senior Circuit Judge, and KEENAN,^* Senior District Judge.

SELYA, Senior Circuit Judge.

The district court bifurcated an action but, after the first-phase trial had been completed, misinterpreted the effect of the jury's verdict. That error prompted a series of rulings which, among other things, foreclosed a second-phase trial. Because these rulings were erroneous and prejudiced substantial rights, we reverse one order, vacate another, and remand for further proceedings consistent with this opinion and with Puerto Rico law governing the allocation of damages between settling and non-settling successive tortfeasors.

I. BACKGROUND

Edward and Myrella Fiorentino sojourned from Arizona to Puerto Rico to stay at the Westin Río Mar Beach Hotel. On December 7, 2000, while swimming in the ocean, Edward was struck by a wave which rendered him unconscious. Following his shore-side resuscitation by a group of vacationing doctors, lifeguards realized that they lacked proper equipment for stabilization. When emergency medical personnel finally arrived, they placed a supportive collar around Edward's neck and transported him to the Hospital San Pablo del Este (the Hospital).

Although a scan taken that same day indicated that a cervical vertebra had been broken, the medical staff failed to treat the fracture. In the meantime, fragments pressed on Edward's spinal cord, causing swelling and nerve damage. Myrella had him transferred to a hospital in Miami but, despite prompt surgical intervention there, Edward emerged from his ordeal as a quadriplegic.

Invoking diversity jurisdiction, 28 U.S.C. § 1332(a)(1), the Fiorentinos filed suit in the United States District Court for the District of Puerto Rico against the hotel and the entity that owned it (collectively, the Hotel) and against the Hospital. With respect to the Hotel, the amended complaint alleged negligent failure to warn of hazardous beach conditions and negligent entrustment of beach safety to untrained and ill-equipped lifeguards. With respect to the Hospital, the amended complaint alleged, among other things, medical malpractice.

Edward died before trial for reasons unconnected with the accident. His wife, as personal representative of his estate and in her own behalf, pressed forward with the suit (accordingly, we henceforth refer to her singularly as the plaintiff). Meanwhile, the Hotel and the Hospital filed cross-claims against each other. See Fed.R.Civ.P. 13(g).

As trial approached, the Hospital settled with the plaintiff for $1,400,000, and the district court granted a motion to dismiss the amended complaint as to that defendant. The Hotel's cross-claim remained pending. The court proceeded effectively to bifurcate what remained of the action, reserving the cross-claim for a separate trial.

Before the first-phase trial commenced, the Hotel moved to compel disclosure of the release, settlement agreement, and related documents (collectively, the Release) memorializing the settlement between the plaintiff and the Hospital. The plaintiff opposed the motion. The court did not act on the matter immediately, and the first-phase trial got underway.

The trial itself showcased the plaintiffs claims against the Hotel (the Hospital did not participate). At the charge conference, the judge reiterated how he had decided to structure the proceedings, advising the Hotel that it could "repeat against the hospital" in the second-phase trial all claims "for any damages that the hospital may have caused." The judge then stated:

Basically, what I have done in this case is ... a bifurcation. I have tried plaintiffs' causes of action against the hotel first. Once that is over, if there is any reason to go forward with [the] cross claim against the hospital, then we'll have another jury trial, and we'll go [forward with the] cross claim against the hospital.

Later that day, the court charged the jury. Pertinently, the court instructed:

A person who by his negligence causes physical injuries to another is also' responsible for any additional injuries suffered by that person as a result Of the medical services provided to treat the original injuries. Nothing precludes the person who caused the original injuries to recover from the hospital who provided the medical services those additional injuries caused by their insufficient care.

If you find that the [Hotel] defendants ... are responsible for Mr. Fiorentino's accident on December 7, 2000, you must also determine that they are liable for all damages sustained by him as a consequence of the medical services provided to him to treat the physical injuries suffered at the beach of the Westin Rio Mar Beach Hotel....

After deliberations, the jury returned a verdict in favor of the plaintiff in the amount of $1,844,000.

The district court subsequently granted the Hotel's pending motion for disclosure of the Release. When produced, the settlement accord proved to be fashioned along the lines of a Pierringer release. See Pierringer v. Hoger, 21 Wis.2d 182, 124 N.W.2d 106, 112 (1963) (interpreting such a release as discharging the settling defendant entirely and discharging the non-settling defendant from responsibility for the settling defendant's proportionate share of liability). Such "proportionate share" releases are not uncommon. See, e.g., McDermott v. AmClyde, 511 U.S. 202, 205, 217, 114 S.Ct. 1461, 128 L.Ed.2d 148 (1994); In re Exxon Valdez, 229 F.3d 790, 797-98 (9th Cir.2000); Austin v. Raymark Indus., Inc., 841 F.2d 1184, 1188-91 (1st Cir.1988).

The Release purported not only to free the Hospital from any and all further liability to the plaintiff but also to discharge it from liability for any associated third-party claims. An additional provision in the Release assured the Hospital of indemnification should any such claim be pressed.¹

Armed with the Release, the Hotel filed a flurry of post-trial motions, including a motion for a new trial, see Fed.R.Civ.P. 59(a), and a motion to alter or amend the verdict by, say, a dollar-for-dollar setoff of the settlement amount, see Fed.R.Civ.P. 59(e). The district court denied both motions. The court's rejection of the new trial motion is not seriously disputed on appeal. With respect to the Rule 59(e) motion, the court expressed a belief that the Hotel, in filing it, had misconstrued the import of the jury's verdict. The court wrote:

During the trial, the jury was only considering [the Hotel's] participation in the event that caused plaintiffs damages. The only defendant at trial was [the Hotel]. The evidence that was presented pertained to [the Hotel's] negligence and involvement in the events leading to plaintiffs injury. The jury was instructed to consider the damages only as to [the Hotel].... Therefore, this is not a situation of double recovery because the jury was only considering the damages as to [the Hotel].

In line with this understanding, the court entered judgment against the Hotel for the total amount of the verdict, denied its motion for a setoff, and dismissed its cross-claim. These timely appeals ensued.

II. ANALYSIS

Our analysis is divided into three parts. We begin by addressing the district court's rulings during the proceedings that followed the first-phase trial. We then canvass the case law to determine the proper allocation of damages between settling and non-settling tortfeasors in a successive tortfeasor case governed by Puerto Rico law. Lastly, we turn to the remedy for the discerned error and furnish a roadmap for further proceedings.

A. The Post-Trial Rulings.

In the final analysis, the Hotel's assignments of error hinge upon the contention that the district court misconstrued the legal import of the first-phase verdict — a misconception that it says tainted the post-trial rulings. The most critical of those rulings was made in connection with the Rule 59(e) motion.

Ordinarily, we review a district court's disposition of a Rule 59(e) motion for abuse of discretion. See Vasapolli v. Rostoff, 39 F.3d 27, 36 (1st Cir.1994). But this is not the ordinary circumstance. Where, as here, the disposition of a Rule 59(e) motion depends entirely on a question of law, our review is plenary. See Pérez v. Volvo Car Corp., 247 F.3d 303, 319 (1st Cir.2001); see also Charlesbank Equity Fund II v. Blinds to Go, Inc., 370 F.3d 151, 158 (1st Cir.2004) ("An error of law is, of course, always an abuse of discretion."). Since the cross-claim is at bottom a legal claim like any other, its dismissal is examined under the de novo standard of review. See Ruiz v. Bally Total Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir.2007); see also United States v. Hardage, 985 F.2d 1427, 1433 (10th Cir. 1993) (applying de novo standard to lower court's dismissal of cross-claim).

The underlying legal question is nuanced, and it is understandable why the able district judge struggled with it. We have the luxury of time and, after careful consideration of the record, we conclude that both the district court's disposition of the Rule 59(e) motion and its concomitant dismissal of the cross-claim rest upon an incorrect interpretation of the effect of the first-phase verdict. We elaborate below.

The jury instruction, quoted above, scarcely could have been more lucid in its exposition of an uncontroversial...