Facilitation-arbitration approach nets $8M for cancer fraud claims 

Parties' unorthodox method settles mass med-mal litigation
Michigan Lawyers Weekly
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By: Douglas Levy December 23, 2016

In July 2015, an oncologist accused of giving more than 500 patients unnecessary treatments some of which led to fatalities received justice on the criminal side.

A year later, more than 40 of his victims got justice on the civil side.

But the path to getting all the parties to agree to an $8 million settlement was fraught with as many moving parts as an auto assembly plant.

"We knew what kind of a nightmare it was going to be to have 43 different cases going at the same time," said Donna M. Mackenzie, plaintiffs' co-counsel for the litigation in Korff v. Fata. "We had not only a convicted felon but we had his PC and three major hospital systems and all of these entities had their own lawyers."

In addition, the oncologist, Dr. Farid Fata, had a limited insurance policy that included exclusions for willful and fraudulent acts. Also, because the litigation was tried as medical malpractice, each victim had specific claims that wouldn't meet the legal requirements for class-action status. So the parties worked toward the fairest solution, which turned out to be an unconventional one.

"It took a long time, but we finally agreed to a two-step process where we did facilitation and then an arbitration," Mackenzie said.

The cases roll in.

Fata owned and operated Michigan Hematology-Oncology, which had several locations throughout Oakland County.

A whistleblower's tip-off to the Feds uncovered allegations that Fata, over a nearly eight-year period, had misdiagnosed his patients with cancer, then treated them unnecessarily and excessively with chemotherapy.

He was sentenced in federal court to 45 years in prison on fraud and money laundering charges.

When Fata was indicted Aug. 6, 2013, lawyers used that date as the discovery date, for statute of limitations purposes, for most of the plaintiffs.

"Most of these people had been treated over seven years," said Mackenzie, who spent three years working on the plaintiffs' case with co-counsel Jules B. Olsman (the two are partners at Olsman Mackenzie & Wallace in Berkley) and Brian J. McKeen of McKeen & Associates in Detroit, "If you're looking at the statute of limitations in Michigan," she said, "it's two years from the date of the incident, unless you can use the discovery rule that at six months from the date you discovered, you can then go back a lot more years."

The process meant separate complaints, separate affidavits of merit and different experts.

"In every single case, we still had to work with the individual issues," Mackenzie said. "We still had to prove liability, causation and damages in each case, with a separate expert, as well as the individual liens."

Olsman said there was no choice but to try the cases as med-mal.

He said that given the charges levied against Fata, when it comes to the insurance carriers, "all you’ll see are the back of their heads as they walk out the door, because there was no coverage" for willful and fraudulent acts.

"So it was a matter of constructing the case as a [med-mal] case, which it clearly was. Keeping it in the zone where there could be coverage was the whole idea."

The risk, he notes, was the limitation on damages, as med-mal claims are capped under Michigan law.

Mackenzie said that one issue with the claims was the decision to put discovery on hold. Counsel used information from Fata's criminal case, such as what the Feds had found and what the whistleblower uncovered.

Most of the notices of intent went out before Feb. 6, 2014, making it within the six-month period, and suits were filed by Aug. 6, 2014.

Other cases were entered into tolling agreements, where the other side agreed to try a global resolution first.

But not all of the cases were filed, as plaintiff’s counsel began talks with the defense about different ways to resolve cases outside of the courtroom.

"We knew what kind of a nightmare it was going to be to have 43 different cases going at the same time," Mackenzie said.

Doing it 'the fair way’

Finally, the facilitation-arbitration course of action was hatched.

"The plan we came up with made everything manageable," Mackenzie said. "Well facilitate all the cases together.

Well try to get one global settlement where we'd create one fund where, when the case was settled, each of the different entities could contribute to that fund.

"Then once we had an agreement on how much that fund would be, the cases would be settled as to all of those defendants."

John M. Toth of Sullivan Ward Asher & Patton PC, who represented Fata, said that "recognizing early on the limitations of having to deal with so many of these cases that were not, by definition, class-action cases and looking at the economy of scale, In looking at the defense costs as well as the plaintiffs' costs in doing this with a limited amount of dollars, before everyone went running to the races to take depositions and do discovery was literally the more efficient way of handling it.

"And the fair way… Everyone was able to cut to the chase, sit down and work this through."

At that point, the specifics of the named parties needed to be ironed out.

Mackenzie said that besides Fata and his PC, the named defendants included Crittenton Hospital Medical Center, McLaren Health Systems and Trinity Health Systems each with different counsel. And before facilitation took place, more lawyers were added to the mix because other doctors were named. "In order to cut the deal to facilitate, we had to let the other doctors go," Mackenzie said.

Almost at finish line

Robert F. Riley, of Riley & Hurley PC in Dearborn, was chosen as the facilitator for the cases, which now had been whittled down to 41. Both Mackenzie and Toth said they commend Riley for devoting nearly a full year to the mission, which included his dealing with multiple parties and counsel.

Once the parties agreed to the $8 million facilitation figure for the fund and Oakland County Circuit Court Judge Hala Jarbou gave her approval the next phase was recruiting Richard C. Boothman from the University of Michigan Health System Office of Clinical Affairs to be the arbitrator.

Over a two-day period, each plaintiff’s lawyer arbitrated his or her case or cases. Defense counsel would not be allowed to listen in or make recommendations. Boothman then made his determination as to how the $8 million would be split among Fata's patients. (The arbitration results are confidential.) Mackenzie said that because claims like the ones Fata's patients made don't happen very often in litigation, she encourages counsel who might encounter a similar situation to come up with unorthodox ways to get such cases resolved.

"This wasn't a normal situation by any means. We came up with a hybrid approach that worked for these cases," she said.