Significant Decision Regarding Sovereign Immunity In Alabama

An eight-year-old piece of litigation ended on February 28, 2014, when a 6-3 Alabama Supreme Court overruled the defendant hospital’s application for rehearing.

BACKGROUND:

In September 2005, 73-year-old Lauree Ellison was in the emergency department of Baptist Medical Center East (BMCE) in Montgomery complaining of a sore throat. A test for streptococcus found the presence of dangerous methicillin-resistant staphylococcus aureus (MRSA), but that lab result was never communicated to the treating physician. Therefore, Ms. Ellison was discharged to go home. She died in November 2005 from the untreated MRSA infection.

The executrix of the Ellison estate, Kay Davis, filed suit against the hospital in 2006 through her attorney, Shay Samples of Birmingham’s Hare, Wynn, Newell & Newton, LLP. A Montgomery County jury returned a wrongful death verdict in the amount of $3.2 million in June 2009. The hospital appealed to the Alabama Supreme Court. On appeal, the hospital raised, for the first time, the issue of sovereign immunity. On January 14, 2011, a divided Alabama Supreme Court issued its first opinion in this case. The 2011 majority held that hospital was absolutely immune to suit, as an arm of the State of Alabama. This rather shocking holding derived from the fact that, earlier in 2005, prior to Ms. Ellison’s visit to the emergency room, the hospital had entered into a sort of “affiliation” agreement with UAB Hospital.

Prior to 2005, BMCE was operated by Baptist Health, a private, non-profit corporation. In July 2005, Baptist Health and the University of Alabama Board of Trustees agreed to the formation of a new health care authority, the Health Care Authority for Baptist Health, pursuant to Alabama statutes permitting the creation of such entities. In a complicated series of agreements, UAB agreed to help manage the Baptist hospitals in Montgomery.

SIGNIFICANCE OF THE ALABAMA SUPREME COURT RULING

Davis filed an application for rehearing, and a new opinion was released on May 17, 2013. The nine Justices wrote five separate opinions. Six Justices voted to reverse the 2011 opinion and to affirm the judgment, rejecting the defense of immunity. The final order of February 28, 2014, reaffirms that 6-3 split and creates the final judgment in this case.

This Alabama Supreme Court decision is very significant in at least two regards. First, it will be a major precedent in the area of the law of sovereign immunity. Section 14 of the Alabama Constitution of 1901 grants absolute legal immunity to the State of Alabama. This Davis opinion explains that the determination of which kinds of entities or persons fall within Section 14 immunity is a judicial function for the courts, not the legislature. The six-member majority weighed and discussed all the relevant factors and held that the Health Care Authority for Baptist Health is not the State and is not immune to suit.

According to Justice Murdock’s main opinion, some of the most important factors are: “(1) the fact that operating a hospital is not a uniquely governmental function, (2) the power to sell and dispose of property, (3) the fact that the State assumes no responsibility for any debt issued by a health-care authority, (4) the fact that no tax dollars are used in the operation of a health-care authority, (5) the power of a health-care authority to make contracts and to do so without being required to solicit bids or to participate in
the State contract-review process, (6) the fact that the legislature specifically prescribed to health-care authorities an amenability to suit, and, perhaps most significantly, (7) the fact that money judgments and other losses or obligations incurred by a health-care authority are not payable from the State treasury. . . .”

Second, this Davis opinion will also be an important precedent regarding the Legislature’s powers to grant legal immunity or to cap the amount of damages. The hospital argued that, if it is not absolutely immune as the State itself, then it is, at least, a “governmental entity” protected by the $100,000 damages cap. The same 6-3 majority also refused to reduce the $3.2 million judgment down to $100,000, pursuant to a 1977 Alabama statute that caps damages against local governmental entities at $100,000. The hospital argued that one of Alabama’s health care authority statutes intended to extend the $100,000 cap for cities and counties to all kinds of health care authorities. The main opinion holds that, even if that was the legislative intent, such intent would be unconstitutional.