Content area
Full Text
Res judicata." This little Latin phase is supposed to mean that when an issue is decided by the court, it is binding on the parties and the fight is over. At least, that is what they teach in law school.1 What every good bankruptcy lawyer knows is that the fight is never really over until the entire bankruptcy proceeding is over because a decision in one stage of the case can often be attacked again. ..and again.. .and again... at later stages. The chapter 1 1 proceedings of PhyAmerica are a telling example.
Flashback to November 2002. After losing its major funding source, PhyAmerica Physician Services, along with approximately 250 affiliates (PhyAmerica), filed chapter 11 cases in Baltimore.2 PhyAmerica is in the business of providing staffing for hospital emergency rooms. The business works like this: Under an exclusive contract, PhyAmerica supplies all of the emergency room doctors to a hospital, recruits additional doctors if needed and then does all of the scheduling to make sure that the emergency room has 24/7 coverage, taking this burden off of a hospital's administrators.
What happens in the event of a malpractice claim? Under the laws of some states, a hospital can be held vicariously liable for the acts of an emergency room physician, even if that physician is an independent contractor or working for a group like PhyAmerica.3 PhyAmerica usually agrees m its contracts to indemnify its hospital clients and to maintain malpractice insurance to cover claims. Most of its policies provide either that the hospitals are protected as "additional insureds" or provide coverage for indemnity claims that might be brought by the hospitals (thus putting the insurance company on the hook to pay claims of the hospitals if PhyAmerica lacks die assets).
Emergency rooms are fertile fields for malpractice claims, and upon filing for bankruptcy in November 2002, PhyAmerica found itself with a significant constituency of potential tort claimants. Those tort claimants had three potential sources of recovery - the doctor providing services, PhyAmerica (for vicarious liability) and the hospital where the services were performed (for vicarious liability). To help resolve the tort claims, PhyAmerica put forward a voluntary ADR procedure4 in the case that allowed plaintiffs to go to mediation to resolve their claims. The...