The Bryant Case and the Calculation of Future Periodic Payments

By Barbara D. Goldberg & Kenneth Mauro

For the time being at least, the recent decision by the Court of Appeals in Bryant v. New York City Health & Hospitals Corporation (93 N.Y.2d 592, 695 N.Y.S.2d 39, 716 N.E.2d 1084 [1999]) has resolved the issue of how future periodic payments are to be calculated for purposes of CPLR Article 50-A and Article 50-B, an issue left open by prior decisions which addressed such matters as the calculation of attorneys' fees, proof of inflation, and interest on future periodically paid damages. Cf. Mauro, "Mathematics, the Law and 'Rohring'", New York Law Journal, September 6, 1994, p. 1, col. 1. Agreeing with the Appellate Division, Second Department, and a majority of the other courts that have considered the issue, the Court of Appeals held that the basis for future periodic payments is the undiscounted future value of the damages remaining after deduction of the $250,000 lump sum and the calculation of attorneys' fees attributable to future periodically-paid damages.

By reaching this result, the Court rejected the methodology advocated by the defendants and adopted by a minority of courts in such decisions as Silvestri v. Smallberg, 165 Misc.2d 827 (Sup. Ct., N.Y. County 1995), affd on other grounds 224 A.D.2d 172 (lst Dept. 1996), affd 88 N.Y.2d 803 (1996), and Alvarez-Icaya v. Cartier Inc., 920 F. Supp. 449 (S.D.N.Y. 1996). According to this method, future periodic payments were based on the present value of future damages. The plaintiffs argued that the Silvestri method undercompensated them, since basing future periodic payments on the present value of future damages would result in the plaintiff receiving less than the full amount of damages that the jury awarded.

The Court in Bryant, in addition, held that the mandatory 4% annual increase in periodic payments is to be included in the damage award prior to determining attorneys' fees. Rejecting the defendants' position that including the statutory additur in calculating attorneys' fees was "gratuitous," the Court reasoned that this was consistent with both the language of the structured judgment provisions and the statutory provisions governing attorneys' fees, whereby fees are based on the plaintiff's total recovery.

More important, perhaps, than either of these holdings is the invitation extended by the Court of Appeals to the Legislature. Noting that Articles 50-A and 50-B were reaching their fifteenth anniversary, the Court urged the Legislature to review the statutes to determine whether they are indeed meeting the legislative objectives of moderating the cost of insurance premiums and assuring adequate and fair compensation for injured persons, "and not B as submissions before us urge B egregiously overcompensating or undercompensating anyone." Thus, Bryant may ultimately prove to be the impetus for legislative reform, or perhaps even the repeal, of the provisions that, as the Court of Appeals noted, have aptly been described as "circuitous," "vexing," as "every Judge's nightmare," as "at best A* * *ambiguous [which] can lead to inexplicable results," see Bryant, slip opinion at 6, quoting Bermeo v. Atakent, 241 A.D.2d 235, 242 (citations omitted); and which commentators have criticized as simply being wrong, from a mathematical perspective. Mauro, "the Law and 'Rohring,'" New York Law Journal, September 6, 1994, p. 1, col. 1.

In this regard, it should be noted that, in 1998 and 1999, the Law Revision Commission prepared detailed proposals for amending Articles 50-A and 50-B. The 1998 proposal would have eliminated the 4% mandatory increase. In addition, in place of the current provisions whereby the present value of future damages subject to periodic payments is to be "determined in accordance with generally accepted actuarial practices by applying the discount rate in effect at the time of the [jury's] award," the 1998 proposal called for a 2% net discount rate.

The 1998 proposal would also have allowed the jury to designate certain awards for pecuniary loss as "permanent," so that even if the plaintiff outlived the number of years specified by the jury, payments for such items as medical expenses or custodial care would continue for the duration of the plaintiff's life. Under the current provisions, the payments cease at the end of the time period specified by the jury.

Another provision would have specifically authorized awards for one-time expenses or deferred expenses to be payable in the future -- i.e., where the evidence indicates that the plaintiff will require a single major operation in the future, or will require a new wheelchair every five years. Such flexibility of future payments would allow the awards to conform to the plaintiff's needs, rather than the monthly payout required by the statute for all items of damages.

While there was little disagreement in principle with the idea of permanent or deferred payments, the proposal for a net 2% discount rate was controversial, and it was ultimately recognized that this would favor plaintiffs' attorneys at the expense of their clients, since the attorneys would have received a higher fee on future damages, in proportion to the plaintiff's award, than under the current law. Indeed, in a personal injury case where the attorney was entitled to a 1/3 contingency fee, the attorney would ultimately receive more than 2 of the present value of the periodically paid damages and therefore more than 1/3 of all future damages if a net 2% discount rate were used.

In an attempt to correct these anomalies and eliminate the potential conflict of interest between attorney and client the use of a net 2% discount rate would have created, the 1999 proposal of the Law Revision Commission would have retained the 4% additur and required that the 10-year Treasury Bill rate be used as the discount rate. The 1999 proposal was submitted to the OCA Advisory Committee on Civil Practice, which after extended discussion, voted to table it. One reason for the vote, which was extremely close, was the fact that Bryant was already before the Court of Appeals. Some members of the Committee felt that it would be premature to propose wide-sweeping amendments to the statutes before the Court of Appeals had had an opportunity to rule in Bryant.

Now that the Court of Appeals has not only decided Bryant but has invited the Legislature to review the statutes, it is almost certain that these matters will again be considered by the Law Revision Commission and the Advisory Committee, and that some kind of a reform proposal will eventually be submitted to the Legislature. Certainly the language of Bryant leaves little doubt that any major change must come from the Legislature and not the courts.

Obviously, the mandatory 4% increase and the applicable discount rate are among the key issues that should be addressed. Although the Court of Appeals concluded in Schultz v. Harrison Radiator Div. General Motors Corp., 90 N.Y.2d 311 (1997), that the 4% additur did not preclude the plaintiff from offering proof of inflation, the fact remains that every time the plaintiff's economist testifies to a growth rate for future damages, this results in a doubling of inflation. Also problematic is the discount rate to be used. As any personal injury lawyer can attest and as the Law Revision Commission acknowledged when it put forward its 1999 proposal, this rate must be litigated on a case by case basis if the parties cannot agree.

Some courts avoid the issue by adopting whatever rate for Treasury Bills was in effect on the date of the verdict; other courts have adopted a historical averaging approach, whereby Treasury Bill rates in effect over a time period corresponding to the time period specified by the jury are averaged. Still other courts adopt the annuity rate that a company such as MetLife would pay at the date of the verdict. Needless to say, these varying approaches have led to the use of widely differing discount rates in otherwise similar cases.

Other issues and areas of uncertainty abound. For example, the very requirement that the first $250,000 of future damages be paid as a lump sum, without reduction to present value, may be seen as a windfall to plaintiffs in itself, since in a so-called "old-law" case, all future damages were discounted to present value. There is also the issue of what to do about cases where there is more than one claimant: B a wrongful death action where there are multiple beneficiaries, or the typical case where the spouse of the injured plaintiff asserts a derivative claim for loss of consortium.

The Court of Appeals addressed the first issue in Adamy v. Ziriakus, 92 N.Y.2d 396 (1998), and held that where the decedent's children were merely distributees and not themselves plaintiffs, the plaintiff was entitled to apply a single lump sum of $250,000.

On the issue of whether the spouse of the injured plaintiff is entitled to his or her own payment of $250,000, there has as yet been no definitive ruling by the Court of Appeals or the Appellate Division. Some lower courts, however, have held that the spouse who is named as a plaintiff is entitled to a separate lump sum payment of $250,000. See Rodgers v. 72nd Street Associates, New York County Index No. 128950/95 (Justice Jane Solomon); Flynn v. General Motors Acceptance Corp., 179 Misc.2d 555 (Sup. Ct., N.Y. County 1998)(Justice Ira Gammerman). These courts reason that, although the derivative claim must be joined to the claim of the injured plaintiff under the decision of the Court of Appeals in Buckley v. National Freight, Inc., 90 N.Y.2d 210 (1997), the two claims are nevertheless distinct, involve different damages, and belong to the spouses individually. Accordingly, they conclude that the spouses are entitled to separate lump sums. This approach, of course, overlooks the fact that, even though a derivative claim may be asserted, there is nevertheless a single action, and the claim for loss of consortium is little different, analytically, from claims for different types of damages such as pain and suffering and lost earnings.

To allow each spouse a separate lump sum permits the plaintiffs to receive $500,000 in "future" damages, payable in an immediate lump sum, without reduction to present value. This doubles the "boon" to the plaintiff already inherent in the $250,000 lump sum:

[B]ecause all methods permit the first $250,000 to be paid in lump sum immediately to the plaintiff, a sum which is never reduced to present value (as were all future damages under the "old" law), the cost to the defendant is greater under Articles 50-A and 50-B than under the old law. (Emphasis in original), Mauro, Staller and Sullivan, "Current State of CPLR Articles 50-A, 50-B: Few Answers, New Questions," New York Law Journal, Jan. 27, 1994, p.1, col. 1.

The plaintiff has won a substantial bonus and arguable unjustified bonus on the first $250,000 in future damages, which was unavailable prior to enactment of this new statutory scheme, New York Negligence Reporter, Vol. 2, No. 3, p. 33 (March 1991).

There is also the question of post-verdict interest. Currently, post-verdict interest as to future periocially paid damages is based on their present value, in accordance with the Schultz decision. While a minority of the members of the Law Revision Commission favored the retention of this rule, the majority concluded that post-verdict interest should be assessed only on those periodic payments that become due before the satisfaction of the judgment. (This approach, it might be noted, is consistent with the Uniform Periodic Payment of Judgments Act, and yet, predictably, is highly controversial.)

Yet another issue concerns the order of taking set-offs. In some recent cases the issue has arisen of whether the set-off for a plaintiff's comparative negligence should be taken prior to collateral source reductions. The order of taking these set-offs makes a difference in the total figure. In a recent District Court case, Rivera v. Cincinnati, Inc., 92 Civ. 4345 (December 28, 1998), Judge Sidney Stein concluded that the proper approach was to deduct the collateral source payments first, since this method resulted in a greater net recovery for the plaintiff. Other courts have taken the opposite approach, including Justice Solomon in Rodgers and the District Court in Frey v. Chester E. Smith & Sons, Inc., 751 F. Supp. 1052 (N.D.N.Y. 1990).

In light of these and other open questions, and the nearly universal dissatisfaction with the current statutes, it is to be hoped that the Legislature will accept the invitation of the Court of Appeals, and that Bryant will indeed prompt a legislative overhaul of the structured judgment provisions. Perhaps this time the Legislature will solicit the views of economists and apply a mathematical analysis in formulating revisions to the statutes. A purely mathematical approach would enable the Legislature to avoid the pitfall of a "political" compromise that, in the end, would satisfy neither plaintiffs nor defendants.

As was noted at the time of the decision in Rohring v. City of Niagara Falls, 84 N.Y.2d 60 (1994), when the Court of Appeals applied mathematics to determine the proper method of calculating attorneys' fees:

[M]athematical knowledge is commonly deemed to have a high degree of validity, binding on mankind, irrespective of cultural conditioning and predilection. If appellate courts do not wish to "make new law," or if they do not wish to take a "political" position, they can do no better than to employ mathematical reasoning. The employment of mathematical reasoning, as done by the Rohring Court in a footnote "proving" what the answer to the question posed must be, gives a certain "non-political" validity to the Court's decision. . . .

With solid mathematical reasoning on such issues, the Court's conclusions are indisputable. Where the issue lends itself, the Court should apply a mathematical analysis to test the correctness of its reasoning and assumptions. Mauro, "Mathematics, the Law and 'Rohring'", New York Law Journal, September 6, 1994, p. 1, col. 1.

The same observations are equally applicable to the Legislature. The legislative process, like the science of jurisprudence, can benefit from all areas of knowledge, including mathematical reasoning. If the Legislature not only accepts the invitation of the Court of Appeals in Bryant, but applies a mathematical analysis to test the correctness of any proposed revision, then Bryant will ultimately have been a victory for both sides.