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Edelson v. Soricelli

decided: November 2, 1979; As Amended November 15, 16, 1979.



Before Aldisert, Rosenn and Garth, Circuit Judges.

Author: Aldisert


The question presented by these consolidated appeals is whether a federal court may entertain a Pennsylvania medical malpractice claim under the diversity statute, 28 U.S.C. § 1332, before the claimant has initially taken recourse to the state Arbitration Panels for Health Care, created by the Pennsylvania Health Care Services Malpractice Act of 1975, 40 P.S. §§ 1301.101 to 1301.1006. Under § 309 of the Act, 40 P.S. § 1301.309, a medical malpractice plaintiff may not have his claim heard on the merits by the Pennsylvania court of common pleas until arbitration proceedings have first been completed, and an appeal filed for trial de novo in the court of common pleas "in accordance with the rules regarding appeals in compulsory civil arbitration and the Pennsylvania Rules of Civil Procedure." 40 P.S. § 1301.509.

Appellant Edelson, a citizen of New Jersey, and the McCormick appellants, citizens of New York, brought their respective claims alleging medical malpractice by physicians who are Pennsylvania citizens and by medical institutions located in Pennsylvania and organized under its laws. In both cases, the district courts held that although claimants made the necessary averments for subject matter jurisdiction in the federal courts, exercise of diversity jurisdiction would be improper until the claims were arbitrated under the state arbitration procedure.*fn1 The district court dismissed Edelson's complaint on the authority of Marquez v. Hahnemann Medical College and Hospital, 435 F. Supp. 972 (E.D.Pa.1976). In the McCormick case the district court held that the Pennsylvania arbitration panel had exclusive primary jurisdiction because the injuries complained of did not occur until after the effective date of the Health Care Arbitration Act.*fn2 Both dismissals were without prejudice to the plaintiffs' right to file fresh complaints after completing arbitration. We affirm the judgments of both courts.


Appellants argue that federal district courts sitting in Pennsylvania need not await completion of the state arbitration process before entertaining medical malpractice claims within their diversity jurisdiction. Appellants concede the general applicability of Erie Railroad v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), which requires federal courts to apply state substantive law to diversity actions, but argue that one of two exceptions to Erie is applicable. First, they argue that the malpractice arbitration program is merely procedural and thus not binding on federal courts. Second, they argue that, even if the program is substantive and therefore normally within the mandate of Erie, the analysis of the Supreme Court in Byrd v. Blue Ridge Rural Electric Cooperative, Inc., 356 U.S. 525, 78 S. Ct. 893, 2 L. Ed. 2d 953 (1958), dictates reversal of the district court judgments because "affirmative countervailing (federal) considerations" require the federal courts to grant the plaintiffs immediate access to federal court. We reject both contentions.


The appellants' first argument is that the state arbitration program is a mere procedure, which, under their interpretation of the Supreme Court's decision in Hanna v. Plumer, 380 U.S. 460, 85 S. Ct. 1136, 14 L. Ed. 2d 8 (1965), is not binding on a federal court sitting in diversity. Although appellants' argument that federal courts must adhere to their own procedures does find some support in Hanna, it neglects what we consider to be the more important teaching of that decision: "Choices between state and federal law are to be made not by application of any automatic, "litmus paper' criterion, but rather by reference to the policies underlying the Erie rule." Id. at 467, 85 S. Ct. at 1141. The essence of our legal tradition is that the beginning point of legal reasoning, or, stated syllogistically, the major premise, must not be a statement of the suggested conclusion because to engage in this practice is to indulge in Petitio principii, more colloquially referred to as "begging the question." By whatever label, it is a process of circular reasoning that fails to prove the initial thesis propounded and uses the argued thesis as proof of itself. Labeling a legal precept Ab initio as "procedural" or "substantive," without more, contributes nothing to reasoned discourse. It provides no effective guidance in solving difficult problems that arise in diversity cases such as the one before us. Thus, even if we were to agree with appellants by labeling the arbitration requirement procedural, that characterization would not be dispositive; we would still need to examine its effect on diversity litigation under the Erie mandate. See Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 163-65 (3d Cir. 1976).

Judge Cahn persuasively examined and rejected the argument that the arbitration requirement is procedural in Marquez v. Hahnemann Medical College and Hospital, 435 F. Supp. 972 (E.D.Pa.1976). The court noted that the Supreme Court has interpreted Erie as precluding "maintenance in the federal courts of suits to which the state has closed its courts. Woods v. Interstate Realty Co., 337 U.S. 535, 69 S. Ct. 1235, 93 L. Ed. 1524 (1949)." 435 F. Supp. at 973. Citing Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160 (3d Cir. 1976), for the policies that underlie the Erie doctrine, Judge Cahn concluded: "The major thrust of Erie R. Co. v. Tompkins . . . was to avoid having the outcome of a case depend on whether it was brought in a state or federal court and to permit the state legislatures to define the substantive rights of their citizens." 435 F. Supp. at 974.

The reasoning and holding of Marquez comport with what was said in Guaranty Trust Co. v. York, 326 U.S. 99, 109-10, 65 S. Ct. 1464, 1470, 89 L. Ed. 2079 (1944):

The nub of the policy that underlies Erie R. Co. v. Tompkins is that for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away, should not lead to a substantially different result. . . . Erie R. Co. v. Tompkins has been applied with an eye alert to essentials in avoiding disregard of State law in diversity cases in the federal courts. A policy so important to our federalism must be kept free from entanglements with analytical or terminological niceties.

For guidance in the case at bar, Guaranty Trust is not only important because it set forth the outcome determinative test, Id. at 109, 65 S. Ct. 1464, but because the subject matter of that case was the state statute of limitations, a statute that regulated the time of entry into the state courtroom. A proper analogy lies here. The Pennsylvania Health Care Services Malpractice Act also regulates the time and, in addition, the means of entry to the courtroom. Guaranty Trust suggested a test for guidance in similar cases:

The question is whether (the) statute concerns merely the manner and the means by which (the) right to recover, as recognized by the State, is enforced, or whether such statutory limitation is a matter of substance . . . (that) significantly affect(s) the result of a litigation for a federal court to disregard a law of a State that would be controlling in an action upon the same claim by the same parties in a State court?

326 U.S. at 109, 65 S. Ct. at 1470. The obvious answer to the question in these cases is that appellants, as federal plaintiffs seeking medical malpractice damages, may not have rights superior to state citizen plaintiffs because a fundamental notion underlying Erie is that a federal court sitting in diversity merely provides an impartial forum, not a different set of legal rules. Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 164 (3d Cir. 1976).

Our analysis indicates that the arbitration requirement is a condition precedent to entry into the state judicial system.*fn3 It is not designed to, nor does it, replace the Pennsylvania common law right of trial by jury, a right that has been elevated to a state constitutional right.*fn4 Trial by jury is still available to malpractice litigants in the state's courts of common pleas after completion of arbitration. 40 P.S. § 1301.509. As a condition precedent, the arbitration requirement does not differ materially from other preconditions that states may impose on a plaintiff's right to sue in state court, and federal courts have recognized the applicability of these conditions to diversity plaintiffs. See Markham v. City of Newport News, 292 F.2d 711, 714 (4th Cir. 1961). Because the condition would apply without discrimination to both state court and federal court malpractice actions, we conclude that Erie, which requires federal courts to treat diversity claims so as to discourage forum shopping and to reach results identical to the state courts, requires us to give effect to this condition precedent.*fn5


Appellants' second argument is that the performance of the arbitration program is so dismal that it will effectively preclude them from a full and fair adjudication of their claims in federal court, thus affronting affirmative countervailing federal considerations. Although they stop short of alleging deprivation of due process,*fn6 they emphasize that the delays and other inadequacies of the program encourage federal plaintiffs to settle or forgo legitimate claims that would otherwise be litigated before a federal court. By effectively precluding their access to federal judges and juries, they assert, the program conflicts with fundamental federal policies that even the mandate of Erie cannot override. Thus, they conclude, federal courts should provide relief to federal plaintiffs even if the same relief is unavailable to state plaintiffs. To understand and analyze appellants' argument fully, we must examine the factual basis for their contention.

The most recent annual report of the administrator of Arbitration Panels for Health Care, required by 40 P.S. § 1301.306 and filed on September 1, 1979 by Professor Arthur S. Frankston, the plan's new administrator, disclosed the following data:

Total Claims filed, April 5, 1976 to August 31, 1979:

1976 48

1977 422

1978 1,166

1979 830

TOTAL 2,466

Claims settled, discontinued, conciliated, and hearings held:

Dismissed or discontinued without

conciliation conference 507

Conciliation Conferences held 563

Conciliation Conferences held in settled,

discontinued and ended claims 172

Claims which were settled, discontinued

and ended with two conciliation conferences 27

Claims which were settled, discontinued

and ended with three conciliation

conferences ...

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