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decided: April 18, 1984.


No. 58 M.D. Appeal Docket, 1983, Appeal from the Order of the Commonwealth Court dated August 11, 1983, entered at 460 C.D. 1981, vacating the Order of the Administrator of the Arbitration Panels for Health Care, dated February 3, 1981, entered at No. M76-0009. Pa. Commw. , Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Larsen, J., concurs in the result. Hutchinson, J., files a dissenting opinion.

Author: Nix

[ 504 Pa. Page 530]


Carmello Marquez, a minor, by Dionisia Marquez, his mother and guardian, and Dionisia Marquez in her own

[ 504 Pa. Page 531]

    right, filed a complaint with the Administrator for Arbitration Panels for Health Care (Administrator), pursuant to the Health Care Services Malpractice Act (Act), Act of October 15, 1975, P.L. 390, as amended, 40 P.S. § 1301.101 et seq. At the time of the filing of the complaint in this matter, the arbitration panel had "original exclusive jurisdiction over a claim brought by a patient or his representative for loss or damages resulting from the furnishing of medical services which were or which should have been provided." Section 309 of the Act, 40 P.S. § 1301.309.

Before an arbitration panel was formed, the parties reached a settlement of one million dollars, one-third of the settlement to go to counsel as attorneys' fees. Because a minor was involved in the action, Martin Heller and Robert F. Simone, as counsel for the Marquez family, petitioned the court of common pleas for leave to compromise the action.*fn1 The court approved the settlement and the attorneys' fees, although the attorneys' fees were in excess of the fees allowed pursuant to section 604(a) of the Act, 40 P.S. § 1301-604(a), which provided that:

(a) When a plaintiff is represented by an attorney in the prosecution of his claim the plaintiff's attorney fees from any award made from the first $100,000 may not exceed 30%, from the second $100,000 attorney fees may not exceed 25%, and attorney fees may not exceed 20% on the balance of any award.*fn2

[ 504 Pa. Page 532]

Pursuant to section 307 of the Act, 40 P.S. § 1301.307, the parties also sought the approval of the Administrator,*fn3 who initially declined to approve the settlement as proposed because the attorneys' fees were greater than those permitted by section 604(a) of the Act.*fn4 The Administrator subsequently approved that portion of the fee allowed by the Act; however, because Heller and Simone raised a question as to the constitutionality of the attorneys' fees provision, the Administrator ordered that the disputed fees ($110,610.77) be placed into escrow pending final judicial disposition. The Attorney General filed a petition in the court of common pleas by which he sought to modify the court's order approving the settlement and attorneys' fees and granting distribution of the settlement fund.*fn5 On October 2, 1979, the common pleas court entered an order denying the petition to modify and directed that the disputed attorneys' fees from the escrow account be remitted to appellees.

The Attorney General appealed to the Commonwealth Court, and while that appeal was pending, our Court handed down the decision in Mattos v. Thompson (Mattos), 491 Pa. 385,

[ 504 Pa. Page 533421]

A.2d 190 (1980). Subsequently, the Commonwealth Court held that the common pleas court did not have jurisdiction to entertain the petition seeking approval of the settlement and attorneys' fees based on its belief that only the Administrator was competent to consider and approve the settlement. Marquez v. Hahnemann Medical College and Hospital of Philadelphia, 56 Pa. Commw. 188, 424 A.2d 975 (1981). The Commonwealth Court made only passing reference to Mattos and did not address the question as to the effect of that decision on the issue then before the court. Marquez v. Hahnemann Medical College and Hospital of Philadelphia, supra, 56 Pa. Commw. at 190 n. 1, 424 A.2d at 976 n. 1.

Thereafter, relying on the Commonwealth Court's decision, the Administrator directed the appellees to relinquish the disputed fees. The action of the Administrator was in turn appealed to the Commonwealth Court. That court declared section 604(a) of the Act unconstitutional, finding an impermissible legislative interference with the responsibility of the judiciary. Heller v. Frankston, 76 Pa. Commw. 294, 464 A.2d 581 (1983). This appeal is from that decision.


The Commonwealth Court and the parties herein have implicitly assumed the continuing validity of the Act after our decision in Mattos. They have framed the question as being whether the attorneys' fees limitation imposed by section 604(a) of the Act constitutes an impermissible interference with judicial authority to supervise the activities of attorneys. However, it is our view that the effect of the holding in Mattos was to nullify all of the arbitration procedures of the Act, including section 604(a).

At the outset it is instructive to review the purposes of the Act. The stated objectives were to make available professional liability insurance at a reasonable cost, and to establish a system through which a victim who had sustained injury or death as a result of tort or breach of contract by a health care provider could obtain a prompt

[ 504 Pa. Page 534]

    adjudication of his claim and fair and reasonable compensation for the resulting losses. Section 102 of the Act, 40 P.S. § 1301.102. The heart of the scheme designed to effectuate the prompt and the fair dispute resolution was the compulsory arbitration. It is clear that section 604(a) was ancillary to and a component of that arbitration scheme. The Act's other objective of making available professional liability insurance at a reasonable cost was implemented through the establishment of the Medical Professional Liability Catastrophe Loss Fund.*fn6

We were first confronted with constitutional challenges to the arbitration system created under the Act in Parker v. Children's Hospital of Philadelphia, 483 Pa. 106, 394 A.2d 932 (1978). The focus of our attention then and now was on those provisions relating to the arbitration scheme, Articles III, IV, V, and VI. It was argued, inter alia,*fn7 in Parker that the arbitration requirement constituted an impermissibly onerous burden upon the right to trial by jury accorded pursuant to Article I, Section 6 of the Pennsylvania Constitution. We upheld the constitutionality of the Act with the caveat that "deference to a coequal branch of government requires that we accord a reasonable period of . . . time to test the effectiveness of the legislation." Id., 483 Pa. at 121, 394 A.2d at 940.

The challenge that the arbitration process created by the Act infringed upon the right to jury was again raised in Mattos. By that time experience had demonstrated that the lengthy delays occasioned by the arbitration scheme under

[ 504 Pa. Page 535]

    the Act impermissibly burdened the right of trial by jury so as to render "the right practically unavailable." Id. 491 Pa. at 390, 421 A.2d at 195.

The findings made by the Commonwealth Court indicate that the arbitration panels provided for under the Act are incapable of providing the "prompt determination and adjudication" of medical malpractice claims which was the goal of the Act. See § 102, 40 P.S. § 1301.102. Nor has the arbitration system improved within the last year. Papers filed with this Court included a statistical analysis of the health care panels up to May 31, 1980. These documents reveal that as of May 31, 1980, a total of 3,452 cases had been filed with the Administrator and that only 936 of these cases had been resolved, settled or terminated. This means that 73 per cent of the cases filed with the Administrator have not been resolved. Even worse, six of the original 48 cases filed in 1976 remain unresolved, despite the passage of four years. No extraordinary circumstances have been offered to explain this intolerable delay. Furthermore, as of May 31, 1980, 38 per cent of the claims filed in 1977, 65 per cent of the claims filed in 1978, and 85 per cent of the claims filed in 1979 remain unresolved. Such delays are unconscionable and irreparably rip the fabric of public confidence in the efficiency and effectiveness of our judicial system. Most importantly, these statistics amply demonstrate that "the legislative scheme is incapable of achieving its stated purpose."

Mattos, 491 Pa. at 395-96, 421 A.2d at 195-96 (footnote and citation omitted).

Despite our repeated statements in Mattos declaring the arbitration "system", the arbitration "procedure", the arbitration panels, and the legislative "scheme", to be ineffective and oppressive, it is still being contended that the arbitration system of the Act is viable. However, in Mattos, we expressly held:

We are compelled, therefore, to declare unconstitutional section 309 of the Act, 40 P.S. § 1301.309, giving the

[ 504 Pa. Page 536]

    health care arbitration panels "original exclusive jurisdiction" over medical malpractice claims, because the delays involved in processing these claims under the prescribed procedures set up under the Act result in an oppressive delay and impermissibly infringes upon the constitutional right to a jury.

Our conclusion merely indicates the inability of this statutory scheme to provide an effective alternative dispute resolution forum ...

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