Ironic Twist of Fate--Tort Reform Champion loses his own Medical Malpractice case

Elliott M. Kaplan is a prominent Kansas City attorney. For years, he railed against judges, juries, and trial attorneys, as he and his former firm, Daniels & Kaplan, got big bucks to represent big companies. He was well known as one of the founders of the modern tort reform movement in America. He was named "Legal Reform Champion" by the American Tort Reform Association.

In a cruel twist of fate, it appears he may have reaped what he sowed.

According to its website, The American Tort Reform Association was founded in 1986 by the American Council of Engineering Companies and shortly thereafter, the American Medical Association followed them. They have worked to enact tort reform legislation in 45 states. They have led grassroots efforts which have resulted (they claim) in 85% of Americans believing that frivolous lawsuits clog our courts.

Their efforts have paid off, perhaps to the detriment of one of their own. According to the National Practitioner Data Bank, the number of U.S. malpractice payments in 2008 was the lowest since creation of the federal National Practitioner Data Bank, which has tracked payments since 1990.

WHAT HAPPENED TO LAWYER KAPLAN

Lawyer Kaplan was diagnosed in 2003 with pancreatic cancer by his doctor in Kansas City. Kaplan sought the best care money could buy. He went to the Mayo Clinic in Rochester, MN. There he was again diagnosed with pancreatic cancer.

To save his life, he underwent a Whipple resection, a highly invasive surgery that can cause more harm than good. It was only after the surgery that the diagnosis was determined to be wrong, that he only suffered from pancreatitis, and that the Whipple resection made the condition worse, leaving him debilitated and a broken man.

Believing that the doctor had committed malpractice, Kaplan sued the pathologist alleging negligence in the diagnosis.

He assembled what appears to be an army of attorneys to represent him; his former law partner, James F.B. Daniels of McDowell Rice Smith & Buchanan, Thomas Ward of Ward & Ward, Mark Johnson of Greene Espel & Robert A. Stein (former Dean of Minnesota School of Law).

Unfortunately, the jury found against Kaplan and awarded him no damages. He has moved for a new trial. The motion is currently pending.

Read the Kansas City Business Journal article describing Kaplan's lawsuit against the Mayo Clinic here.

I certainly feel for Lawyer Kaplan. Unfortunately, he and the organization which he was a "Champion", foster the belief that all lawsuits are frivolous and that they compromise access to affordable health care, punish consumers by raising the cost of goods and services, chill innovation, and undermine the notion of personal responsibility.

I don't know if his lawsuit was meritorious or not. If it is, then I pray that justice will prevail. I do know that his organization, the American Tort Reform Association, has perpetuated the belief among many Americans that all lawsuits are frivolous. The beneficiaries of this belief are not injured or defrauded people, but the insurance companies and large corporations who fund these organizations.

One only need read jury verdict reporters to see that juries daily turn away victims just like attorney Kaplan.


Correction: Yesterdays initial post had information referring to Elliott S. Kaplan, one of the founders of the law firm of Robbins Kaplan Miller & Ciresi. The source of this information was the Alabama Jury Verdict Reporter and was assumed to be correct. We have notified the Jury Verdict Reporter of this potential error.


Elliot M. Kaplan Biography:

• by Forbes.com - http://people.forbes.com/profile/elliott-m-kaplan/26454
• Legal Reform Champion
• ZoomInfo - http://www.zoominfo.com/Search/PersonDetail.aspx?PersonID=58139401
  

Chris Hellums can be reached at Chrish@pdkhlaw.com

Abusive 412(i) Tax Shelter Litigation

PARTIES:

Typically, these transactions will include an Insurance company, accountant, tax attorney, and a promoter (someone with an insurance background, perhaps an actuary, who knows how to structure the policy itself). These groups will use insurance brokerages and sub-agents (licensed in the various states) to sell the policies themselves.

INSURANCE COMPANIES
AMERICAN GENERAL LIFE INSURANCE COMPANY
INDIANAPOLIS LIFE INSURANCE COMPANY
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
PACIFIC LIFE INSURANCE COMPANY MET LIFE
PROMOTERS/ATTORNEYS/ACCOUNTANTS
KENNETH HARTSTEIN ECONOMIC CONCEPTS, INC.
PENSION SERVICES, LLC
BRYAN CAVE LLP
RICHARD SMITH

HOW THESE PLANS WORK:

In the late 1990’s, the individuals and groups above devised a scheme to sell abusive tax shelters under the auspices of Section 412(i) of the tax code. A 412(i) is a defined benefit pension plan. It provides specific retirement benefits to participants once they reach retirement and must contain assets sufficient to pay those benefits. A 412(i) plan differs from other defined benefit pension plans in that it must be funded exclusively by the purchase of individual life insurance products. To create a 412(i) plan, there must be a trust to hold the assets.

The employer funds the plan by making cash contributions to the trust, and the Code allows the employer to take a tax deduction in the amount of the contributions, i.e. the entire amount. The trust uses the contributed funds to purchase some combination of life insurance products (insurance or annuities) for the plan. As the plan participants retire, the trust will usually sell the policies for their present cash value and purchase annuities with the proceeds.

The revenue stream from the annuities pays the specified retirement benefit to plan participants. These defendants (with the aid and knowledge of the insurance companies) used the traditional structure and sold life insurance policies with excessively high premiums. The trust then uses the large cash contributions to pay high insurance premiums and the employer takes a deduction for the sum of those large contributions. As you might expect, these policies were designed with excessively high fees or “loads” which provided exorbitant commissions to the insurance companies and the agents who sold the products.

The policies that were sold were termed Springing Cash Value Policies. They had no cash value for the first 5-7 years, after which they had significant cash value. Under this scheme, after 5-7 years, and just before the cash value sprung, the participant purchases the policy from the trust for the policy’s surrender value. In theory, you have a tax free transaction.

The IRS does not recognize the tax benefit of such a plan and has repeatedly issued announcements indicating that such plans are contrary to federal tax laws and regulations. These plans were targeted to high net worth individuals, including doctors, dentists, corporate executives, and professional athletes.

If you would like to speak to one of our attorneys regarding this area of litigation, please contact Chris Hellums