Doctor’s orders: Follow Georgia advance directives!

When it comes to following orders, MDs don’t have the best track record. This brings to mind advance directives for health care. They’re touted as estate plan essentials but do they really work? It turns out that their practical impact depends on the willingness of healthcare providers to read and heed what patients write.

In her excellent book, The Nurses, Alexandra Robbins contends that medical personnel pay little attention to advance directives, especially if hovering family members are demanding that grandpa be kept alive. After all, who is more likely to sue? A patient on indefinite life support or a grieving daughter?

The Georgia Supreme Court explored this touchy territory in a 2016 drama featuring very busy medical doctors, a terminally ill nonogenerian patient, a hospital whose advance directives policy was not followed, and a very unhappy granddaughter.

Spoilers: In Doctors Hospital of Augusta v. Alicea (S15G1571, July 5, 2016), the Court held that advance directives and health care agent instructions are mandatory reading for doctors, and that a good faith attempt to follow them is a prerequisite to any immunity for failure to so do under OCGA § 31-32-10. For more details, read on.

In November 2009, Alicea’s grandmother, Bucilla Stephenson, executed an advance directive authorizing Alicea to consent to or refuse any medical treatment for Stephenson. It also specifically warned health care providers not to prolong her life (1) when she had an incurable and irreversible condition that would result in her death within a relatively short period of time; (2) when she became unconscious and, to a reasonable degree of medical certainty, would not regain consciousness; or (3) when the likely risks and burdens of treatment outweighed the expected benefits.* While the directive did not list specific medical technology, Stephenson told family members that no “machines,” including ventilators, were allowed.

On March 3, 2012, at age 91, Stephenson was admitted to the hospital and diagnosed with pneumonia, sepsis, and acute renal failure. On admission, she was disoriented and marginally responsive. Alicea gave the hospital a copy of the advance directive and the hospital placed it in Stephenson’s medical record.

The next day, March 4, Alicea reminded the treating surgeon, Dr. Catalano, of the advance directive and told him not to administer CPR or other heroic measures. Later the same day, she reiterated these instructions to a Dr. Joseph, adding that neither intubation nor mechanical ventilation should be used. Dr. Joseph duly noted these instructions in Stephenson’s treatment progress notes.

On March 5, Dr. Catalano–who had read neither the progress notes nor the advance directive–called Alicea to get approval to drain fluid from Stephenson’s chest cavity. He did not tell her that intubation would be required. After the procedure, Stephenson was extubated. Later, after Stephenson’s condition worsened,  on March 7 at about 4:50 a.m., Dr. Catalano again ordered Stephenson intubated without informing Alicea or seeking her approval.

When Alicea arrived later that morning, she was faced with choosing between affirmatively removing her grandmother’s life support or allowing it to remain in place. She told the hospital that having forced this choice on her, the hospital would be responsible for Stephenson’s care from that point forward. She remained in the ICU until March 14, when she was disconnected from the ventilator, and died on March 17.

Alicea, as administrator of Stephenson’s estate sued Doctors Hospital, LLC and Dr. Catalano, seeking compensatory and punitive damages, attorneys fees, and expenses of litigation. The defendants moved for summary judgment, arguing that the intubation and ventilation were immune from liability under OCGA § 31-32-10. The trial court disagreed, denying summary judgment because the defendants’ good faith was a disputed question of material fact to be decided at trial. The Georgia Court of Appeals affirmed; the Supreme Court agreed:

[I]t is clear that the Defendants were properly denied summary judgment on their immunity claim . . . The health care decision in question is the decision to intubate Stephenson and put her on a ventilator as a life-prolonging measure around 4:00 a.m on the morning of March 7, 2012. Although there is evidence to the contrary, there is ample evidence that in ordering that procedure, Dr. Catalano was not acting in good faith reliance – in honest dependence – on any decision Alicea had made as Stephenson’s health care agent . . . Instead, the evidence would support a finding that Dr. Catalano made the health care decision himself, in the exercise of his own medical and personal judgment. By his own account, when he directed the on-duty doctor to intubate Stephenson, he was not considering the stuff of advance directives and health care agents . . . he decided himself “what’s right for the patient,” and would check with Alicea later to see if she wanted to . . . “pull the tube out.” Dr. Catalano even rebuffed a nurse’s question about calling Alicea before ordering the intubation, saying that he would call her later “and tell her what happened.”

As discussed above, the Advance Directive Act is all about letting patients and their health care agents, rather than the health care provider, control such decisions. Also reflected in many provisions of the Act is a principle that Dr. Catalano apparently disagreed with – that the patient and her agent may see a real difference between passively allowing her life to slip away and requiring a loved one to make the affirmative decision to “pull the plug” and halt life-sustaining measures like mechanical ventilation so that the patient dies. . .

Because there is at least a disputed issue of fact as to whether Dr. Catalano acted with good faith reliance on any decision made by his patient’s health care agent, Dr. Catalano cannot on motion for summary judgment claim the immunity that subsections (a) (1), (2), and (3) give to providers who honestly depend on such a decision . . .

What about the hospital? Did Dr. Catalano’s disregard of hospital policy and Alicea’s instructions immunize the hospital from liability? To this, the Court answers with a firm “no”:

Likewise, the Hospital points to no evidence that its staff acted based on a decision by Alicea with respect to the March 7 intubation; when Dr. Catalano made the decision himself, the staff simply proceeded based on his directive.

Finally, the Court offered an alternative theory on which the defendant’s summary judgment motion should be denied:

There is also another straightforward ground for rejecting immunity under subsections (a) (2) and (3). . . [T]hose provisions immunize providers who are unwilling to comply with a health care agent’s directive, promptly inform the agent of that unwillingness, and take other steps regarding the patient’s care until a transfer can be effectuated. There is no evidence that Dr. Catalano and the Hospital staff were unwilling to comply with Alicea’s direction regarding intubating Stephenson, much less that they promptly communicated any such unwillingness to Alicea. If anything, the Defendants claim that they believed they were complying with Alicea’s directive, which would invoke immunity under subsection (a) (1).

Bottom line: Doctors and hospitals beware! Georgia takes advance directives and patient health care agents seriously. Every complete estate plan should include include an advance directive but patients or their healthcare agents should communicate clearly with healthcare providers to ensure that directives and agent instructions are followed.

* These instructions in Stephenson’s advance directive require several data-dependent probabilistic judgments–e.g., whether a patient will not regain consciousness “to a reasonable degree of medical certainty,” and whether treatment risks and burdens outweigh expected benefits–that will be discussed in a future blog post. Bayesian data talk incoming!

Confidentiality agreements blocked by SEC Rule 21F-17

For whistleblowers and their past or present employers, one of the more important features of the SEC’s new whistleblower program regulations is Rule 21F-17,  copied in part below.  Over the years, targets of whistleblower claims have employed increasingly aggressive and sophisticated tactics — including “gag orders,” TROs, and breach of confidentiality agreement or even trade-secret-theft claims — to intimidate whistleblowers and prevent them from alerting regulators and law enforcement about wrongdoing.  Rule 21F-17 is a significant step toward ending such shenanigans and should encourage more SEC whistleblowers to come forward.

Among other things, Rule 21F-17 clearly prohibits any “person” from taking “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce” most confidentiality agreements. (Emphasis added.)  Confidentiality agreements covering attorney-client privileged information are generally excepted from this ban under Rule 21F-4(b)(4). But even the 21F-4(b)(4) exceptions have exceptions outlined in 21F-4(b)(4)(v).

The bottom line: Attempting to silence a would-be SEC whistleblower is more dangerous now than ever before.  Employers would do well to carefully analyze the extent to which their “investigative” activities — which far too often include firing and suing the very whistleblowers who prompt such investigations — are themselves an additional violation of SEC Rule 21F-17.

§ 240.21F-17 Staff communications with individuals reporting possible securities law violations.

(a) No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement (other than agreements dealing with information covered by § 240.21F-4(b)(4)(i) and § 240.21F-4(b)(4)(ii) of this chapter related to the legal representation of a client) with respect to such communications.

(b) If you are a director, officer, member, agent, or employee of an entity that has counsel, and you have initiated communication with the Commission relating to a possible securities law violation, the staff is authorized to communicate directly with you regarding the possible securities law violation without seeking the consent of the entity’s counsel.

240.21F-4(b)(4) The Commission will not consider information to be derived from your independent knowledge or independent analysis in any of the following circumstances:

(i) If you obtained the information through a communication that was subject to the attorney-client privilege, unless disclosure of that information would otherwise be permitted by an attorney pursuant to § 205.3(d)(2) of this chapter, the applicable state attorney conduct rules, or otherwise;

(ii) If you obtained the information in connection with the legal representation of a client on whose behalf you or your employer or firm are providing services, and you seek to use the information to make a whistleblower submission for your own benefit, unless disclosure would otherwise be permitted by an attorney pursuant to § 205.3(d)(2) of this chapter, the applicable state attorney conduct rules, or otherwise; or …

(iii) In circumstances not covered by paragraphs (b)(4)(i) or (b)(4)(ii) of this section, if you obtained the information because you were:

(A) An officer, director, trustee, or partner of an entity and another person informed you of allegations of misconduct, or you learned the information in connection with the entity’s processes for identifying, reporting, and addressing possible violations of law;

(B) An employee whose principal duties involve compliance or internal audit responsibilities, or you were employed by or otherwise associated with a firm retained to perform compliance or internal audit functions for an entity;

(C) Employed by or otherwise associated with a firm retained to conduct an inquiry or investigation into possible violations of law; or

(D) An employee of, or other person associated with, a public accounting firm, if you obtained the information through the performance of an engagement required of an independent public accountant under the federal securities laws (other than an audit subject to §240.21F-8(c)(4) of this chapter), and that information related to a violation by the engagement client or the client’s directors, officers or other employees.

(iv) If you obtained the information by a means or in a manner that is determined by a United States court to violate applicable federal or state criminal law;

(v) Exceptions. Paragraph (b)(4)(iii) of this section shall not apply if:

(A) You have a reasonable basis to believe that disclosure of the information to the Commission is necessary to prevent the relevant entity from engaging in conduct that is likely to cause substantial injury to the financial interest or property of the entity or investors;

(B) You have a reasonable basis to believe that the relevant entity is engaging in conduct that will impede an investigation of the misconduct; or

(C) At least 120 days have elapsed since you provided the information to the relevant entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or your supervisor, or since you received the information, if you received it under circumstances indicating that the entity’s audit committee, chief legal officer, chief compliance officer (or their equivalents), or your supervisor was already aware of the information.

Watch Out for Falling Chinese Derivatives: Banks Run for Cover as China Hedges Fuel Bets

As this story from Chinese markets shows, financial derivatives are often not what they seem.  If you plan to use derivatives to hedge risks, don’t forget the counterparty risks inherent in the derivatives themselves.

Highlighting once again the risks of doing business with state-owned Chinese companies, banks and the derivatives market took another hit on September 7 when the Chinese government encouraged state-owned airlines and shippers, including China Eastern Airlines Corp., Air China Ltd. and China Ocean Shipping (Group) Co., to legally challenge their fuel derivatives contracts with foreign banks.

The contracts were used by these companies to hedge against what they expected to be a steep rise in fuel prices.  When the prices fell — as they sometimes do in a market — the companies ended up losing millions.  The losses are premised on the assumption that the companies are legally bound by the derivative contracts. This assumption should have been questioned back in March 2009 when, according to China Daily, China’s State-owned Assets Supervision and Administration Commission (SASAC) “tightened the rules” governing State-owned enterprises’ (SOEs) use of derivatives under Chinese law.  Those who did not question then are certainly doing so now.

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How much is that comma worth? How about £3.5 million?

Ever get frustrated with attorneys who fuss over precise contract wording?  They do it for good reason:  In negotiating and drafting agreements, millions can be won or lost by the placement of commas or parentheses.   Chartbrook v. Persimmon Homes, decided July 1, 2009 by the British House of Lords,* vividly illustrates the principle that a cup or two of annoying front-end fuss can avert shipping containers full of it down the road. Continue reading

Not even WSJ reporters get FASB accounting standards. Why write more of them?

For an eloquent illustration of how accounting innovations like FAS 157’s “fair value” regime are way beyond even above-average American financial readers, try Michael Rapoport’s May 1, 2009 article entitled
New FASB Rule Aims to Clarify ‘Net Income’.

Rapoport, trying to capture the meaning of the new SFAS No. 160, stumbles over one of the most basic concepts in the accounting literature — that “minority interests” in consolidated financial statements reflect the fact that “parent” companies don’t really “own” 100 percent of the assets or income of “subsidiaries” except those they wholly own. Continue reading

Comments on FASB’s fair value amendment reflect FAS 157 distress

Lenders have been hammered by the pathologically procyclical impact of FAS 157’s mark-to-market regime.  Hardly surprising, therefore, that banks and credit unions came out in force to support the latest FASB “clarification” of FAS 157.  Some other commenters, mostly from the “analyst” community, emphatically disagree.

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Barney Frank to FASB: Quit pretending to so much reality and certainty in fair value accounting!

Today, in congressional action sure to give every internal auditor and financial analyst recurring nightmares, members of the U.S. House Capital Markets Subcommittee demanded that the Financial Accounting Standards Board (FASB) demonstrate greater flexibility and speed in changing market-to-market (or “fair value”) accounting rules in the face of today’s financial industry crisis, or else. Much of the commentary came across as a congressional call for an IASB-like principles approach in place of the FASB’s detailed rules-based approach.

House Financial Services Committee Chair Barney Frank (D-Mass) and Capital Markets Subcommittee Chair Paul Kanjorski (D-Pa), each in his own way, stated that mark-to-market accounting must be applied differently to different companies and industries based on their respective circumstances that changed must happen now, not later after more “academic” study. In his opening statement, Kanjorski declared:
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Obama mortgage plan: Every American with a mortgage should call their lender

When I first watched commodities traders at Chicago’s CME denounce President Obama’s Homeowner Affordability & Stability Plan, I was on board with the traders. “How dare anyone ask that I help pay off my neighbor’s mortgage? If they bit off more than they could chew, that’s their fault!” But I began to have second thoughts . . .

. . . whose misdeeds in this crisis are worse? How are the mistakes of individual home buyers morally or financially worse than similar miscalculations by these very commodities traders or by Lehman Brothers, GM, Chrysler or Citigroup? These companies and professionals are also losers, aren’t they? They arguably took risks that they should never have taken, in many cases totally abdicating their professional duties of care and due diligence, going deep into debt to buy stuff they did not understand and could not afford. Continue reading

Bernie Madoff, James Madison and public virtue

James Madison saw Bernie Madoff 220 years in advance. That so many supposedly bright people were duped by Madoff testifies to their ignorance or disregard of history and to what may be an approaching nadir in the cycle of American public virtue.

At the Convention called by the Commonwealth of Virginia to debate the newly proposed U.S. Constitution, Madison declared, in support of the Constitution:

But I go on this great republican principle, that the people will have virtue and intelligence to select men of virtue and wisdom. Is there no virtue among us? If there be not, we are in a wretched situation. No theoretical checks, no form of government, can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people, is a chimerical idea. Continue reading

Not so fast, Johnathan Weil: Citigroup & the fair value illusion

Johnathan Weil called on Citigroup today to “properly confess” the “rot on Citigroup’s $2.1 trillion balance sheet.”  Weil is sure the rot is there because if it weren’t Citigroup “wouldn’t have needed last week’s government rescue [including] a new $20 billion investment by the Treasury Department, plus a guarantee covering about $306 billion of the bank’s assets against most losses.” I beg to differ.

The “rot” may well be an illusion created by poorly-drafted accounting principles applied in draconian fashion by auditors spooked by the specter of ruinous lawsuits.  Citigroup’s request for government assistance may well be an appropriate strategic response to the illusion.  In the market place, a good illusion beats a bad reality most any day.

Weil assumes facts not in evidence and arguably misapplies SEC regulations in demanding the Citi book losses now.  Under SEC rules, Citigroup would be obligated to “confess” losses on Form 8-K only if Citi’s board concludes that a material charge for impairment is required under generally accepted accounting principles.  If the board either has concluded that such a charge is not required or has not yet concluded that one is, no Form 8-K confession is called for. Continue reading