Ruben Trevino v. United States
21 Fed. R. Serv. 1402, 804 F.2d 1512, 1986 U.S. App. LEXIS 34092 (1986)
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Rule of Law:
In calculating pecuniary damages for future losses under the Federal Tort Claims Act (FTCA), a district court abuses its discretion by applying a negative discount rate based on a short, aberrational period of economic history. The appropriate discount rate should be based on the 'real' interest rate over a long, representative time period, generally falling between 1% and 3%.
Facts:
- On November 3, 1981, Rachael Trevino gave birth to her daughter, Sophia, at Madigan Army Medical Center.
- During labor, Rachael suffered from abruptio placentae, a partial detachment of the placenta from the uterine wall.
- The medical care provided by the Army hospital was negligent because it did not take this condition into account.
- As a result of the negligent care, Sophia was born with severe and permanent disabilities, including brain damage, cerebral palsy affecting all four limbs, and a seizure disorder.
- Despite her physical disabilities, evaluations indicated Sophia would be mildly mentally retarded but could achieve a fourth-grade reading and writing level and have normal emotional development.
- Experts projected that Sophia could potentially work in a sheltered workshop setting and function in a fairly independent manner.
- Sophia's life expectancy is normal.
Procedural Posture:
- Sophia Trevino and her parents filed a medical malpractice action against the United States under the Federal Tort Claims Act (FTCA) in U.S. District Court.
- The United States government conceded liability for the negligence.
- Following a five-day bench trial, the district court entered a judgment for the plaintiffs, awarding a total of over $6.3 million in damages.
- The United States filed a motion for a new trial or, alternatively, for an amended judgment.
- The district court denied the motion.
- The United States, as the appellant, appealed the district court's damage award to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Did the district court commit clear error and abuse its discretion in calculating the damages award by finding certain nonpecuniary awards excessive and by applying a negative discount rate to the award for future pecuniary loss?
Opinions:
Majority - Sneed, J.
Yes, the district court committed clear error and abused its discretion. The nonpecuniary awards were excessive when compared to similar cases, the award for attendant care was wholly unsupported by the record, and the use of a negative discount rate for future pecuniary losses was based on flawed economic reasoning. Regarding Sophia's $2 million nonpecuniary award, the court found it excessive compared to the $1 million award upheld in Shaw v. United States for a child with more profound disabilities. Given that Sophia is capable of schooling, potential work, and positive emotional experiences, the court reduced her award to $1 million. Similarly, the parents' $400,000 nonpecuniary award was reduced to $100,000, as they would be able to enjoy Sophia's company to a far greater degree than the parents in Shaw. The court eliminated the $1.7 million award for attendant care, finding the plaintiffs' expert witness unqualified and her conclusions unfounded, while crediting the government's expert who testified that constant care would be harmful to Sophia's development. Most significantly, the court held that applying a -2% discount rate was an abuse of discretion. This rate was based on an unrepresentative and 'aberrational' time span (1974-1982) of high inflation. Citing guidance from Jones & Laughlin Steel Corp. v. Pfeifer, the court stated that the proper method is to use a 'real interest rate' between 1% and 3%, reflecting the long-term difference between safe investment yields and inflation.
Analysis:
This decision provides significant guidance on the calculation of damages in FTCA cases, particularly concerning the determination of discount rates for future economic losses. It strongly rejects the use of negative discount rates based on short-term, volatile economic periods, establishing a preference for a more stable, long-term 'real interest rate' approach, as suggested in the Supreme Court's Pfeifer decision. By substantially reducing both pecuniary and nonpecuniary awards, the court also reaffirms the appellate judiciary's role in policing damage awards for excessiveness, using comparisons to similar state-law cases as a key benchmark. The ruling creates a strong presumption against negative discount rates and pressures trial courts to justify their economic assumptions with long-term, credible data rather than relying on periods of economic anomaly.
