Opinion ID: 77369
Heading Depth: 2
Heading Rank: 2

Heading: Guerras' Adversary Complaint

Text: 17 The Guerras do not contend that a physician-patient relationship creates fiduciary duties or that malpractice debts are generally non-dischargeable. Rather, they contend that the Debtor owed his patients a fiduciary duty, created by the Florida Financial Responsibility Act, Florida Statutes § 458.320, to maintain funds to satisfy malpractice debts. The Guerras argue that the Debtor breached that fiduciary duty by failing to maintain those funds and that the Guerras have a non-dischargeable claim against the Debtor for the amount of the required fund to pay their malpractice award. Thus, we examine whether § 458.320 creates a fiduciary duty or technical trust between the Debtor and the Guerras or even any debt between them. 18 As a condition of licensing and maintaining an active [medical] license, § 458.320 requires that a physician must by one of the following methods demonstrate to the satisfaction of the board and the department financial responsibility to pay claims and costs ancillary thereto arising out of the rendering of, or failure to render, medical care or services: 19 (a) Establishing and maintaining an escrow account consisting of cash and assets eligible for deposit . . . in the per claim amounts specified in paragraph (b).... 20 (b) Obtaining and maintaining professional liability coverage in an amount not less than $100,000 per claim, with a minimum annual aggregate of not less than $300,000 .... [or] 21 (c) Obtaining and maintaining an unexpired, irrevocable letter of credit, established pursuant to chapter 675, in an amount not less than $100,000 per claim, with a minimum aggregate availability of credit of not less than $300,000. The letter of credit must be payable to the physician as beneficiary upon presentment of a final judgment indicating liability and awarding damages to be paid by the physician or upon presentment of a settlement agreement .... 22 Fla. Stat. § 458.320(1). Thus, to obtain a medical license, § 458.320(1) requires that a physician maintain either an escrow account, professional liability coverage, or a letter of credit in an amount of $100,000 per claim with a minimum aggregate of $300,000. Id. As to physicians who have hospital staff privileges, such as the Debtor here, § 458.320(2) increases those amounts to $250,000 per claim or $750,000 in the aggregate. Fla. Stat. § 458.320(2). 23 On appeal, there is no dispute that the Debtor was required by Florida law to maintain an escrow fund, or malpractice coverage, or a letter of credit; nor is there any dispute that he failed to do so. However, for several reasons, we conclude that § 458.320 does not create a fiduciary duty or technical trust or even a debt between the Debtor and the Guerras for purposes of § 523(a)(4) of the Bankruptcy Code. 24 First, § 458.320 is a regulatory statute requiring that the Debtor demonstrate financial responsibility to the State to maintain his license and hospital staff privileges. It even offers physicians three options, including maintaining an escrow fund, to demonstrate financial responsibility. The statute does not create a relationship, much less a contractual or fiduciary duty or a technical trust between a physician and a patient. 25 Second, even to the extent a physician opts to create such a claims fund to satisfy the statute, the statute does not use the term fiduciary capacity, nor does it require a doctor to place funds in trust for the benefit of third party patients. The statute does not require the physician to hold and account for the funds to third party patients. The statute does not create any property right in a doctor's escrow fund in favor of a patient. Rather, the stated purpose of § 458.320 is to require physicians to demonstrate to the satisfaction of the board and the department financial responsibility to pay claims and costs arising out of medical care. Put simply, § 458.320 requires that a physician demonstrate financial responsibility to the appropriate state licensing authorities through certain means, but it does not create in malpractice victims an entitlement to those means. See Hanft v. Church (In re Hanft), 315 B.R. 617, 624 (S.D.Fla.2002) (Plainly, the ultimate purpose of [§ 458.320] is to ensure that patients will be reimbursed for successful malpractice claims, but that does not mean that the patients are `identifiable beneficiaries' as required for creation of a technical trust.). 5 26 Third, [t]he definition of `defalcation' as `a failure to produce funds entrusted to a fiduciary,' Quaif, 4 F.3d at 955, further compels the conclusion that Fla. Stat. § 458.320 does not create a fiduciary duty, because no funds are `entrusted' to a doctor under the statute. Hanft, 315 B.R. at 624. No funds were entrusted to the Debtor, and thus no fiduciary duty could be created with regard to entrusted funds. 6 27 The Guerras rely heavily on this Court's decision in Quaif for the proposition that statutes such as § 458.320 create fiduciary duties. However, the Guerras' argument is misplaced. As noted earlier, the Georgia statute at issue in Quaif explicitly stated that agents were to hold and account for premiums in a fiduciary capacity. Here, as explained above, nothing in § 458.320 suggests that any funds required to be maintained would be held in a fiduciary capacity. Nothing in § 458.320 requires the physician to perform any accounting to patients of any funds held to satisfy the § 458.320 regulatory requirements. 28 Accordingly, the district court and bankruptcy court did not err in concluding that the Guerras' claim against the Debtor based on his failure to comply with § 458.320 falls outside the defalcation exception to discharge set forth in § 523(a)(4). 7