New Jersey squelches lawsuit for advertising fraud

In the Courts. By Tanya Albert, amednews staff. March 8, 2004.

IN THE COURTS

Analyzing the impact of recent court decisions on physicians

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New Jersey's Supreme Court has helped physicians dodge a bullet that could have been used as ammunition by lawyers looking for a new way to sue them.

The source of potential problems is an unlikely one -- advertising.

Buying print ads or putting together a radio spot wasn't something most physicians did 20 or 30 years ago.

But it's more commonplace today, and two New Jersey patients tried to take their physician to court over the ads he ran for LASIK surgery.

Patients Joseph Macedo and Rosemary Lesky said ads led them to believe that Joseph Dello Russo, MD, would do their eye surgery and provide all of the follow-up care they received. Instead, the patients said a physician who was not fully licensed provided their follow-up care, something that is medically acceptable.

Indeed, the patients didn't claim that their care had fallen below medical standards. They didn't claim that they had sustained any physical injuries because Dr. Dello Russo had not provided the follow-up care.

They didn't make any traditional medical malpractice claims.

Instead, they claimed that Dr. Dello Russo made false or misleading statements in his ads that led patients to believe that he would provide all of their treatment. They said that's why they chose him.

Macedo and Lesky sued Dr. Dello Russo under the New Jersey Consumer Fraud Act, an area of law from which physicians traditionally have been exempt.

They claimed that they had sustained mental anguish, loss of enjoyment of life, medical bills and economic damages because they believed that they would be treated "by properly licensed doctors with no limitations on their licenses," but were not.

A New Jersey appellate court sided with the patients, saying they could go ahead with a lawsuit. But the Supreme Court in February reversed that decision.

For New Jersey doctors, who are already facing medical liability woes, the ruling is a good one.

If patients had been allowed to pursue a lawsuit under the Consumer Fraud Act, Dr. Dello Russo could have faced paying trebled damages -- three times the amount awarded. Also, the losing physician would have to pay the other side's attorney fees.

To add insult to injury, the award is not something that traditional medical liability insurance would cover.

The Medical Society of New Jersey expected that if the patients had been allowed to go forward with their case then "virtually every medical malpractice lawsuit to be brought would include a Consumer Fraud count, just as every medical malpractice case includes a count for failure to provide informed consent."

"It would have been devastating," said Steven I. Kern, the attorney who represented Dr. Dello Russo. "It would have come at a time when liability insurance rates are already driving doctors out of the state."

Had the New Jersey Supreme Court allowed the Consumer Fraud Act lawsuit to go forward, it would have been a major shift in state law.

State law traditionally has shielded physicians and other professionals from claims like the ones Macedo and Lesky made.

The state's high court said it saw no reason and no direction from the Legislature to deviate from what courts traditionally have held when it comes to doctors, engineers and other professionals.

New Jersey passed its Consumer Fraud Act in 1960, and it wasn't until 1978 that the New Jersey Board of Medical Examiners allowed physicians to advertise under guidelines, the high court said.

And although the New Jersey Legislature amended the Consumer Fraud Act to include real estate sales in the definition of "merchandise," it hasn't made changes to include physicians or other professionals.

Citing an earlier state court ruling, the New Jersey Supreme Court said that "no one would argue that a member of any of the learned professions is subject to the provisions of the Consumer Fraud Act despite the fact that he renders 'services to the public.' "

That earlier court said it would be "ludicrous" to include professionals other than real estate agents under the Consumer Fraud Act even if the literal language could be construed to include professional services.

The current New Jersey Supreme Court said that logic still applies.

"Forty years after the CFA was enacted, our jurisprudence continues to identify learned professionals beyond the reach of the act so long as they are operating in their professional capacities," the court said.

Not quite out of the woods

Patients might not be able to recover damages under the Consumer Fraud Act, but it doesn't mean they're left without any recourse against a physician they believe is defrauding the public.

The state attorney general has the authority to investigate complaints.

The New Jersey Board of Medical Examiners has the right to discipline doctors. Physicians face potential suspension or revocation of their licenses, fines and restitution.

But this court case could change that. The New Jersey Supreme Court justices recognized that if they are "incorrect in their assumption," then they expect the "Legislature to take action to amend the Consumer Fraud Act."

And a bill already has been introduced into the New Jersey Legislature to hold physicians and other professionals accountable under the Consumer Fraud Act.

Bruce H. Nagel, the New Jersey attorney who represented the patients, said the Supreme Court had failed to recognize that the mass marketing of physician, attorney and other professional services is no different than the mass marketing of any other consumer services.

"I expect the bill to pass the Legislature," Nagel said. "This will be the case that triggered a change in the law to protect consumers" in New Jersey and other parts of the country.

For now, though, the court has spared physicians from having Consumer Fraud Act charges tacked on to medical malpractice lawsuits or brought against them when there is no medical issue about which to sue.

Albert is a staff writer covering legal issues.