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In re Kietur

June 14, 2000


Before Judges King, Carchman and Lefelt.

The opinion of the court was delivered by: Lefelt, J.S.C., (temporarily assigned).


Submitted May 24, 2000

On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Bergen County.

The Division of Medical Assistance and Health Services ("DMAHS") appeals from the denial of its motion for partial withdrawal of funds from the Bergen County Surrogate's Custodial Account for Minors. The funds were placed in the account on behalf of Kelly Kietur ("Kelly") as a result of a medical malpractice settlement with the medical care providers who allegedly caused Kelly spastic dysplasia and mental retardation at her birth. DMAHS claimed entitlement to $18,480.59 of the settlement funds as reimbursement for Medicaid payments DMAHS made to Kelly. We reverse the motion judge's denial and direct that DMAHS be reimbursed.

We recount the relevant facts. On February 27, 1989, the Blume, Goldfaden, Berkowitz, Donnelly, Fried & Forte law firm ("Blume Goldfaden") filed a medical malpractice complaint on behalf of Kelly and her parents against the doctors and other medical care providers that rendered medical assistance during Kelly's August 28, 1980 birth. From August 4, 1981, through December 2, 1986, DMAHS claimed it disbursed $24,640.78 for the medical care and services necessary to treat Kelly's severe brain injuries.

On July 10, 1987, Blume Goldfaden notified DMAHS that it had filed suit on behalf of Kelly, and requested a copy "of all payments made on behalf of Kelly Kietur from August 28, 1980 to date." About one month later, in an August 19, 1987 letter, DMAHS acknowledged Kelly's suit, stated Medicaid disbursements to Kelly totaled $28,423.75, and indicated that "[a] complete listing of treating Providers is forthcoming." This correspondence also provided that although "[DMAHS is authorized] to pursue an independent right of action against the defendant, we seek your cooperation in the disbursement of funds in order to avoid additional litigation." The letter concluded that "[u]pon settlement of this case, the check should be made payable to the 'Treasurer, State of New Jersey.'"

By January 12, 1988, Blume Goldfaden had not received the promised list of medical providers, and the firm wrote requesting that DMAHS "forward that list to [Blume Goldfaden] as soon as possible." Without the promised list of providers, Blume Goldfaden settled the medical malpractice claim against Kelly's physicians for $400,000, and judgment was entered on April 20, 1989. Blume Goldfaden did not notify DMAHS of the settlement, nor did it specifically provide for any DMAHS reimbursement in the settlement.

The April 20, 1989 settlement order entered judgment in favor of Gilma Kietur, individually and as guardian for Kelly, against the defendant medical care providers in the amount of $150,000. This $150,000 was allocated as follows: (1) $16,493.79 to Blume Goldfaden for reimbursement of costs; (2) $95,879.05 to Blume Goldfaden for attorneys' fees; and (3) $37,637.16 to Gilma Kietur, Kelly's mother, for Gilma's past and future losses and expenses. Additionally, the order awarded $50,000 to Kelly's guardian, Gilma, to be paid to the Bergen County Surrogate's Custodial Account for Minors. The remaining $200,000 was structured. The order provided that Gilma Kietur, as guardian for Kelly, would receive $1,022.55 per month, increasing by 3% compounded annually, for Kelly's lifetime or for thirty years, whichever was longer, and these payments were to be deposited into the Bergen County Surrogate's Custodial Account for Minors. The order did not mention or reference DMAHS's Medicaid claim or any medical expenses.

On October 16, 1991, DMAHS wrote Blume Goldfaden stating, "[w]e have been informed that this case has been settled without our lien being satisfied. The Division requests a copy of the settlement distribution sheet and the reason why the lien was not satisfied upon settlement." This correspondence also requested the name, address and phone number of the malpractice defendant and his attorney. The record does not contain a response from Blume Goldfaden to DMAHS's letter.

Seven years later, on August 27, 1998, after DMAHS traced Kelly's settlement funds to the Bergen County Surrogate's Court, DMAHS filed a motion for partial withdrawal of funds. DMAHS's medical review analyst gathered Kelly's treatment records for 1981 to 1986 from Hackensack Medical Center and compared these records to the charges listed on Kelly's Medicaid "Recipient Profile Report." From the approximately $30,000 in itemized charges on Kelly's Recipient Profile Report, the analyst separated $24,640.78 in charges allegedly associated with services for injuries related to Kelly's malpractice claim. After a pro rata reduction for DMAHS's share of attorneys fees, its total claim for reimbursement equaled $18,480.59. Blume Goldfaden appeared and opposed DMAHS's motion.

When the motion was heard on November 4, 1998, the Surrogate's account contained over $200,000. John Blume certified that [t]he monies deposited with and paid to the Surrogate of Bergen County represented a small portion of the damages sustained by Kelly Kietur, and were only partial compensation for her pain and suffering and disability. No portion of those funds was contemplated to be for past, present, or future medical costs . . . .

The motion judge noted that Kelly had reached the age of majority as of August 28, 1998 and would be entitled to periodic payments under the settlement terms. In denying DMAHS's claim, the judge stated that to "carve out" DMAHS's funds "nunc pro tunc" from the settlement, "the court would have to revisit the entire settlement concept, modify the judgment, reallocate the funds and redisburse[,]" but he did "not have the necessary underlying information . . . conceptually to do that now some 11 years after the fact." The judge concluded that the funds in the Surrogate's account were "specifically earmarked" for Kelly's pain and suffering and her future needs, and these funds were "not accessible by the Division merely because they are convenient and available and the Division has a claim." The ...

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