Attorneys: Bankruptcies could delay hepatitis trials

Wednesday, Aug. 12, 2009 | 10:13 a.m.

Dr. Dipak Desai, center, owned the Endoscopy Center of Southern Nevada, where dangerous injection practices have led to eight confirmed cases of hepatitis C.

Bernstein Interview

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The three clinics at the heart of the valley's hepatitis crisis are seeking bankruptcy protection. In Business talks with attorney Ed Bernstein about that and more.

Clinics tied to hepatitis outbreak seek bankruptcy (7-20-09)

The bankruptcies of the Endoscopy Center of Southern Nevada and related companies are threatening to delay trials for patients who say they were infected with hepatitis because of unsafe medical procedures at the endoscopy clinics, attorneys say.

The attorneys say that because of the bankruptcies filed July 17, lawyers for the companies controlled by Dr. Dipak Desai are now refusing to cooperate with depositions and other evidence-gathering procedures in preparation for at least 10 trials scheduled to start between this October and November 2011.

The patients' lawyers are asking the U.S. Bankruptcy Court in Las Vegas to lift an automatic stay of legal actions granted to bankrupt companies. Lifting the stay would allow the patients' attorneys to proceed with trial preparations, the lawyers say.

But the U.S. bankruptcy trustee is opposed to their motion, saying it may allow a select group of creditors to collect the limited insurance money that is available under Desai's policies -- leaving thousands of other creditors empty-handed.

A hearing on the patients' request is set for Aug. 26 before bankruptcy Judge Mike Nakagawa. The patients trying to lift the stay are represented by the law firms Kemp, Jones & Coulthard and Edward M. Bernstein & Associates.

The Endoscopy Center of Southern Nevada, the Gastroenterology Center of Nevada and the Desert Shadow Endoscopy Center are the companies that filed for bankruptcy. Thousands of patients charge in lawsuits they were infected with hepatitis or exposed to the risk of infection because of unsafe procedures at the clinics including the reuse of syringes and vials for anesthesia.

The Southern Nevada Health District late last year classified 101 cases of chronic hepatitis C infection as possibly associated with the Endoscopy Center of Southern Nevada, 700 Shadow Lane; and four cases possibly associated with the Desert Shadow Endoscopy Center, 4275 Burnham Ave. Testing was urged for patients who had procedures done at the clinics between March 2004 and January 2008.

Justice for patients allegedly infected with hepatitis can't come soon enough, attorneys said in recent court filings.

"Time is of the essence in lifting the automatic stay for numerous reasons," attorney Will Kemp wrote.

He said critical factual discovery and depositions have been under way for one of the initial trials set for Dec. 7 and other trials.

"Defense counsel is now refusing to conduct these depositions absent relief from the automatic stay," he wrote. "Discovery needs to resume in the immediate future in these cases or the trial dates will be jeopardized."

Of nine scheduled trials his firm is handling, he wrote: "All of these plaintiffs have been diagnosed with hepatitis and some of these plaintiffs are very ill."

But U.S. Trustee Brian Shapiro is opposed to lifting of the automatic stay of legal proceedings against the bankrupt companies.

"Shapiro has been advised that approximately 6,000 people have asserted claims against debtor and related entities and personnel," his attorneys wrote in a court filing. "It is Shapiro's understanding that a limited amount of insurance may be available.

"If creditors are granted relief from the automatic stay, it may allow those creditors to make demand for payment from the insurance in place with the result that the insurance coverage will be exhausted. This could result in a benefit for those who are the fastest, or fortunate enough to have an early trial date or reach a settlement.

"This is contrary to the basic concept of bankruptcy that no creditor receive preferential treatment," the attorneys wrote.

Shapiro also said it's unfair to the thousands of other potential creditors or claimants that they haven't received notice of the effort to lift the stay.

"Shapiro believes each of the potential claimants against the insurance of debtor is an 'interested party' to whom notice should be afforded. Without providing notice to each of the purportedly injured parties who are claimants on the fund, they are being deprived of an opportunity to object to the request for relief from the stay and may be precluded from sharing in the insurance if the policy limits are exhausted prior to their having an opportunity to present a claim," his attorneys wrote.

Kemp, in his filing, laid out the massive scale of the pending litigation against Desai, his clinics and other defendants:

--At least 300 people have filed lawsuits in Clark County District Court alleging they were infected with hepatitis or other infectious diseases.

--Another 4,000 people were tested and found not to be infected, but have filed suit for their test costs and the emotional distress they endured while awaiting their results.

--The defendants include not only the clinics, but surgeons, nurses and anesthesia manufacturers.

--The drug makers are being sued on the theory that their sale of jumbo-sized 50-milliliter propofol drug vials contributed to the infections by prompting reuse of the vials, since the drug makers' literature said smaller 10-milliliter vials were ideal for endoscopies. Kemp said the drug makers' potential liability could significantly reduce the potential damages to be paid by the bankrupt clinics.

Kemp suggested in his filing that proceeding with the initial trials as test cases will help determine damages in the remaining cases -- and help determine who will pay.

"Determining the potential value of the cases will be an invaluable aid in ultimately resolving the bankruptcy," he wrote.

Discussion: 6 comments so far…

By dodgerchuck

8/12/09 at 11:49 a.m.

Suggest removal

cant get blood from a stone
By countrygirlinlasvegas

8/12/09 at 12:16 p.m.

Suggest removal

OK Now I can say im pissed off. I am one of the patients sueing desai. i tested negative to having hep c thank god but still this is just another tactic he and his attorneys have cooked up to stall the courts. he's a thief and a cheat and doesnt care about his patients one bit. i do hope the courts see him for what he really is, nothing but a money hungry man that let greed get the best of him.
By AngryReader

8/12/09 at 3:24 p.m.

Suggest removal

It's sad but the only people that will see any money from this mess are the ones who hold licenses to steal.

That would be the attorneys.
By CynicalObserver

8/12/09 at 5:20 p.m.

Suggest removal

About 75% the time bankruptcy judges simply ignore the whinings of attorneys for the U.S. Trustee. This is true in all states.

The problem with the bankruptcy court judge trying to keep jurisdiction over these personal injury cases is that he is not allowed to try them himself. He is obligated to send them to U.S. District Court for trial. The U.S. District Court judges generally hate personal injury cases and will probably quietly talk to the bankruptcy court judge, in the judges' lunch room, and tell him to send them back to state court.

So let's just wait and see what happens, before people get too excited. Also, if the plaintiffs' lawyers don't like what the bankruptcy court judge decides, they can always appeal to the U.S. District Court judge in a quick public way, just like happened in the Chrysler case. The USDJ who gets the case will say "Yikes I don't want this case" and kick it back to the bankruptcy judge with instructions that the cases go back to state court for trial.

There is also something called the Younger/Colorado doctrine which says that Federal courts should abstain from getting involved in state law cases involving state law policy decisions. In this case the Eighth District Court of Nevada judge(s) decided that the trials for the sickest people should go first, and not to make a gigantic mess by trying the speculative "I might die in 5 years claims" at the same time.

So everyone should have a little faith in the principle that Federal Court judges generally like messy personal injury trials to stay in state court, and hopefully the P.I. cases will be back on track in a month or so.

Also, as an FYI to the universe, under Bankruptcy Code Section 362(b) the filing of any criminal prosections against Dr. Death and his partners is not stayed, even if they personally go BK. So have at it Mr. District Attorney. I think you'll find a hanging jury. Look what happened to that doctor who was using the veterinary grade botox, and in his case nobody is terminally ill.
By afveteran

8/12/09 at 5:21 p.m.

Suggest removal

Shouldn't the patients that were physically damaged by his unlawful medical practice policies be the ones to collect any monies?
That's what the law says and was written for.
Anyone else doesn't get a dime or deserve one, either.
By Birdiedreamin

8/12/09 at 5:49 p.m.

Suggest removal

you know what's funny...
everyone likes to take shots at the lawyers...
well...
seems to me...
the damn lawyers are the only ones doing anything about this horrible epidemic...
what the hell has the medical licensing board done???
all you ever hear from them is excuses...
they think they represent the doctors...
what the hell has district attorney david roger done???
hmmm...
i'm waiting...
time to vote his sorry butt out of office...
what the hell has attorney general catherine cortez masto???
hmmm...
i'm waiting...
time to vote her sorry butt out of office...
bottom line...
it's the damn lawyers that have done something...
and the residents of nevada are not one bit safer!!!