Court to allow endoscopy lawsuits to proceed

By Steve Green (contact)

Published Wednesday, Sept. 9, 2009 | 3:13 p.m.

Updated Wednesday, Sept. 9, 2009 | 5:10 p.m.

The judge in the Endoscopy Center of Southern Nevada LLC bankruptcy case is allowing three of the first malpractice cases against the Las Vegas clinic to go to trial -- but that doesn't mean the plaintiffs will be collecting on any judgments against the clinic anytime soon.

Judge Mike Nakagawa said in his ruling Wednesday that potential judgments against the bankrupt clinic and associated companies will be handled by the bankruptcy court, meaning anyone winning a malpractice lawsuit in state court will be a creditor and will compete with other creditors for the available funds in the bankruptcy estate.

Nakagawa on Wednesday ruled three of the initial cases -- which are set for trials starting in October, December and January -- are far enough along in the preparation stages that they are exempt from the automatic stay of litigation granted in bankruptcy cases. Malpractice cases that are not so advanced remain subject to the automatic stay.

Nakagawa rejected arguments from the court-appointed Chapter 7 trustee in the case that allowing the first cases to go to trial could prejudice other potential creditors in the case by consuming more than their fair share of the clinic's malpractice insurance coverage.

"Because any favorable judgments will not be paid from the insurance proceeds and assets of the bankruptcy estate at this time, the interests of other claimants are not prejudiced," Nakagawa said in his ruling.

Attorneys for trustee Brian Shapiro had argued that allowing the cases to move to trial, before other creditors' claims are considered, could give the plaintiffs in the state court lawsuits preferential treatment.

"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."

Attorneys for the patients, however, said justice couldn't come soon enough for many of them since some are seriously ill after allegedly being infected with hepatitis at the clinics.

The Endoscopy Center of Southern Nevada, the Gastroenterology Center of Nevada and the Desert Shadow Endoscopy Center are the companies that filed for bankruptcy July 17. Clinic owner Dr. Dipak Desai and other defendants in the malpractice cases have not filed for bankruptcy protection and therefore are not part of the automatic stay.

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.