The opinion of the court was delivered by: Kevin Nathaniel Fox United States Magistrate Judge
MEMORANDUM OPINION AND ORDER
Before the Court is an application by John M. Tomsky ("Tomsky"), guardian ad litem for the infant Jacques Jacobs ("JJ"), in this medical malpractice and loss of services action against the United States of America, Rosario Ferrer Villasenor, NP ("Villasenor") and Bronx Lebanon Hospital Center ("BLH"), for an order approving the settlement of the action, pursuant to Local Civil Rule 83.2 of this court and New York Civil Practice Law and Rules ("CPLR") §§ 1201-1211. The plaintiffs, Equisha Jacobs ("Jacobs") and Tomsky, are represented by the law firm Silberstein, Awad & Miklos, P.C. Having considered the application and based on the record in this case, including the infant compromise hearings conducted on July 19, 2011, and August 2, 2012, as well as the reasons that follow, the Court finds that the proposed settlement agreement reached by the parties to the action is in the best interest of the infant.
Plaintiff Jacobs, individually, and as the "Mother and Natural Guardian" of her infant son JJ, brought this medical malpractice and loss of services action for damages due to injuries alleged to have been sustained during the course of Jacobs's pre-natal, labor, delivery, and post-natal medical care and treatment provided by the defendants in connection with JJ's birth, in 2006. Jacobs alleged that the defendants provided inadequate, improper and untimely monitoring and management of her high-risk labor and delivery of JJ at BLH, Bronx County, New York. She asserted that, as a result, JJ suffered severe bradycardia and related metabolic acidosis, including permanent neurological damage involving spastic motor disability, brain injury, physical, mental and cognitive disabilities. The parties consented to proceed before a United States magistrate judge for all purposes, pursuant to 28 U.S.C. § 636(c) and Rule 73 of the Federal Rules of Civil Procedure. On April 5, 2010, the parties informed the Court that they had reached a global settlement agreement.
In July 2011, the plaintiffs filed various documents, seeking approval of the proposed settlement agreement. On July 19, 2011, the Court conducted an infant compromise hearing and directed the plaintiffs to submit supplemental materials. On November 7, 2011, due to various procedural and substantive deficiencies in the plaintiffs' submissions, the Court directed the plaintiffs to: (a) serve and file their motion to settle this action, in compliance with New York law, the Federal Rules of Civil Procedure, the Local Civil Rules of this court, the Electronic Court Filing Rules and Instructions and the Court's Individual Rules of Practice; and (b) serve and file a status report regarding the alleged New York City Human Resources Administration, Department of Social Services, lien. On November 18, 2011, the Court directed the parties to submit written briefs addressing whether the settlement in this action is subject to the New York State Medical Indemnity Fund (the "MIF" or the "Fund"), New York Public Health Law ("PHL") §§ 2999-g-2999-j.
On February 22, 2012, the Court: (1) denied the plaintiffs' motion to settle this action because it contained inconsistent and conflicting statements making the proposed settlement agreement ambiguous and vague, was deficient and granting it was not in the best interest of the infant; and (2) determined that the MIF applies in this case because no judgment or court-approved settlement agreement existed prior to the enactment of the MIF. On the same date, the Court removed Equisha Jacobs "as Mother and Natural Guardian" of JJ, as that was in the best interest of the infant, and appointed Tomsky to serve as the infant's guardian ad litem, effective on the date of his consent to the appointment. Tomsky consented to the appointment.
On April 20, 2012, Jacobs, "as mother and natural guardian" of JJ and individually, filed a notice of appeal from the denial of the plaintiffs' motion to settle and compromise the action and the Court's determination that the MIF applies, Docket Entry No, 86, and from the order removing her as JJ's representative and appointing a guardian ad litem, Docket Entry No. 88. The appeal was dismissed on June 28, 2012, Docket Entry No. 114.
On June 8, 2012, Tomsky filed a motion for an order to approve the settlement. On August 2, 2012, the Court conducted a hearing, because it had questions about certain documents submitted on the motion, namely the proposed: (1) settlement agreement; (2) trust; (3) releases; and (4) hold harmless instrument. The hearing was attended by the parties as well as Jay Sangerman, Esq. ("Sangerman"), the attorney who drafted the proposed trust, and Marvin Kipnes ("Kipnes"), a principal of Kipnes Crowley Group LLC, advisors in structured settlements. The Court made inquiries of Tomsky, the attorneys for the parties, Sangerman and Kipnes concerning the proposed settlement agreement and trust, as well as other documents submitted on the motion. Thereafter, the parties made supplemental submissions to the Court. The following documents, in support of the instant motion, are before the Court: (1) medical records, Exhibits D and E to the Supplemental Attorney's Affirmation by Joseph P. Awad ("Awad"), dated August 3, 2011, Docket Entry No. 60; (2) Notice of Motion, Docket Entry No. 106; (3) Attorney Affirmation of Douglas Kaplan, dated May 22, 2012, Docket Entry No. 107; (4) Affirmation of Sangerman, dated May 30, 2012, Docket Entry No. 108; (5) Parent Affidavit, dated June 1, 2012, Docket Entry No. 109; (6) Affidavit of Guardian Ad Litem, Tomsky, dated June 7, 2012, Docket Entry No. 110; (7) Attorney Affirmation by Awad, dated June 8, 2012, Docket Entry No. 112; (8) Attorney Affirmation by Robert Miklos, dated September 7, 2012, Docket Entry No. 119*fn1 ; (9) Attorney Affirmation by Robert Miklos, dated September 10, 2012, Docket Entry No. 121; (10) Affidavit of Services of Guardian Ad Litem, dated September 12, 2012, Docket Entry No. 124; and (11) Attorney Affirmation by Awad, dated September 26, 2012, Docket Entry No. 126.
Tomsky is the guardian ad litem for JJ and resides in Stanford, Connecticut. JJ was six years old on January 14, 2012, and he lives with his mother, Jacobs, in Bronx County, New York. The following are the circumstances giving rise to this action:
On January 13, 2006, shortly after 5:00 p.m., Jacobs's labor began. Jacobs was sixteen years old and had experienced a significant increase in weight. Between 6:00 p.m., on January 13, and 12:30 a.m., on January 14, 2006, a significant loss of beat-to-beat variability and lack of progress in labor occurred; allegedly, these conditions were not recognized timely. On January 14, 2006, Jacobs gave birth to a male child, JJ. JJ was born prematurely, via emergency cesarian section secondary to prolonged, unrelieved fetal bradycardia. The unrelieved bradycardia produced metabolic acidosis, which JJ suffered in utero and immediately upon his birth. The complaint alleged that an intervention by cesarian section, before midnight and before the fetal oxygen reserve was completely depleted, would have protected JJ from sustaining unrelieved fetal bradycardia and its consequences.
Upon birth, JJ was determined to be suffering from severe perinatal and respiratory depression. He was intubated and placed on mechanical ventilation. On January 14, 2006, around 2:00 a.m., JJ was transferred to the BLH neo-natal intensive care unit ("NICU"), where he remained until May 15, 2006, when he was discharged temporarily to a foster mother, due to his medical condition and because, at that time, Jacobs was in foster care under the auspices of the New York City Human Resources Administration, Department of Social Services. A computed topography scan, performed on January 17, 2006, revealed that JJ had a hyperdense intraventricular hemorrhage within the left occipital horn and scalp soft tissue swelling was seen overlying the right parietal calvarium near the vertex. On March 1, 2006, a magnetic resonance imaging ("MRI") test of JJ's brain was performed, resulting in a diagnosis of hypoxic ischemic encephalopathy. Mild dilation of lateral ventricles, superior interhemispheric fissure and frontal convexity sulci was described, and an enlarged extra-axial cerebral spinal fluid space was noted at the anterior and inferior margin of the left temporal lobe in the left middle cranial fossa. The previously documented intraventricular hemorrhage in the left occipital horn was no longer visualized. At the time of JJ's discharge from the NICU, he was also diagnosed with perinatal depression, metabolic acidosis and seizures.
A June 17, 2010 Children's Aid Society, Medical Foster Care Program Medical Summary (the "summary") indicates that JJ was diagnosed with gastroesophageal reflux disease, reactive attachment disorder, developmental delays and hypoxic ischemic encephalopathy. The summary notes that, while JJ was in NICU, he was placed on nasal continuous positive airway pressure for four weeks and treated for seizures with Phenobarbital. On August 17, 2006, he had a myringotomy tube placement.
On March 17, 2007, JJ was taken to Montefiore Medical Center, where he had a gastronomy tube placed due to dislodgment. On April 11, 2007, JJ underwent a tonsillectomy and adenoidectomy due to obstructive sleep apnea. An examination, performed on October 23, 2007, revealed a normal electroencephalography. An MRI test of the brain, performed on the same date, revealed enlarged ventricles and underdeveloped white matter.
A comprehensive eye examination, performed on September 23, 2008, revealed pseudo strabismus due to epicanthal folds in the left eye. A comprehensive audiological evaluation was also performed on the same date, revealing possible severe hearing loss in the composite hearing ear. Individual ear audition could not be specified based on soundfields measures and unmasked stimuli and JJ's auditory sensitivity was judged inadequate for the development of communication skills and was a likely contributor to his developmental delays. On November 11, 2008, JJ had an endoscopic procedure, under anesthesia. He was subsequently treated with Prevacid, Reglan and Pepcid, and was administered Pediasure, four cans per day, to meet caloric goals, in addition to his intake of solid food.
On January 7, 2009, bilateral myringotomy tubes were placed. JJ has a history of chronic otitis. On July 8, 2009, JJ was evaluated by a pulmonary specialist who prescribed medication for nasal congestion. He was doing well, "eating PO without choking," sleeping through the night without fragmentation, exhibiting mild snoring and no apnea. Seizure activity was reported during the neonatal period. JJ underwent various immunizations between April 2006 and February 2010.
On October 8, 2009, Joseph Carfi, an assistant clinical professor with the Department of Rehabilitation Medicine, Mount Sinai Medical Center ("Dr. Carfi"), reviewed JJ's medical records from the Children's Aid Society, "Westchester County Department of Health Children with Special Needs," Montefiore Medical Center and BLH, and prepared a Life Care Plan for JJ, taking into consideration medical care costs, such as rehabilitative specialist, gastroenterologist, pulmonary specialist, orthopedist, medication, medical supplies and equipment, home equipment adaptations, transportation, various therapies, such as physical, occupational and speech-language, as well as a choice of home and facility care. Dr. Carfi estimated that the annualized cost for a home-care services option for JJ would be: (1) $48,676.40, to age 16; (2) $76,193.75, for ages 16-21; and (3) $78,103.71, at age 21. He estimated that the annualized cost for a facility-care services option for JJ would be: (a) $438,000, to age 16; (2) $438,000, for ages 16-21; and (3) $74,660.75, at age 21.
On October 11, 2009, Robin E. Smith ("Dr. Smith"), a child neurologist, reviewed JJ's medical records and noted that JJ "was a 34 week AGA premature infant who had a sustained fetal bradycardia for about 20 minutes," and he was born with "severe neonatal encephalopathy at birth with low Apgar scores and severe metabolic acidosis." Dr. Smith opined, with a reasonable degree of medical certainty, that "the clinical presentation in [JJ] is strongly suggestive of an intrapartum timing of the Hypoxic Ischemic Encephalopathy."
On October 12, 2009, Alan M. Leiken, Ph. D. ("Dr. Leiken"), an economist, prepared an economic loss analysis ("ELA"), showing the future cost of health care and income loss, based on Dr. Carfi's Life Care Plan for JJ. Dr. Leiken stated that he increased the cost of medical supplies and equipment, home equipment and nutritional supplement by 2.75% per year. He also increased the cost of medications by 5% per year and other costs by 4% per year. Dr. Leiken explained that his increases were based on data provided by the United States Bureau of Labor Statistics over the past 25 years, showing that the costs for health care have been increasing at an average annual rate of approximately 5.5%. According to Dr. Leiken, he determined the future cost, commencing January 1, 2010, and continuing over the remainder of JJ's life expectancy, which, based on data provided by the United States Center for Health Statistics, for a male of JJ's age is 74.2. Based on Dr. Carfi's identification of two options for JJ, Dr. Leiken determined the present value of the future cost by using the total future non-discounted cost for the home-care option ($34,672,015), and the facility-care option ($36,912,934) and applying an interest rate of 3.4%, which was the current rate on the 10 year Treasury bond, to obtain the following: (a) $8,749,201, for the home-care option; and (b) $13,149,306, for the facility-care option. Dr. Leiken assumed that JJ would have been a high school graduate and he would earn the average annual income of a male high school graduate, which, according to the 2007 United States Census Bureau, Current Population Survey, was $36,839. He increased that figure by 3.3% per year, which is the average wage increase per year over the past 20 years. Dr. Leiken determined that the income loss commencing the first full year after reaching age 18 and continuing until retirement at age 67, which is the normal retirement age considered for someone JJ's age by the Social Security Administration, is $7,525,115. The present value of the income loss using an interest rate of 3.4% is $1,879,604.
On July 15, 2010, an "Order (Adjournment in Contemplation of Dismissal)" was entered in the proceeding entitled "In the Matter of Jacques Jacobs (DOB: 1/14/2006, CIN # DY47323K) A Child Under Eighteen Years of Age Alleged to be Neglected by Equisha Jacobs, Respondent," in the Family Court of the State of New York. The July 15, 2010 order provided, inter alia: Now, therefore, upon the motion of this Court, it is hereby ORDERED that the petition herein is adjourned in contemplation of dismissal until July 15, 2011, upon the following terms and conditions with a view to ultimate dismissal of the petition in furtherance of justice: ACD for 12 months on the following conditions:
1. The mother must comply with agency supervision.
2. The mother must ensure that the child will have all his special medical needs met, and that he attend all medical and well child care appointments.
3. The mother shall ensure that all the babysitters are cleared by ACS; and it is further ORDERED that during the period of adjournment, the child shall reside in the custody of the respondent mother; . . . and it is further ORDERED that, if the proceeding has not been restored to the calendar and if no application for restoration is pending as of the expiration date of this order and if this order has not been extended, the child protective agency shall report to the Court, the law guardian, the parties, their attorneys and the non-respondent parent on the status and circumstances of the child and family and any actions contemplated, if any, by the agency with respect to the child and family; and it is further ORDERED that, if the proceeding has not been restored to the calendar and if no application for restoration is pending as of the expiration date of this order and if this order has not been extended, the petition shall be deemed dismissed in furtherance of justice.
The July 15, 2011 order not having been extended or restored, the petition was deemed dismissed and JJ remained in the custody of Jacobs.
An Individualized Education Program (the "IEP")*fn2 , by New York City Department of Education, indicating November 23, 2011, as a projected date to be implemented, and November 4, 2012, as a projected date of annual review, describes the present levels of JJ's performance and academic, developmental and functional individual needs. The present levels of performance and individual needs are noted on the IEP. In the area of JJ's academic achievement, functional performance and learning characteristics, he was assessed using the Student Annual Needs Determination Inventory as well as the Citywide Speech Services Speech and Language Checklist. The following was noted, inter alia:
Jacques is nonverbal and communicates using facial expressions and some gestures. He is learning to use AAC [Augmentative and Alternative Communication] systems to improve his communication skills. He exhibits some hearing loss and therefore does not respond consistently to auditory cues in the environment. He responds to visual and tactile cues and will track objects and people. Jacques is better at attending to objects rather than people. He is able to make requests and choices by reaching, seeks attention by reaching/touching an adult, rejects by pushing items away or turning his head, demonstrates cause and effect, and understands some single words. He is learning to use a single cell voice output device to request in the classroom. He is also working on developing feeding skills, such as self feeding with assistance and drinking from a cut out cup. He is also able to manipulate some objects; however, he has coordination problems and needs support in order to complete more precise tasks. He will follow simple commands with multiple prompts and is learning the concept of more. He will attend to a book for a minute. Jacques is expected to reach all of his goals within one year; however, he acquires and retains information at a slow rate of speed.
With respect to JJ's social development, the IEP notes, inter alia:
Jacques is friendly to both familiar caregivers and strangers. He shows enthusiasm upon seeing familiar caregivers, especially his mother, and displays a certain level of anxiety when caregivers walk away from him or move out of his visual field. When not engaged with a tactile object, he will reach out to people near to him in order to grab onto something. He does not initiate interactions with his peers and requires maximum assistance to participate in social games such as peek-a-boo and rolling a ball. He displays a few emotions such as happy, content and sad. . . . Jacques is able to express his needs and wants by lifting his arms to indicate he wants to be picked up or by crying. He will engage in an activity with another person for a brief period of time.
With respect to JJ's physical development, physical development needs and management needs, the IEP notes:
Jacques turns inconsistently to sounds, relying on visual cues to orient himself. He communicates with via [sic] eye gaze and facial expression, with vocalization of vowel sounds and some babbling. Jacques reaches for objects bilaterally and grasp[s] them, although he has difficulty coordinating movements. He is able to remove objects from a container and stack rings on a cylinder with minimal assistance. At home, mom reports that he is able to place puzzle piece[s] in allotted spaces but this has not been observed in school despite prompts/cues. Jacques loves to move around the mat by rolling over or wriggling around while in supine (backlying). . . . Jacques requires a small, structured classroom with a high staff: student ration [sic]. He needs a multi-sensory environment with visual guides to aid him in responding . . . to his environment. He requires physical support to help him with his coordination. Jacques requires moderate to maximum assistance with all activities of daily living.
On April 12, 2012, Tomsky met with JJ and his mother at their attorney's office, and he reports the following in his affidavit:
Jacques is a severely injured child. He cannot walk, talk or sit still. He has very limited understanding. He cannot go to the bathroom alone and cannot feed himself.
He requires a pureed diet as well as three cans of Pediasure supplementation per day.
He requires constant hands on supervision. . . . Since July 2010, Jacques has been residing with his mother, Equisha Jacobs [in the] Bronx, New York. . . . Jacques currently attends the school United Cerebral Palsy in the Bronx, New York. When Jacques is not in school, he is cared for by his mother, Equisha. She wakes Jacques up in the morning, prepares him breakfast and gets him ready for school. When Jacques gets home from school Equisha tends to Jacques' needs, prepares dinner for him and, at bed time, gets him ready for bed. At this time, Equisha is Jacques' sole caregiver. . . . While Equisha has every good intention and truly believes that she is trained to and will be able to care for Jacques, there is no doubt in my mind that she will not be able to do so. As Jacques gets older, bigger and heavier first as an adolescent and then as an adult, Equisha will not be able to lift Jacques to clean, dress and otherwise tend to his every need and will need help in the form of a home health aid or will have to place him in a custodial care setting. . . . Clearly, Jacques Jacobs has lost the enjoyment and quality of life that is typically enjoyed by children his age and will never have such a life. I have no doubt that Jacques Jacobs will be unable to live independently or work to support himself at any time during his life.
His injuries will require constant supervision and assistance for his entire life. He will never be able to perform the activities of daily living, the 'basic self-care tasks', [such] as dressing and undressing, self-feeding, bowel and bladder management, ambulation with or without the use of an assistive device, functional transfers from one place to another, and personal hygiene and grooming. . . . He will never be able to perform the 'instrumental activities of daily living', [such] as taking medications as prescribed, performing housekeeping tasks, managing money, using the telephone or other form or communication, shopping for groceries and clothing, and managing transportation within the community.
On August 29, 2012, Dr. Andrew J. Klein ("Dr. Klein"), a pediatrician, reviewed JJ's medial history and examined JJ. In his report, Dr. Klein noted that JJ had the gastronomy tube replaced by pediatric surgery several times, but it "was removed two years ago and not replaced." Dr. Klein noted that JJ had a bilateral myringatomy and tube placement at approximately one year of age and again in July 2012 for bilateral serous otitis media. JJ is currently being fitted for hearing aids due to bilateral sensorineural hearing loss. Dr. Klein reported:
Jacques has severe developmental delay. He is hypotonic and hyperreflexic. He can sit unsupported, but cannot stand alone. He wears leg braces as part of his physical therapy. He is severely delayed in fine motor skills and receives occupational therapy. Jacques is nonverbal, he has no expressive language, minimal receptive language and he does not feed himself. He currently receives both speech and feeding therapy. . . . Impressions: Jacques Jacobs is a 6 1/2 year old boy with multiple medical problems that are the result of severe hypoxic ischemic encephalopathy at birth. He is severely neurologically and intellectually impaired, with severe global developmental delay and cerebral palsy. He is growth retarded and has a sensorineural hearing loss. All of these medical conditions are permanent and irreversible. Jacques will require intense therapy to even reach his severely limited potential. It is doubtful that he will ever achieve independent ambulation, or any expressive language. For the rest of his life, Jacques will require constant care and supervision to perform even the most basic daily activities.
On August 24, 2012, Dr. Maudina Gumbs, JJ's treating physician at Montefiore Comprehensive Health Care Center, wrote a letter, directed "To whom it may concern," informing that JJ "has cerebral palsy, severe intellectual impairment, seizure disorder, and gastroesophageal disease. He requires 24hr attention as he is nonverbal and immobile. His medical conditions are nonreversible." The injuries JJ sustained resulting from the alleged medical malpractice in this action include profound permanent neurological damage involving spastic motor disability, brain injury, physical, mental and cognitive disabilities, developmental delays and neurological impairment, cerebral palsy and mental retardation.
On September 11, 2012, the New York City Human Resources Administration, Department of Social Services, Office of Legal Affairs Liens and Recovery Litigation Unit, sent a letter to JJ's attorney concerning JJ, stating:
This letter reconfirms our agreement pursuant to my letter of April 9, 2012 where the Department of Social Services agreed to settle the Medicaid lien originally asserted in the amount of $264,830.00, which represents causally related Medicaid paid for the benefit of your client from May 15, 2006 through April 26, 2012, against the $5,950,000.00. . . . settlement in the above referenced matter for the amount of $150,000.00 (One Hundred Fifty Thousand Dollars and No Cents).
PROPOSED SETTLEMENT AGREEMENT
The proposed settlement agreement is in the form of a partially structured settlement, with the total cost to the defendants prior to the allocation to the MIF, as follows: $5,950,000.00 (five million nine hundred fifty thousand and 00/100 dollars). The defendants' payment obligations are as follows: (i) $4,750,000.00 (four million seven hundred fifty thousand and 00/100 dollars) by BLH; (ii) $500,000.00 (five hundred thousand and 00/100 dollars) by Villasenor; and (iii) $700,000.00 (seven hundred thousand and 00/100 dollars) by the United States of America. The parties agreed that 25% ($1,487,500.00) of the total settlement amount would be allocated to the MFI and 75% ($4,462,500.00) allocated to the non-MIF. Of the total settlement of $5,950,000.00, the sum of $5,831,000.00 (five million eight hundred thirty one thousand and 00/100 dollars), or 98%, is allocated to JJ's claim and the sum of $119,000.00 (one hundred nineteen thousand and 00/100 dollars), or 2%, is allocated to Jacobs's derivative claim for loss of services. The total proposed attorney's fees, to be allocated proportionally between the MIF portion and non-MIF portion of the settlement agreement and among the defendants as ...