Over the holidays, the Ohio Supreme Court upheld the damages caps enacted by the Ohio General Assembly in 2004 (and effective in 2005) on pain and suffering and other "noneconomic" damages in personal injury lawsuits and other tort actions (other than medical malpractice cases), as well as on punitive damages in other cases. The 5-2 ruling in Arbino v. Johnson & Johnson, 2007 Ohio 6948, came in a products liability lawsuit brought by a Cincinnati woman against Johnson & Johnson Pharmaceutical Co. seeking recovery for blood clots and other serious medical problems she suffered after using a birth control patch.
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Getting to the Point Quickly. For those not wishing to read the entire 75-page decision (including a 30+ page majority opinion), but still wanting to experience the full flavor of the case, the informative and well-written
Opinion Summary (containing crucial quotes from the various opinions) issued by the Ohio Supreme Court's Communications Office may prove a useful substitute. For those wanting something even more to the point about was decided, I suggest reading the
Drug and Device Law Blog's excellent and concise
recent post explaining the basic legal import of the decision.
The decision in this closely watched case -- which had numerous amicus briefs submitted -- is being widely viewed (and denounced) as a victory for "Big Business" at the expense of the "average Joe". Click here for coverage by the Cleveland Plan Dealer blog and public comments. Interestingly, in the Wall Street Journal Law Blog's posting (which also contains numerous unhappy comments on the ruling) on this decision, it noted that a nearly contemporaneous decision by the Oregon Supreme Court reached a "divergent ruling." More on that below.
Decision and Pertinent Law. The case involved the consititutionality of Ohio Rev. Code 2315.18 involving caps on noneconomic damages in "tort actions" and Ohio Rev. Code 2315.21 regarding caps on punitive damages. Specifically, the Ohio Supreme Court ruled that these statutes do not violate the constitutional rights of injured parties to (1) trial by jury, (2) a remedy at law for their injuries; or (3) due process and equal protection of the laws. In addition, the Court held that Ohio Consitution provisions guaranteeing open courts and the separation of powers between the legislative and judicial branches of government were not violated by the legislation.
Chief Justice Moyer was joined in his majority opinion by Justices Judith Ann Lanzinger, Evelyn Lundberg Stratton and Maureen O'Connor; Justice Robert R. Cupp agreed with the majority, but wrote a separate concurring opinion focusing on a historical analysis of the rationale for trial by jury. Justices Paul E. Pfeifer and Terrence O'Donnell authored separate dissenting opinions.
The statutory "noneconomic" damages cap at issue limits damages for intangible injuries (such as pain and suffering, loss of consortium, disfigurement, mental anquish. etc.) that may be awarded in "tort actions" to the greater of $250,000 or three times the economic damages awarded -- up to an absolute maximum of $350,000 -- unless the plaintiff suffers a permanent disability or the loss of a limb or body organ in which case there is no cap. "Tort actions" include product liability claims, but do not include medical malpractice type claims; other non-medical professional negligence claims (such as those against attorneys, CPAs, architects, and engineers) appear to be encompassed within the statute limiting recovery of damages. Ohio Rev. Code 2315.18(A)(7).
Punitive damages were limited by the newly enacted legislation to twice the amount of compensatory damages awarded from the same defendant.
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Liability Limits on Individuals and "Small Employers". In addition, Ohio Rev. Code 2315.21(D)(2)(b) further limits punitive damages against individual or "small employer" defendants to the lesser of (A) twice the compensatory damages awarded against that defendant; or (B) ten percent (10%) of that defendant's net worth. A "small employer" is defined by Ohio Rev. Code 2315.21(A)(5) as either having 100 or fewer permanent full time-employees or, if the defendant is a "manufacturer", not more than 500 full-time permanent employees.
Majority Opinion
While the noneconomic damages cap and the punitive damages cap are analyzed separately in the lengthy majority opinion, the rationale for upholding each is largely the same.
Past Ohio Legislative Efforts and Decisions in Other States. In his majority opinion, Chief Justice Thomas Moyer noted that the Ohio General Assembly had repeatedly passed tort reform laws over the past few decades which had been overturned by the Ohio Supreme Court, but stated that
A careful review of the statutes at issue here reveals that they are more than a rehashing of unconstitutional statutes. In its continued pursuit of reform, the General Assembly has made progress in tailoring its legislation to address the consittutional defects identified by the various majorities of the court. The statutes before us here are sufficiently different from the previous enactments so as to avoid the blanket application of stare decisis and to warrant a fresh review of their individual merits.
Chief Justice Moyer also observed that various states have reached differing conclusions regarding whether awards in defective product and malpractice situations should be restricted. (Footnote 9 to the majority opininion cites cases in Illinois, New Hampshire, North Dakota, South Dakota, and Wisconsin striking down damages caps as uncsonstitutional; footnote 8 cites many other cases reaching the opposite result.) However, in the majority's view, the judiciary had no basis for overturning the Ohio law; "This court is not the forum to second-guess such legislative choices; we must simply determine whether they comply with the Constitution, " Moyer wrote.
Right to a Jury Trial. In addressing the right to a jury trial issue, Chief Justice Moyer found that the right was not "absolute" and that the damages caps did not trample upon the jury's central fact-finding responsibility. Rather it involved only applying law to those facts and "[b]y limiting noneconomic damages for all but the most serious injuries, the General Assemply made a policy choice that noneconomic damages exeeding set amounts are not in the best interest of the citizens of Ohio."
Open Courts and Right to Remedy Constitutional Provisions. The Court further ruled that the statutes limiting noneconomic and punitive damages did not run afoul of the Ohio Consititution's provisons promising "open courts" and a "right to remedy" because the limits do not "wholly deny persons a remedy for their injuries." According to Chief Justice Moyer, " [w]hile the statutue prevents some plaintiffs from obtaining the same dollar figures they may have received prior to the effective date of the statute, it neither forecloses their ability to pursue a claim at all nor 'completely obliterates the entire jury award'."
Due Process and Equal Protection. The Ohio Supreme Court also found no violation of equal protection or due process because the statutes' caps bear a"real and substantial relation to the general welfare of the public" and are neither arbitrary or unreasonable, in part because there is no cap for those "suffering catastrophic injuries." According to the majority, the caps on damages also bear a rational relationship to a legitimate governmental purpose of "reforming the state civil justice system to make it fairer and more predicatable and thereby improving the state's economy."
Separation of Powers. Chief Justice Moyer dealt with this challenge summarily, opining that while determining damages is certainly a question of fact reserved to a jury, "that function is not so exclusive as to prohibit the General Assembly from regulating the amount of damages available in certain circumstances."
Concurring and Dissenting Opinions
Justice Cupp's Concurrence. Justice Cupp had some concerns about the jury trial challenge. After delving into a historical analysis of the right to a jury, Justice Cupp concludes that "[l]egislative action, however, may alter or limit what damages the law makes available and legally recoverable. in doing so the General Assembly does not trespass upon the right to a jury."
Justice O'Donnell's Dissent. Relying on the Ohio Supreme Court's decision in Sorrell v. Thevenir, 69 Ohio St.3d 415, 633 N.E.2d 504 (1994), Justice O'Donnell opined that the noneconomic damage caps of Ohio Rev. Code 2315.18 violate the right to have all issues, including the amount of damages, determined by a jury. He specifically found fault with the majority's analogy of damages caps to treble damages. He also stated that "while it may be argued that the General Assembly may abolish a common-law cause of action in its entirety without violating due process or equal protection, such reasonaing soes not imply that the legislature may establish by statue the maximum amount a litigant may recover where the Constitution provides that a litigant has the right to have a jury make that determination." In addition, Justice O'Donnell took issue with Justice Cupp's analysis of the historical basis for trial by jury. His dissent did not specifically address the majority's ruling on punitive damages.
Justice Pfeifer's Dissent. Justice Pfeifer's lengthy dissent rejected the holding of the majority on every issue, concluding
I have a basic philosphical difference with the members of the majority and what they have written in the majority opinion. I believe that the Constitution is the fundamental document that protects all Ohioians, not just thoese with the most lobbying power. I believe that the Constitution says what it says for a reason and that no part of our judicial system exists merely to enable the General Assembly to write around the Constitution. I believe that the Constitution should be altered only by amendment, not by legislative or judicial fiat.... If the General Assembly had the courage of its convictions, it would submit caps to the voters -- that is the proper way to amend the Constitution..... If the members of the majority had the courage of their convictions, they would not allow the General Assembly to circumvent the amendment process....
Today is a day of fulfilled expectations for insurance companies and manufacturers of defectice, dangerous, or toxic products that cause injury to someone in Ohio. But this is a sad day for our Constitution and this court. And this is a tragic day for Ohioians, who no longer have any assurance that their Constitution protects the rights they cherish.
In Justice Pfeifer's view, the majority's opinion would allow the General Assembly to limit damages to even just $1, thereby in essence making any right to a jury meaningless.
In response to the majority's argument that caps are helpful to business, Justice Pfeifer also noted that the caps imposed by the statute are over-inclusive in that they benefit businesses regardless of whether the business is located in Ohio.
Contemporaneous Oregon Decision Striking Down Damages Caps
While the decision in this closely watched case is interesting and certainly important on its own, the nearly contemporaneous lengthy decision by the Oregon Supreme Court in Clark v. Oregon Health Services University which reached a divergent conclusion with respect to a less tailored statute is also interesting. For news media coverage of, and public comment on, this decision, click here. The decision involved a brain damaged child injured as a result of medical negligence and an Oregon statute (Oregon Rev. Statutes 30.270) which limited total damages to $200,000; the plaintiff raised similar right to a jury trial and right to a remedy arguments as in Arbino.
However, one important distinction between the two cases is that the injury occurred in a state university hospital and the statute in question was specific to state defendants and individuals employed by the state. Because the state defendant would have been entitled to sovereign immunity under common law, the Oregon Supreme Court had no trouble upholding the damages cap with respect to the hospital. However, with respect to the individual defendants, the Court reached a different conclusion.
As the Oregon Supreme Court framed the issue:
[T]he state contends that the determination of whether a substitute remedy is adequate should not focus on the facts of an individual case, but instead should focus on the balance struck by the legislature in creating a substitute remedy. The state asserts that, unless a category of potential plaintiffs is left without a remedy, the legislative policy choice is conclusive. On the other hand, plaintiff contends that the Remedy Clause protects both the procedure for seeking redress as well as the substance of that redress. Plaintiff argues further that, when the legislatiure abolishes a common-law remedy, it must provide a remedy that is "substantially equivalent" to the common-law remedy.
While the Oregon Supreme Court acknowledged the legislature's right to "modify the nature, the form, or the amount of recovery for a common law remedy", it held that this authority was not unlimited and the statute had impermissibly competely eliminated any right to recovery.
In a lengthy concurrence by Justice Balmer, joined by Justice Kistler, the "arbitarily low" nature of the cap was emphasized as a "problem that has long called for a legislative solution." It also emphasized that it was still possible for the legislature to impose "some" limits on recovery.
What's it All Mean?
So what does this mean to "regular" Ohio businesses?
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For starters, if you haven't already signed key employees up to confidentiality/non-disclosure and/or non-compete agreements, you certainly should now if you want to have any chance of recovering the full amount of any damages caused by their departure to a competitor.
Limiting Damages in Employment Discrimination and Other Business Tort Cases. John Hyman has speculated in his Ohio Employer's Law Blog post on the Arbino ruling that some might attempt (unsuccessfully in his view) to expand the decision regarding caps on noneconomic damages to cover employment discrimination claims. Certainly, one would expect defendants to make every effort to expand the definition of "tort action" -- which the statute defines simply as a "civil action for damages for injuries or loss to person or property" -- as broadly as possible. The statute does specifically exclude medical malpractice type causes of action and "damages for breach of contract or another agreement between persons", but beyond that, the full scope of the statute is yet to be defined.
And while employment law claims may be rooted in statute, most business tort actions are more easily categorized as descendants of common law actions. And when does an injury result from a "breach of contract" rather than commission of a tort action anyway?
Consider the usual case in which a key employee with knowledge of certain "trade secrets" or other confidential information has been lured away by a competitor. Depending upon whether a confidentiality, non-disclosure, or non-compete style agreement has been executed, there may or may not be contractual claims against the defecting employee. However, there will almost always also be claims sounding in tort against the defecting employee and it is virtually certain that business interference or unfair competition type tort claims will be leveled against the new employer. Does the statute limiting damages apply in this instance?
If the employee has signed some sort of contractual agreement limiting his or her use of proprietary information, then the statute limiting damages against him or her clearly doesn't apply. This is certainly good news for businesses concerned about losing key employees to the competition and ought to provide even more incentive to obtain these sort of agreements from these employees -- beyond whatever good counsel the company's attorney has already given about the importance of having this agreement.
What about the competitor who has snapped up the employee in question? Here there is no direct contractual agreement with the aggrieved company. Yet the injury may arise because of a contractual breach by the defecting employee. So does the limitation on damages apply? Given the emphasis of the statute on matching damages limitations with the defendants responsible, I would think not, but it is still an interesting argument and one that I would expect to be tested.
Small Business Punitive Damages Limitation. From the perspective of the privately held, owner operated, "small business", perhaps the best news is that there is in fact now a LIMIT to the maximum amount of punititive damages that could be assessed against a business of ten percent (10%) of the company's net worth. However, since for smaller companies, the compensatory damages alone can sometimes be devastating, one wonders if attempts to limit even these damages will follow.
Medical Malpractice Claims. If I was an Ohio state legislator looking at this decision which told me I'd finally "gotten it right" as far as limiting tort damages, I think I'd start thinking about moving into the medical malpractice area and applying the same logic there. Logically, other than lobbying efforts, there is no reason to exclude medical malpractice claims from the operation of the statute. Make a few considered exclusions for the "really horrific" injuries or negligence and you should be "good to go".
Conclusion
So there you have it. A major Ohio Supreme Court decision soldifying the impression that "business-friendly" rulings are here to stay for a while. It will definitely be interesting to see how the case law develops regarding the ultimate scope and effect of these damages caps and whether they do in fact have the desired economic effect.
