By Erin Marie Daly,

Wednesday, Jan 02, 2008 --- As oversized payouts in personal injury lawsuits continue to come under fire, courts are debating the constitutionality of damages caps to limit the amount plaintiffs can reap for pain and suffering.

Late last week, two state supreme courts issued divergent rulings on the issue, further stoking the controversy.

The Ohio Supreme Court upheld the constitutionality of a state law limiting the amount of pain-and-suffering damages a person can collect in tort lawsuits, while the Oregon Supreme Court ruled that a damages-caps state statute as applied to the family of a brain-damaged boy was unconstitutional.

In the Ohio case, plaintiff Melisa Arbino sought to recover damages for a series of blood clots and other continuing medical problems she allegedly suffered after using the Ortho Evra birth control patch. (Her case was eventually consolidated with a group of dozens of other plaintiffs asserting claims against the company over the product.)

Arbino asked the court to declare that provisions of state law imposing caps on the potential amounts of noneconomic and punitive damages she could recover from J&J were unconstitutional and therefore unenforceable.

But the court disagreed, ruling that legislation capping the amount of noneconomic damages that may be awarded to personal injury plaintiffs and placing limits on the amount of punitive damages that may be awarded in Ohio tort actions does not violate the constitutional rights of injured parties to trial by jury, to a remedy at law for their injuries, or to due process and equal protection of the laws.

The court also held that the challenged statutes do not violate provisions of the Ohio constitution that guarantee open courts and the separation of powers between the legislative and judicial branches of government.

“This court is not the forum to second-guess such legislative choices; we must simply determine whether they comply with the constitution,” wrote Chief Justice Thomas J. Moyer for the majority opinion. “The limitations were aimed at reducing the uncertainty associated with the existing tort system and the negative consequences resulting from it. The distinctions the legislature drew in refusing to limit certain injuries were rational and based on the conclusion that catastrophic injuries offer more concrete evidence of noneconomic damages and thus calculation of those damages poses a lesser risk of being tainted by improper external considerations.”

However, not everyone was on board with the opinion. In a strong dissent, Justice Pfeifer said that rather than exercising “judicial restraint” in affirming the legislature's authority to impose caps on civil damages awarded by juries, the majority decision abandoned constitutional principles that the court has defended in many prior decisions, including those rejecting prior tort reform statutes.

Citing the court's decision in a 1994 case, Pfeifer said that the right to trial by jury includes the right to have a jury determine all questions of fact, including the amount of damages to which the plaintiff is entitled.

“Ignoring factual findings is the equivalent of changing them. Ignoring factual findings is the equivalent of rendering those findings impotent,” Pfeifer said. “However you characterize it, a statute that authorizes a judge to ignore or change factual findings (made by a jury) deprives litigants ‘of the benefits of trial by jury' and must be declared unconstitutional.”

Pfeifer added that it is the people, not the state legislature, who hold the power to cap noneconomic damages through the amendment process.

“If a damages cap of $250,000 is constitutional, why can't the General Assembly limit damages for claims they do not favor to $100,000? Or $1,000? Or $10? Under this court's reasoning, there is nothing in the Ohio Constitution to restrain the General Assembly from limiting noneconomic damages to $1,” Pfeifer said.

“After today, what meaning is left in a litigant's constitutional right to have a jury determine damages?”

Like the Arbino case, a recent case in Oregon has highlighted the differences of opinion over damages caps.

In the Oregon case, the parents of 10-year-old Jordan Michael Clarke sued the Oregon Health Sciences University after their son, who was born with a congenital heart defect, suffered prolonged oxygen deprivation in the hospital's surgical intensive care unit, causing permanent brain damage.

Clarke sought $11 million for total expenses for life and health care, $1.2 million for the loss of future earning capacity, and $5 million in noneconomic damages, but the hospital argued that it should only have to pay $200,000, the maximum liability allowed under Oregon state law – a contention the trial court accepted. Later, however, a state appeals court reversed the judgment, finding that that "recovery of less than two percent of one's economic damages – particularly given the nature of the injuries alleged – is a remedy 'incapable of restoring the right that has been injured.'”

In its Dec. 28 ruling, the Oregon Supreme Court affirmed the decision of the Court of Appeals, reversing the circuit court's judgment.

“We view plaintiff's economic damages of over $12 million as representative of the enormous cost of lifetime medical care currently associated with permanent and severe personal injuries caused by the medical negligence of a state officer, agent or employee,” the court wrote. “Defendants do not argue that those damages do not constitute an 'injury' within the meaning of the constitution. Nor does anything in the legislation suggest such a conclusion by the legislature. Yet, the legislature has completely eliminated an injured person's preexisting right to obtain a full recovery for those damages from the individual tortfeasors who negligently caused the injuries.”

Over the years, many states have enacted legislation capping malpractice payments in the hopes of discouraging frivolous lawsuits.

But critics have argued that because the limits aren't ever adjusted for inflation, the caps prevent victims – especially low-income workers – from recovering damages for legitimate claims.

In some states, the damages caps laws have had noticeable effects. In California, for example, the 1975 Medical Injury Compensation Reform Act has slashed jury awards by 30% since it was enacted, according to a 2003 Rand Corporation report.

But those savings have come largely at the expense of severely injured or impaired patients, the Los Angeles Times reported Dec. 29. The Times said that on average, California juries awarded $800,000 in malpractice death cases from 1995 to 1999, but the amounts were later reduced to $250,000 under the law, suggesting that medical malpractice victims and their families could be collecting much larger payouts than the law allows.

Meanwhile, the issue of damages caps is continuing to play out in courts nationwide.

In November, an Illinois circuit court judge ruled that a 2005 state law that caps noneconomic damages in medical liability cases was unconstitutional. The case is currently on appeal.

And in 2006, a Louisiana appeals court ruled that its state malpractice cap, established in 1975, did not adequately compensate patients and needed to be raised to $1.6 million. That ruling was overturned in 2007 by the state's Supreme Court.

Cases like the Arbino lawsuit, in the meantime, are hugely significant for general tort law in individual states, said Irene Keyse-Walker, partner at Tucker Ellis & West LLP, the firm representing Johnson & Johnson in that litigation.

Speaking about the Arbino case specifically, Keyse-Walker said that “it is significant not only that Ohio will finally have tort reform in place, but that the court was willing to look at the differences between the current statute and earlier statutes as well as the decisions of other states over the past 30 years.”

Keyse-Walker added that the jurisprudence in this area has become more developed.

“Some scholars have termed what the U.S. Supreme Court is doing in the area of punitive damages as constitutional tort reform,” she said. “When the court says that it's a violation of due process to give punitive damages awards in excess of three or nine times the compensatory damages, it's essentially doing tort reform without a statute. Even the Supreme Court is saying that tort reform helps due process, giving state courts some ammunition to find that legislatures did have rational reasons for imposing such limits.

Keyse-Walker added that the Ohio court noted in its opinion that other courts have upheld such limits in at least 19 other jurisdictions, while at least 10 states have upheld limits on punitive damages. The Arbino case, she said, included a slightly different twist on arguments relating to the right to a jury trial.

“The history of that right, both in Ohio and nationally, shows that it was meant more to protect the public from judges rather than legislators, that there was more worry about judges deciding the facts rather than the actions of those who have the obligation to protect the public as a whole,” she said. “Tort reform doesn't change the jury's fact-finding role, and hopefully some of the arguments made on that issue in this case will help tort reform in other states.”

Some critics have argued that implementing damages caps is causing lawyers to shy away from taking on certain cases, such as medical malpractice cases, because they don't think it's worth the time and expense of litigating.

But Keyse-Walker said that to the extent that trend is real, the issue is still one for the legislature to decide.

“If the effect of the damages caps is that both sides of the aisle get less work, with plaintiffs filing less cases and companies having less cases to defend, then that's the way the government works,” she said. “It's important too that the noneconomic damages cap does not apply to catastrophic injuries in many states.”

Kurt Stitcher, a partner at Levenfeld Pearlstein LLC, pointed out that while the two recent state supreme court decisions both addressed the damages cap issue, the rulings dealt with different state statutes.

In the Ohio case, the court was reviewing the constitutionality of a law that capped non-economic damages, except in cases of certain severe physical injuries, and capped punitive damages, unless the defendant was also convicted of one or more specified felonies. The Ohio law imposed no limits on economic damages, Stitcher said.

"The Ohio Supreme Court upheld the law against a variety of challenges, in essence deferring to the legislature's authority to pass laws that are rationally related to a legitimate state interest – which, in this case, was a desire not to drive business out of a Rust Belt state through huge tort verdicts,” Stitcher said.

By contrast, the Oregon Supreme Court was assessing the "as-applied" constitutionality of a law that barred all tort lawsuits against state employees and agents, requiring instead a lawsuit solely against the state entity itself, and capping all damages in any such tort suit, Stitcher said.

In that case, the court found that the legislature could not reasonably force all tort claimants to file their suits against the state alone and then recover damages that might be only a fraction of their actual damages, especially those damages that were purely economic, he noted.

But despite the different statutes at issue, the two decisions are indicative of a continuing struggle between American business and the plaintiffs' trial bar over the magnitude of jury verdicts in personal injury cases, Stitcher said.

“From the perspective of a defense lawyer, the tangible benefits of damages caps far outweigh any theoretical costs, depending on the specifics of the damages cap,” he said. “In the Oregon case, I have to believe that most observers would be disturbed by the prospect of a severely brain-damaged child with over $11 million in future medical care receiving only $200,000 in damages from a defendant that admitted negligence. In Ohio, by contrast, the plaintiff was not severely injured or disabled, yet she wanted to preserve her right to argue for untold millions in 'pain and suffering' and punitive damages.”

Stitcher added that he believed the Ohio case was rightly decided, noting that the legislature is elected and accountable to the people.

“If the people of Ohio think it more important to preserve the possibility of windfalls to individual plaintiffs than to promote a positive and predictable climate for business in Ohio, then they can vote the current legislature out of office,” he said. “Barring that, the courts should not interfere, unless the constitutional violation is unequivocal.”

In addition, Stitcher said, a cap on such damages is not unreasonable.

“No amount of money can ever really 'compensate' someone for physical injury, so why pretend that a jury can rationally assess the 'value' of such 'pain and suffering?'” he said.

And the judgment of the Ohio legislature that a “two-times compensatories” limit serves the best interests of the citizens of Ohio is not unreasonable, he said.

“[While] punitive damages are problematic on many fronts – not the least of which is the possibility that early punitive damages verdicts against a business prevent future claimants from obtaining any compensation, when the early claims drive the business into bankruptcy – the U.S. Supreme Court has suggested a single-digit multiplier for punitive damages claims,” he said.

Stitcher said that while it is certainly possible that some plaintiff's lawyers will not take on matters where damages are in any way capped, but there is no need to lose sleep over that prospect.

“The real beneficiaries of our current system of tort law are the plaintiffs' lawyers,” he said. “If the recovery of actual economic damages and capped non-economic and punitive damages is not 'enough' for certain plaintiffs' lawyers, then you know where their true interests lie: not with their injured clients, but with their bloated bank accounts.”

Others have suggested that raising the burden of proof might help curb damages awards in cases where there is a legitimate difference of expert opinion.

But Stitcher said that while many states have made efforts along these lines, such as by requiring pre-suit certification of medical malpractice claims, "clear and convincing" evidence for certain types of claims, and a heightened burden of proof for punitive damages, the business community has still pressed hard for tort reform through the mechanism of damages caps, which lend predictability to an inherently unpredictable jury system of civil justice.

“It is certainly possible that a heightened burden of proof – such as 'clear and convincing evidence' for non-economic damages or actual intent for punitive damages – could suppress jury damage awards,” Stitcher said. “The plaintiffs' bar would undoubtedly find such burdens at least as unpalatable as damage caps, however, and would certainly challenge the constitutionality of such efforts.

"Moreover," he added, "as with damages caps, higher burdens of proof would discourage some plaintiff's lawyers from taking on some personal injury cases. Thus, in the real world, there may be no practical difference between damage caps and heightened burdens of proof.”