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July 15, 2005

Business and economic development organizations, insurance companies, health care providers, defense lawyers and others who have been skeptical of an activist judiciary (one that legislates and establishes public policy from the bench) were handed some additional ammunition this week as the Wisconsin Supreme Court released several important decisions which dissenters on the Court characterized as actions of a “super legislature.” These cases involve: legislatively created caps on noneconomic damages in medical malpractice cases which the majority on the Court held to be unconstitutional under the equal protection clause of the Wisconsin Constitution, negating the Legislature’s rational basis for adoption of the cap; and, liability for injuries sustained by exposure to lead paint under a “risk contribution” theory even though the manufacturer may not have produced the product and the product may not have caused the injury. 

(These decisions follow in the footsteps of the Court’s controversial March decision on its interpretation of the statutorily adopted limitations on the application of punitive damages. The punitive damages definition and the medical malpractice caps were adopted during the 1995 Legislative Session that witnessed a number of civil justice reform enactments.) 

The Court, whose term ended on June 30, has been releasing several cases per week as it heads into summer recess. The Legislature, also in its summer recess, will undoubtedly be examining these decisions with a view toward whether or not to pursue legislation in response to the Court’s decisions when it returns to floor action in September.

Policy Developments

Supreme Court Overturns Medical Malpractice Caps on Noneconomic Damage Awards
The Wisconsin Supreme Court on Thursday, July 14, held (4-3) that the statutory limitation for an award of noneconomic damages in malpractice cases is unconstitutional, violating the equal protection clause of the Wisconsin Constitution. The Majority reiterates the theory of “judicial deference to the legislature and the presumption of constitutionality of statutes,” but states that a statute will be held unconstitutional if the statute is shown to be “patently arbitrary” with “no rational relationship to a legitimate government interest.”

“Noneconomic damages” include pain and suffering, mental distress and loss of enjoyment of normal activity. The caps in question apply only to these damages and no limit is placed on “compensatory damages” such as medical and other care-related expenses and lost wages.

The Majority relies upon the rational basis “with teeth” test to arrive at its conclusion that the cap on noneconomic damages is arbitrary; creates an undue hardship on a small unfortunate group of plaintiffs; and, is not rationally related to the legislative objectives of lowering medical malpractice premiums and controlling health care costs. On the last point, the Court cites certain portions of various studies (some state, some national, some old, some new) to support its conclusion that there was no rational basis (“with teeth”) to support the adoption of statutory caps.

The Majority does point out that statutory limitations are not per se unconstitutional and noted that the Court recently (July 2004) upheld the cap on noneconomic damages  for wrongful death medical malpractice actions. In his concurring opinion, Justice Crooks “emphasizes” that statutory caps in medical malpractice cases can be constitutional.

The Majority also does not address other constitutional issues raised by the petitioner since it reached its decision on equal protection grounds. Justice Crooks, however, joined by Justice Butler, states rather clearly that an unreasonably low cap (presumably including one at $350,000) can also violate the constitutional right to a trial by jury and legal remedies for wrongs inflicted.

Justice Prosser (joined by Justices Wilcox and Roggensack) and Justice Roggensack (joined by Justices Wilcox and Prosser) wrote strong dissents challenging the Majority’s conclusion that the legislatively adopted cap is not rationally related to the Legislature’s objective.

Both Justices challenge the selective use of studies, many outside of Wisconsin, and selected portions of those studies and the conduct of a “mini trial” to justify its conclusions under the rational basis theory. Justice Prosser also states that “This court is not meant to function as a ‘super legislature,’ constantly second-guessing the policy choices made by the legislature and governor.” Prosser points out the deliberative nature of the legislative process; the input that may be provided from parties on both or all sides of an issue; and, the voters remedy to retire those who supported laws that the voters disfavor.

Speaker John Gard and Democrat Representative (and physician) Sheldon Wasserman both issued press releases [Gard] [Wasserman] calling for legislative action to respond to the Court’s decision.

Not surprisingly the plaintiff’s bar, the Wisconsin Academy of Trial Lawyers, praised the Court’s ruling while the Medical Society and the Hospital Association expressed serious concerns about the adverse impacts expected from the Court’s ruling.

Other reactions:

Wisconsin Manufacturers and Commerce

National Federation of Independent Business - Wisconsin

Compelling Testimony of Medical Witnesses
In another decision involving medical malpractice, the Court in Amanda Carney-Hayes v. Northwest Wisconsin Home Care, Inc. clarifies the duties and privileges of medical witnesses, reaffirming the Alt/Glenn holdings, regarding witnesses’ refusal to answer certain questions posed at deposition by asserting privilege.

Collateral Source Payments Allowable Under Section 893
In Lagerstrom v. Myrtle Werth Hospital-Mayor Health System, another medical malpractice case, the Court concluded that evidence of collateral payments to an injured person should be allowed under Wisconsin statute section 893.55(7), but the jury must be instructed not to reduce the value of reasonable medical services based on the collateral source payments.

According to the Court, “The legislature did not mandate that a fact-finder offset collateral source payments in determining the reasonable value of medical services to protect subrogation.”

Justice Roggensack dissented from the majority conclusion that evidence admitted pursuant to s. 893.55(7) could not be used by a fact-finder to abrogate Wisconsin's collateral source rule in this case.

Justice Wilcox wrote separately to "indicate that the majority opinion represents yet another instance of this court undermining the intent of the legislature by rendering void a properly enacted statute through creative judicial interpretation."

Supreme Court Decision in Lead Paint Case
In a review of a decision by the District I Court of Appeals, the Wisconsin Supreme Court held that Article I, Section 9 of the Wisconsin Constitution does not insulate wrongdoers from liability simply because recovery has been obtained from an altogether different wrongdoer for an altogether different wrong.  The Court further concluded that the lead paint claims at issue warrant extension of the risk contribution theory. 

Justice Butler wrote, "…we again conclude 'that as between the plaintiff, who probably is not at fault, and the defendants, who may have provided the product which caused the injury, the interest of justice and fundamental fairness demand that the latter should bear the cost of injury.'" 

The manufacturers are in a better position to absorb the cost of the injury, said Butler. “They can insure themselves against liability, absorb the damage award, or pass the cost along to the consuming public as a cost of doing business.” The Court concluded that it is better to have the manufacturers or consumer share in the cost of the injury rather than place the burden on the innocent plaintiff. 

In his dissent, Justice Wilcox said the end result of the majority decision was "manufacturers can be held liable for a product they may or may not have produced, which may or may not have caused the plaintiff's injuries, based on conduct that may have occurred over 100 years ago when some of the defendants were not even part of the relevant market."  He added, "Simply put, the majority opinion amounts to little more than this court dictating social policy to achieve a desired result."

Justice Prosser warned of the potential consequences of the decision. “Wisconsin will be the mecca for lead paint suits. There is no statute of repose on products liability here, and this court has now created a remedy for lead paint poisoning so sweeping and draconian that it will be nearly impossible for paint companies to defend themselves or, frankly, for plaintiffs to lose."

Supreme Court Reviews Economic Loss Doctrine Cases
Three cases involving the economic loss doctrine were reviewed by the Supreme Court and the opinions were released on July 8.

James B. Linden v. Cascade Stone Company, Inc. involved a claim for faulty workmanship against a subcontractor; In Gerald Grams v. Milk Products, Incorporated, the suit claimed damages that were the result of disappointed expectations of a bargained-for product's performance; Kaloti Enterprises, Inc. v. Kellogg Sales Company and Geraci & Associates, Inc. addressed the issue of whether an intentional misrepresentation claim is barred by the doctrine.

For further reading, go to the CTCW Journal article, “The Economic Loss Doctrine – A Coverage Defense?” written by Monte Weiss.

Zoning Appeals Board Must Provide Reasons for Rulings
Members of a board of zoning appeals must explain their reasons for decisions involving variances the Supreme Court ruled in Lamar Central Outdoor, Inc. v. Board of Zoning Appeals of the City of Milwaukee.  Said the Court, "The Board may not rest on a declaration that an application does not meet certain ordinance criteria; the Board must explain why the application does not meet the criteria."

Supreme Court: Chapter 133 May Apply to Interstate Commerce
In Gene L. Olstad v. Microsoft Corporation, the Supreme Court held that Chapter 133, which prohibits monopolistic practices, may reach interstate commerce under some circumstances. The court then established the circumstances under which it could reach that level, by noting the allegations required for a civil plaintiff filing such an action. The case involves a class action anti-trust lawsuit filed against Microsoft under state law.

Wisconsin Politics

Walker Announces Campaign Manager
Milwaukee County Executive Scott Walker has announced that Bruce Pfaff will be heading his campaign for governor. Pfaff is currently a partner at Public Affairs Strategies, Inc (PASI), where he also serves as Senior Vice President and Director of Client Development. He has worked on numerous statewide campaigns, including serving as Political Director for the McCallum for Governor and as Campaign Manager for John Gillespie and Cate Zeuske for U.S. Senate. Prior to joining PASI, Pfaff served as Chief of Staff for Wisconsin State Senator Ted Kanavas (R-Brookfield).

Green Reacts to Malpractice Cap Ruling
Congressman Mark Green, candidate for governor and lead author of civil justice reform in the Wisconsin Legislature when he chaired the Assembly Judiciary Committee during the 1995 Session, reacted to the Supreme Court decision.  He emphasized that the cap limit had allowed Wisconsin to become a magnet for physicians tending to the health needs of citizens in every part of the state, but that the Court’s decision would put that in jeopardy.

“Let’s be clear, the cap struck down today does not apply at all to medical expenses, lost wages or any other costs incurred by an injured party. All the cap does is limit (now at $445,755 and increased every year at the rate of inflation) unquantifiable “non-economic damages,” said Green.

Governor Doyle Outlines Budget Investments in Door County
As part of his Administration’s "Capital for the Day" in Door County, Governor Doyle outlined two items contained in the budget that benefit Door County and that will be signed in to law.

"To make sure the people living on the peninsula have good jobs and are maintaining a high quality of life, we need to play to our strengths – invest in the strong shipbuilding industry, promote tourism, and ensure the infrastructure is in place to sustain a growing number of visitors," Governor Doyle said.

The two budget items he will support are funding for a second downtown bridge in Sturgeon Bay, which connects northern Door County to the Wisconsin mainland, and $6 million for a new launch at Sturgeon Bay shipyards.

Federal Developments

Federal Tort Reform Legislation
The Bush administration is strongly supporting medical malpractice tort reform legislation. The President is urging Congress to reintroduce a bill that was passed by the House but defeated by the Senate last year. The bill would limit noneconomic damage awards to $250,000, limit punitive damage awards, place limits on the time allowed to injured patients to file a lawsuit and establish a fee schedule for lawyers contingency fees. The proposal would also provide a liability protection for pharmaceutical firms. In recent years the House has approved a bill limiting lawsuits on medical malpractice claims seven times; each was defeated in the Senate.

The proposed federal legislation would restrict state judicial authority and preempt all existing state laws governing medical malpractice lawsuits with the following:

• Caps on noneconomic (pain and suffering) damages at $250,000;

• A 3-year statute of limitations to initiate lawsuits, or one year from discovery; statute of limitations for children until age 8;

• Limits on attorneys fees whether in settlement or judgment;

• Collateral source benefits may be introduced into evidence in court;

• Periodic payments are ordered for future damages exceeding $50,000;

• Standard guidelines for awarding punitive damages (clear and convincing evidence) and limitations on the amount awarded;

• Prohibitions on instructing a jury about any limitations to damage awards;

• Punitive damages may not be awarded against the manufacturer or distributor of a medical product approved by the Food and Drug Administration;

• A specific statement that the provisions would preempt all state laws not in conformance with the standards presented.

Political News

State's high court lifts caps on pain, suffering awards: Milwaukee Journal Sentinel, July 15, 2005.

Supreme Court strikes down malpractice caps for pain, suffering: Janesville Gazette, July 15, 2005.

GOP promises to reverse court's malpractice ruling: Madison Capital Times, July 15, 2005.

Paint firms liable for lead woes: Madison Capital Times, July 15, 2005.

State senator pushes 75 mph: Madison Capital Times, July 15, 2005.

Budget crafted as state slept: Milwaukee Journal Sentinel, July 11, 2005.

GOP plan panned for dismantling Nelson’s program: Appleton Post-Crescent, July 11, 2005.

Senate likely to consider reform bill: Appleton Post-Crescent, July 11, 2005.

Unused pills can be donated rather than dumped: Portage Daily Register, July 11, 2005.

Making a profit, making a difference: Milwaukee Journal Sentinel, July 10, 2005.

Jobless Rate Hits 4-year Low: Wisconsin State Journal, July 9, 2005.

Upcoming Fundraisers

Thursday, July 21

• Rep. Robin Vos (R-Burlington), Racine

• Gov. Jim Doyle (D), St. Paul

• Scott Walker (R) Gubernatorial Candidate, Milwaukee

Saturday, July 23

• Scott Walker (R) gubernatorial candidate, Mequon