June 2, 2016, Trial News | The American Association For Justice Archive

June 2, 2016, Trial News

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Oregon Supreme Court upholds damages cap

Diane M. Zhang

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Oregon’s highest court has overturned a $12 million jury verdict against a public hospital, upholding a $3 million cap on damages in lawsuits brought against the state or its employees. In a lengthy opinion, Judge Rives Kistler held that the Oregon Tort Claims Act (OTCA)—which imposes a $3 million limit on damages payable by public entities—does not violate Oregon’s constitution.

Oregon’s highest court has overturned a $12 million jury verdict against a public hospital, upholding a $3 million cap on damages in lawsuits brought against the state or its employees. (Horton v. Oregon Health & Sci. Univ., 2016 WL 2587403 (Or. May 5, 2016).) In a lengthy opinion, Judge Rives Kistler held that the Oregon Tort Claims Act (OTCA)—which imposes a $3 million limit on damages payable by public entities—does not violate Oregon’s constitution. The court also overturned a seminal case that held caps on noneconomic damages for claims recognized under common law were unconstitutional, leaving uncertainty about the future of damages caps in Oregon.

Eight-month-old Tyson Horton almost died after a botched surgery at Oregon Health & Science University (OHSU) in 2009, when doctors mistakenly cut off the blood supply to the infant’s liver while removing a cancerous mass. Efforts to repair Tyson’s liver or find a donor were unsuccessful, and his mother, Lori, donated part of her liver in an emergency transplant. Tyson survived the surgery, but due to his compromised immune system and the possibility that his body will one day reject the transplant, he will require careful monitoring and significant medical care for the rest of his life.

Tyson’s parents sued the hospital and the pediatric surgeon for negligence. Before trial, OHSU conceded that its doctors were negligent and that the Hortons’ medical expenses totaled about $4.1 million. The hospital agreed to pay $3 million in advance to Tyson—the maximum amount it was required to pay under the OTCA. As Judge Kistler noted, the OTCA sought to balance the interests of preserving public institutions’ sovereign immunity with the interests of plaintiffs who had been injured at the hands of state institutions and their employees.

But attorney David Miller of Portland, Ore., who represents the Hortons, explained that  OHSU essentially functions like a private hospital. In 1995, OHSU was allowed to largely privatize  to compete with private health care institutions. “OHSU gained status as a ‘public corporation’—complete with its own board of directors, financial independence with minimal government oversight, and investment capabilities—and is now a $2.5 billion corporation,” Miller said. However, Miller says the hospital is protected by the $3 million damages cap, regardless of the actual cost of its negligence or the value of any of its malpractice insurance policies.

A jury awarded the Hortons about $12 million in damages, including pain and suffering. The trial judge upheld the award in spite of the OTCA, ruling that the $3 million cap violated the remedy clause of the Oregon constitution. The trial judge relied on Clarke v. OHSU, 175 P.3d 418 (Or. 2007). There, doctors negligently deprived an infant of oxygen while he was recovering from heart surgery, causing profound brain damage. While the parties agreed on a $17 million verdict for the plaintiffs, a previous damages cap reduced the award to $200,000. Clarke went to the Oregon Supreme Court on the issue of stipulated damages, and the court held that the legislative cap violated the plaintiffs’ rights under the remedy clause of the Oregon constitution because of the large disparity between the cap and the verdict—which basically deprived the Clarkes of a remedy altogether. In 2009, the Oregon legislature responded to Clarke by raising the aggregate cap on damages to $3 million.

After the Horton jury awarded the plaintiffs $12 million, OHSU appealed to the state’s supreme court. Writing for the court, Judge Kistler considered whether the damages cap violated the remedy clause and whether it violated the jury trial clauses of the Oregon constitution. In ruling that the cap did not violate the remedy clause, Judge Kistler overturned Smothers v. Gresham Transfer, Inc., 23 P.3d 333 (2001). Smothers posed the following question: When the drafters wrote the Oregon constitution in 1857, did the state’s common law recognize a cause of action for the alleged injury—and, if so, has the legislature provided a constitutionally adequate substitute remedy for the common law cause of action for that injury?

The Smothers court held that the workers’ compensation scheme at issue was not adequate because it required employees to show that a work-related incident was a “major contributing cause” of their injury, setting a more stringent standard than a common law negligence claim, which would have required the employee to only show any injury. In other words, the legislative remedy—the workers’ compensation scheme—left some employees with no recourse for an injury that would have been actionable under the common law in 1857.  In overruling Smothers, Judge Kistler acknowledged that the remedy clause did not tie courts and the legislature to the common law as it existed in 1857—and that the state legislature could constitutionally alter both common law duties and the remedies available for a breach of those duties.

Judge Kistler conceded that the damages available under the OTCA would not sufficiently compensate the Horton plaintiffs for the full extent of their injuries. “However,” he wrote, “our remedy clause cases do not deny the legislature authority to adjust, within constitutional limits, the duties and remedies that one person owes another.” He cited both the state’s constitutionally recognized interest in sovereign immunity, as well as the fact that the Oregon legislature had already corrected the constitutionally inadequate remedy in Clarke by increasing the cap to $3 million.

Next, Judge Kistler examined whether the OTCA violated the state constitution’s right to a jury trial. He overruled Lakin v. Senco Prods., Inc., 329 P.2d 476 (Or. 1999), which held that a 1987 statutory cap on noneconomic damages was unconstitutional in the context of a products liability claim. Judge Kistler held that the legislature had the power to statutorily limit the extent of damages available to plaintiffs—and that the plaintiffs’ right to a jury trial did not include an absolute right to the amount of damages that the jury may determine. “Whatever other constitutional issues a damages cap may present,” he wrote, “a damages cap does not reflect a legislative attempt to determine a fact in an individual case or to reweigh the jury’s factual findings.” Rather, he said, common law courts routinely have limited the type and amount of recoverable damages.

Miller emphasized how problematic this may be for Oregon. “Oregon has withstood the tort reform storm for the most part,” he said. “The Oregon Supreme Court ruled in Lakin that the 1987 cap on noneconomic damages was unconstitutional, and voters have defeated—three times—ballot measure attempts to amend our constitution to impose a cap. Each effort has failed.” Now, however, the future is uncertain due to the Horton court’s broad ruling.

“What this decision says is that the right to jury trial is just that—you have the right to a jury to hear your case, but not the right to have the jury set damages if the legislature has the right to impose a cap,” said Miller. “The concern in overruling the Lakin case is that Lakin was not an OTCA case. By overruling the seminal case that held that the original 1987 cap on all noneconomic damages was unconstitutional, the floodgates are now open for arguments that it is constitutional. The court is careful to say that it’s not taking a position on any other type of cap—but then why did they overturn Lakin?”