Jonathan Henderson

During a wave of tort reform that swept the country in the 1980’s, the Oregon legislature enacted a cap limiting recovery of noneconomic damages to $500,000. That statute is still on the books today. But in the years since its enactment, the cap has been deemed unconstitutional to apply to most claims.  Nevertheless, defendants continued to assert it and plaintiffs continued to fight its application to any claim, producing a fair amount of confusing and often contradictory appellate case law.

On May 5, 2016, the Oregon Supreme Court released its opinion in Horton v. OHSU, et al., 359 Or 168 (2016). In the landmark decision, the Court altered the analysis used to determine if statutory damage caps violate three specific provisions of the Oregon Constitution. In the 141-page opinion, the Supreme Court overruled a few of its prior cases and resuscitated several others that had been overruled for decades. And it made new law. While perhaps adding some confusion or uncertainty to the analysis, the Court’s decision favors defendants. Although part of the analysis under the new paradigm is unclear, paving the way for a good deal of litigation, the ruling seems to open the door for defendants to assert the noneconomic damages cap in many more circumstances than before.

Factual Background

In Horton, the plaintiff is the mother of a young child who was severely injured during a surgical procedure at Oregon Health Sciences University, a local Portland research hospital that is also a public body subject to the provisions of the Oregon Tort Claims Act, ORS 30.260 et seq. (“OTCA”). The mother brought suit on her child’s behalf against the hospital and the surgeon who was alleged to have negligently caused the child’s injury. The defendants admitted liability and the parties went to trial on the issue of damages. The jury returned a verdict for $12,071,190.38. Defendants then moved the trial court to reduce the verdict to $3,000,000, the maximum potential recovery under the OTCA, which contains a statutory cap on damages. Plaintiff argued the statutory damage cap was unconstitutional as applied under three different provisions in the Oregon Constitution: Article I, section 10; Article 1, section 17; and Article VII (Amended), section 3. The trial court reduced the verdict against OHSU, but ruled that the statutes were unconstitutional as applied to the surgeon because they violated the three constitutional provisions listed above.  It entered a judgment against the surgeon for the full amount of the damages the jury awarded. The surgeon appealed. Because the OTCA permits a direct appeal to the Supreme Court, the case skipped over the Oregon Court of Appeals altogether and went directly to the Supreme Court. It heard arguments in November 2014. Appellate practitioners had been waiting ever since, expecting a landmark decision, and the Court delivered.

The “Remedy” Clause Analysis

The Court commenced its analysis with the “remedy” clause contained in Article 1, section 10 of the Oregon Constitution:

“No court shall be secret, but justice shall be administered, openly and without purchase, completely and without delay, and every man shall have remedy by due course of law for injury done him in his person, property, or reputation.”

A good deal of case law, spanning well over 100 years, is devoted to this constitutional provision. Scholars have written reams of articles about state constitutional remedy clauses, nearly all of which are worded similarly because they come from a common source: Sir Edward Coke’s commentary in his exposition on Magna Carta. But in 2001, in Smothers v. Gresham Transfer, Inc., 332 Or 83 (2001), the Oregon Supreme Court laid out the framework for the analysis under this provision that has been followed ever since. In Horton, the Supreme Court overruled Smothers, and resuscitated several nearly 100-year-old cases that Smothers had overruled.

In Smothers, the Court ruled that under the remedy clause, a plaintiff has a constitutional right to any remedy that would have been available to him or her prior to the adoption of the Oregon Constitution in 1857, or at least a remedy that was substantially similar to the remedy available at common law before 1857. In the language of the Smothers Court, the remedy could not be an “emasculated” version of the remedy that was available at common law. This meant that the first step in the analysis was whether plaintiff’s claim, or one like it, was available at common law in 1857. If there was no claim or like claim at common law in 1857, the analysis ended and the cap could be applied without violating the state Constitution. Most current claims have analogs predating 1857, so the cap was deemed to be unconstitutional in most instances because there were no legislative caps on damages at common law in 1857.

In overruling Smothers, and establishing a new paradigm for the analysis, the Court abandoned the notion that remedies were locked-in in 1857.  It created new tests for three categories of legislative action governed by the remedy clause. Only one of those three tests applies to challenges to the noneconomic damages cap. The new test for determining whether the noneconomic damages cap violates the remedy clause of the Oregon Constitution is whether the capped damages are insubstantial when compared to the amount of damages awarded by the jury. Insubstantial means a “paltry fraction.”  The Court offered some guidance here by looking to other cases in which it has had occasion to determine if the capped damages available were a paltry fraction of the damages plaintiff suffered.  In one case, the Court held that where the jury awarded $12,000,000 in economic damages and another $5,000,000 in noneconomic damages, a cap of $200,000 was a paltry fraction, and so insubstantial and unconstitutional. In another, the Court held that where the jury awarded $507,500 in damages, a cap of $200,000 was not a paltry fraction and thus not insubstantial. In yet another, the Court found that where the jury awarded $600,000 in damages, a $100,000 cap was constitutionally permissible. In Horton itself, the Supreme Court ruled that the $3,000,000 limit in the OTCA was permissible where the jury found damages to be in excess of $12,000,000.  It remanded the case with instructions to the trial court to apply the cap and reduce the award against the surgeon.

The takeaway from this new analysis seems to be that the cap can be asserted as a defense in all claims now, and the issue will be whether the $500,000 noneconomic damage cap is a paltry fraction of what the jury awards the plaintiff.  This suggests that in an ordinary negligence case where the jury awards $1,000,000 in noneconomic damages, the cap ought to apply to reduce that portion of the award to $500,000. It will create an anomaly similar to baseball arbitration, where plaintiffs will either receive $500,000 in noneconomic damages, or they will receive the full uncapped amount that the jury awards, depending on whether $500,000 constitutes a paltry fraction of the jury’s noneconomic damage award.  As stated above, we expect this to create a lot of litigation.

One other thing to note is that this case may open the door to arguments that the cap cannot be applied to wrongful death claims where the jury returns a noneconomic damage award large enough to make the $500,000 cap insubstantial. This is so because the rationale used by the Court to rule that the cap could be applied to wrongful death claims was that such claims did not exist at common law in 1857, and that part of the analysis has been abandoned.

The “Jury Trial” Clauses Analysis

The Court went on to address the challenges to the damage cap in the OTCA under Article I, section 17; and Article VII (Amended), section 3, of the Oregon Constitution.  These are known as the “jury trial” clauses.

In 1999, in Lakin v. Senco Products, Inc., 329 Or 62, modified, 329 Or 369 (1999), the Supreme Court ruled that in all cases in which a plaintiff would have been entitled to a jury trial at common law in 1857, he or she remains entitled to a jury trial now. It further held that because it was in the sole province of the jury to determine damages as a factual issue, the courts were not permitted to reduce the amount of damages awarded, even if they were reducing the damages to comply with the noneconomic damages cap.  The Court ruled that the jury trial clauses prohibited the legislature from requiring courts to reduce damage awards because this impermissibly invaded the province of the jury, violating the jury trial clauses.

In Horton, the Supreme Court overruled Lakin and held that neither Article I, section 17, nor Article VII (Amended), section 3, of the Oregon Constitution restrained the legislature from altering remedies available for common law claims. The Court held that these provisions were always aimed at the practice of trial judges arbitrarily reducing a jury’s award; they were never intended to restrain the legislature from creating limits on remedies. In a huge shift in Oregon law, the jury trial clauses can no longer be used to attack damage caps. In the last few years, plaintiffs have relied primarily on the jury trial clauses to attack damage caps, and not the remedy clause. Now they will be required to attack the caps using only the remedy clause, and the somewhat complex analysis set out by the Court in Horton.

While the Horton case involved a state constitutional attack on the damages cap in the OTCA, attacks on the statutory noneconomic damages cap, ORS 31.710, follow the same course, and employ the very same state constitutional provisions: Article I, section 10; Article I, section 17; and Article VII (Amended), section 3, of the Oregon Constitution.  In fact, many of the cases discussed in Horton involved attacks on the noneconomic damages cap, not the cap in the OTCA.

Take-Aways

Although there is still some uncertainty about where this will all lead, it is a good outcome for defendants on balance. The cap should be asserted in every case in which the plaintiff seeks over $500,000 in noneconomic damages.[i] A damages cap is generally a post-verdict issue, meaning the parties will likely not know whether the cap will apply or not until the jury returns a verdict. But preserving the defense early in the litigation could save defendants hundreds of thousands, if not millions of dollars in each case in which the jury awards more than $500,000 in noneconomic damages.

[i] As a practice tip, Oregon personal injury defendants should assert the noneconomic damages cap as an affirmative defense. If the defendant’s answer has already been filed, consider moving to amend the answer to assert this defense based on the change in the law.