State ex rel. Ohio Academy of Trial Lawyers v. Sheward

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TO: Clients and Friends
RE: State ex rel. Ohio Academy of Trial Lawyers v. Sheward: The Ohio Supreme Court Rebukes the General Assembly and Declares Tort Reform Unconstitutional
DATE: October 25, 1999

A year and a half ago, in a decision highly critical of the legislature, the Illinois Supreme Court declared the state’s comprehensive tort reform bill to be unconstitutional. Best v. Taylor Machine Works, 179 Ill. 2d 267, 689 N.E.2d 1057 (1997). This summer the Ohio Supreme Court followed suit, with an opinion that is even more stinging in its critique of lawmakers’ motives and means. State ex rel. Ohio Academy of Trial Lawyers v. Sheward, 86 Ohio St. 3d 451, 715 N.E.2d 1062 (1999). The Court announced on September 29, 1999, that it would not reconsider any aspect of its decision.

Am. Sub. H.B. No. 350 (the “Act”), which became effective January 27, 1997, was the most important tort reform bill in recent Ohio history. For medical malpractice defendants and their insurers, the following are the most critical provisions passed by the legislature but nullified by the Court:

  • Cap on non-economic damages of $500,000 (with some exceptions).
  • Cap on punitive damages of the greater of $250,000 or three times compensatory damages.
  • Six-year statute of repose for medical malpractice.
  • Elimination of joint liability for economic damages in most cases.
  • Requirement of a certificate of merit in medical malpractice cases.
  • Instruction permitting juries to reduce damages by the amount of collateral benefits.

Few Ohio lawyers expected all of these to survive judicial scrutiny, as several had previously been enacted in a different form and held to be unconstitutional.

Sheward is likely to harden positions on both sides of the debate over tort reform in the U.S. – a debate already in danger of developing into a contest of wills between the legislative and judicial branches of government in many states. Recent commentary has noted a trend toward judicial nullification of the major tort reform initiatives that began in the mid-1980s. E.g., William Glaberson, State Courts Sweeping Away Laws Curbing Suits for Injury, N.Y. Times, July 16, 1999. The majority opinion in Sheward accuses the Ohio General Assembly of trying to usurp the Court’s authority, making this the strongest judicial statement yet in opposition to the tort reform movement. The Court’s vigorous defense of its prerogatives suggests that in some states only a constitutional amendment or change in the composition of the highest court can make reform possible.

The principal basis for the four-to-three majority decision in Sheward is the assertion that the state legislature deliberately challenged the authority of the judicial branch by reenacting laws already declared invalid and attempting, with spurious findings and declarations of intent, to evade the Supreme Court’s rulings:

The General Assembly has circumvented our mandates, while attempting to establish itself as the final arbiter of the validity of its own legislation. It has boldly seized the power of constitutional adjudication, appropriated the authority to establish rules of court and overrule judicial declarations of unconstitutionality, and, under the thinly veiled guise of declaring “public policy,” establishing “jurisdiction” and enacting “substantive” law, forbade the courts the province of judicial review.

Such a threat to judicial independence is reminiscent of a bygone era of legislative omnipotence existing prior to the adoption of the Constitution of 1851.

The dissent, in turn, accuses the majority of concocting a constitutional crisis and of rushing to render an advisory opinion, contrary to law:

In arriving at these conclusions the majority has chosen, unnecessarily, to construe the actions and language of the General Assembly in the most negative light. In so doing, and in referring to the General Assembly with inflammatory and accusatory language, the majority appears to be throwing down the gauntlet to that coequal legislative branch of government. . . .

It is time to end this war of words. Rather than responding in outrage to the adoption of Am. Sub. H.B. No. 350, thereby escalating the battle, this court should scrupulously adhere to its own constitutional role in accordance with established legal principles. . . . Instead, in its zeal to invalidate all aspects of the comprehensive tort reform  . . . , the majority has itself arguably affronted our constitutional system of government in a manner no less egregious than it attributes to the General Assembly.

This memorandum will discuss the major holdings in Sheward that affect malpractice liability, and assess whether any of the measures struck down might survive judicial scrutiny were they to be reenacted in a different form. We conclude that this majority will never accept damage caps, statutes of repose, or certificates of merit, but that some of the lesser reforms might be upheld if properly worded. On the other hand, the narrowness of the majority and intensity of the dissent, considered with this Court’s historic willingness to reverse itself, suggest that even a small change in the composition of the Court might cause some of the holdings in Sheward to be overruled.

Overview of the Sheward Decision

This case reached the Supreme Court by an unusual and controversial route. Anti-tort-reform forces in Ohio were unwilling to await the outcome of the normal appellate process. Instead, the Ohio Academy of Trial Lawyers (an organization of plaintiffs’ lawyers) and others filed an original action in the Supreme Court seeking writs of prohibition and mandamus against six Ohio common pleas court judges, in their official capacities and as representatives of a class of all such judges. The writs they sought (and ultimately obtained) forbid the judges from implementing the Act and order them to follow preexisting judicial precedents and rules of court.

The central argument of the majority opinion is that modifying the details of tort reform measures already held to be unconstitutional will not persuade the Court to change its position, and that attempts to do so are illegitimate. The opinion examines several specific measures and explains why each is an attempt to overturn a prior Supreme Court decision. Consistent with its position that the legislature should not keep offering variations on a theme, the opinion brushes aside differences between prior and current legislation, making its treatment of each section deliberately brief. Then the Act as a whole is condemned as an attempt to destroy the separation of powers. Those subjects discussed by the Court that are of interest to medical malpractice litigants are outlined below.

The opinion also invokes an Ohio constitutional doctrine called the single subject rule. By finding that the Act combines legislation on different subjects in violation of this doctrine, the Court was able to rule it unconstitutional in toto, without sparing those parts not analyzed individually.

Specific Sections Held Unconstitutional

Statutes of Repose. The majority’s rhetorical strategy is exemplified by its treatment of statutes of repose (statutes of limitation based strictly on time from the act or omission, without regard to discovery by the injured party). Under the Act, medical malpractice cases would be barred after six years or, if the injury was discovered during the sixth year, then one year after discovery. The Act also included statutes of repose for product liability and other torts.

The majority opinion notes that Brennaman v. R.M.I Co., 70 Ohio St. 3d 460, 639 N.E.2d 425 (1994), overruled earlier cases and held a prior (non-malpractice) statute of repose to be unconstitutional because such a statute may run before the claimant knows or should know of his injury, thus violating the guarantee of a right to a remedy for every wrong found in Article I, § 16 of the Ohio Constitution. Nevertheless, the General Assembly included four statutes of repose in the Act, claiming “to respectfully disagree with those holdings and to recognize the legal rationale set forth in the concurring-dissenting opinion in Brennaman,” Am. Sub. H.B. No. 350, § 5(E)(2), and declaring that “the concept of a statute of repose does not violate the remedy by due course of law and open courts provisions of Section 16 of Article I of the Ohio Constitution,” § 5(G)(1). This was too much for the majority, which concluded that the legislature’s adoption of an unconstitutional act was intentional, not inadvertent, adding:

While some members of this court, now and in the past, may disagree with the holding in Brennaman, no member of this court can, consistent with his or her oath of office, find that the General Assembly has operated within the boundaries of its constitutional authority by brushing aside a mandate of this court on constitutional issues as if it were of no consequence. Indeed, the very notion of it threatens the judiciary as an independent branch of government and tears at the fabric of our Constitution.

The opinion leaves no room for approving any statute that could bar an injury before the claimant has a reasonable opportunity to discover it. Malpractice cases will continue to be barred one year after discovery or the termination of the physician-patient relationship, whichever comes later, under the rule announced in Frysinger v. Leech, 32 Ohio St. 3d 38, 512 N.E.2d 337 (1987).

Certificate of Merit. Article IV, § 5(B) of the Ohio Constitution gives the Supreme Court exclusive power to prescribe rules of practice and procedure for all courts, and makes laws in conflict with such rules void. Because Civil Rule 11 provides that no affidavits are necessary, the Court held unconstitutional a prior attempt to require affidavits of merit in malpractice cases. Hiatt v. South Health Facilities, Inc., 68 Ohio St. 3d 236, 626 N.E.2d 71 (1994). Notwithstanding Hiatt, the Act would require every medical malpractice plaintiff to file a certificate stating that either an expert witness had reviewed the claim and would attest to its merits or that the claim was of a nature not requiring an expert. The legislature attempted to distinguish this from the prior law by characterizing it as “substantive” rather than procedural, and by claiming that it was a jurisdictional measure consonant with its power to regulate the jurisdiction of the courts. The Court was not impressed, stating, “The notion that the General Assembly can direct our trial courts to apply a legislative rule that this court has already declared to be in conflict with the Civil Rules simply by denominating it ‘jurisdictional’ or ‘substantive’ is so fundamentally contrary to the principle of separation of powers that it deserves no further comment.” Therefore, no requirement of a certificate of merit can be constitutional if it is passed by the General Assembly. Only the Supreme Court itself, acting in its rule-making capacity, can impose one.

Collateral Source Rule. This part of the opinion leaves room for the hope that a properly-worded statute might be constitutional. The collateral source rule was adopted in Prior v. Webber, 23 Ohio St. 2d 104, 363 N.E.2d 235 (1970), holding that a jury cannot be told of compensation a plaintiff receives from sources other than the defendants. Former Ohio Rev. Code Ann. § 2317.47, passed after Prior, gave the judge power to modify a jury’s verdict by deducting amounts paid by collateral sources. It was held to be unconstitutional in Sorrell v. Thevenir, 69 Ohio St. 3d 415, 633 N.E.2d 504 (1994), due to lack of a compelling state interest in or rational basis for modifying the constitutional right to a jury trial. The new version of § 2317.47 took this power from the judge and gave the jury the right to consider and offset money received from collateral sources, a change that on its face appears distinguishable. The Court, however, in keeping with its theme that the new law simply reenacts that previously found to be invalid, opines that this “simply attempts to sidestep Sorrell.” It said that the new law, like the old, fails to require that the jury only deduct collateral source payments if they compensate for amounts that are included in damages, making any prevention of double recovery “fortuitous at best” and thereby failing the rational basis test. It is an unstated implication of this argument that a law might be constitutional if it allowed the jury to deduct collateral benefits only to prevent double recovery.

Damage Caps. The Act contains two damage caps applicable to tort cases generally. One would limit punitive damages to the larger of $250,000 or three times compensatory damages and forbid any punitive damages if the defendant had already paid the amount of the cap as punitive damages for the same course of conduct. The other cap would limit non-economic damages (those for pain and suffering, mental anguish, and the like) to the greater of $250,000 or three times economic damages, up to a maximum of $500,000. (The maximum is increased to $1 million or $35,000 times life expectancy in years for certain permanent and substantial injuries.)

The Court notes that it already ruled unconstitutional a statute that left it up to judges to determine punitive damages, holding that this violates the right to a jury trial. Zoppo v. Homestead Insurance Co., 71 Ohio St. 3d 552, 644 N.E.2d 397 (1994). If that is unconstitutional, reasons the majority, then so is a damage cap, which makes trial by jury an illusion by requiring a judge to nullify the jury’s decision if it exceeds the limit. Somewhat less convincingly, but consistent with the theme of the opinion, the Court says that the statute implicitly declares punitive damages in excess of three times compensatory to be unconstitutional, once again intruding on the jurisdiction of the Supreme Court, which upheld punitive damages 100 times compensatory ($1.5 million compared to $15,000) in Williams v. Aetna Finance Co., 83 Ohio St. 3d 464, 700 N.E.2d 859 (1998).

Regarding non-economic damages, the majority cites former Ohio Rev. Code § 2307.43, which limited general damages (equivalent to non-economic damages) in medical malpractice cases to $200,000. This was held unconstitutional in Morris v. Savoy, 61 Ohio St. 3d 684, 576 N.E.2d 765 (1991), as a violation of the “due course of law” provision of Article I, § 16, which requires even a legislative enactment that does not involve a fundamental right or suspect class to (1) bear a real and substantial relation to the public health, safety, morals, or general welfare and (2) not to be unreasonable or arbitrary. Morris held that the $200,000 cap failed both branches of the test, because the Court found no evidence of a rational connection between awards over $200,000 and the law’s goal of reducing insurance rates, and because it is arbitrary to impose the cost of the entire supposed benefit to the public on the class of those most seriously injured by medical malpractice.

It might be imagined that the Court’s finding of a lack of rational relationship between means and end would prompt the legislature to make careful findings of fact the next time it tried to pass such a bill. This it did, but to no avail. The Act contains eight such findings, including one that non-economic damage caps “have been determined by the Congressional Budget Office of the United States Congress, the United States Accounting Office, and the American Academy of Actuaries to effectively reduce loss payments, liability insurance premiums, and defensive medicine . . .” The Court not only rejects this argument, but seems almost to declare it improper for the legislature to have attempted to explain why it thought what it was doing was rational. The majority opinion states, “These findings . . . are judicial, not legislative in nature, and are being used to justify the reenactment of legislation already determined to be unconstitutional.” It also notes that the new law still fails the arbitrariness branch of the due process test.

Nothing in the majority opinion’s consideration of damage caps hinges on the particular amounts established by this Act. Its reasoning would apply to any fixed limit on a jury’s right to determine damages, no matter how large. Therefore, we should not expect any future damage cap to be upheld.

Use of Common Insurer to Impeach Expert. Ohio allows a medical malpractice plaintiff to impeach the objectivity of an opposing expert witness by showing that the expert is insured by the same malpractice carrier as the defendant doctor, and thus has a financial interest in the outcome because it could affect his insurance premiums. Ede v. Atrium South OB-GYN, Inc., 71 Ohio St. 3d 124, 642 N.E.2d 365 (Ohio 1994). Ohio Rev. Code Ann. § 2317.46, would have changed this by allowing such evidence only if the party offering it could show that its probative value outweighed its potential prejudicial effect. Since Ede involved the interpretation of a rule of evidence, however, and court rules are within the Supreme Court’s exclusive authority to prescribe, the majority concludes that this is another unconstitutional violation of the separation of powers. When it comes to rules of court, it seems, the separation of powers requires that only the Supreme Court may pass them, interpret them, or determine their constitutionality.

Single Subject and Severability

Article II, § 15(D) of the Ohio constitution requires that every bill be restricted to just one subject. Although the legislature declared that this bill had just one subject, “changes to tort and other civil actions,” the Court disagreed, holding the Act to be a “manifestly gross and fraudulent violation” of the one-subject rule. Moreover, the majority decided not to apply the remedy of keeping the “primary” part of a multi-subject act and severing the rest, because too many of the core provisions were unconstitutional to make that possible, The Court therefore held the Act to be invalid in its entirety. This branch of the decision adds one more blow against health care providers by sweeping away a reform of joint liability. Tortfeasors who contribute to a common injury in Ohio are jointly liable for economic damages (but not for non-economic damages). The Act would have restricted joint liability to a tortfeasor responsible for over 50 percent of the negligence that caused an injury. This was the only provision of central importance to malpractice defendants that the Court did not discuss individually. Since the Court did not find it unconstitutional on its merits, and since several liability has been upheld for non-economic damages, it may still be possible to reform joint tort liability in Ohio.

Conclusion

Sheward is unequivocal in its conclusions. The shallowness of the majority’s analysis of particular parts of Am. Sub. H.B. No. 350 is intentional, not accidental, and forms part of its rhetorical strategy. The thrust of the opinion is that the Court is not to be trifled with. If it holds a law unconstitutional, the lawmakers should not reenact it with findings or alterations intended to avoid the constitutional deficiencies. In several instances discussed above, the new sections differed from the old in ways that the General Assembly, at least, thought significant. It clearly was trying to reconcile its policy goals with the constitution and produce law that might pass judicial scrutiny. The dissenters thought it should have been given this opportunity, but the majority sought instead to make clear that minor variations would be treated summarily as mere attempts to subvert the constitutional role of the judicial branch. It is therefore unlikely that any provision for damage caps, statutes of repose, or certificates of merit will receive consideration from this majority should they be enacted again. On the other hand, the decision does not totally rule out some future modification of the joint liability of tortfeasors or the collateral source rule. In addition, the depth of the animosity apparent in the way the majority and dissenting opinions discuss one another raises the question of whether a Court differently composed would feel bound by stare decisis to follow Sheward.

If you have any questions, please call Paul Turner at 312-923-4114.