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2018-2019 Dishonorable Mentions

This report’s Dishonorable Mentions generally comprise singularly unsound court decisions, abusive practices, legislation or other actions that erode the fairness of a state’s civil justice system and aren’t otherwise detailed in other sections of the report.

AMERICAN LAW INSTITUTE ADOPTS TROUBLESOME INSURANCE RESTATEMENT

In May of 2018, the American Law Institute voted to adopt the Restatement of the Law of Liability Insurance, yet another troublesome restatement to come out of the ALI in recent years. This Restatement fails to restate the law as it currently is written, but rather represents the minority views. ALI Restatements receive great deference from judges around the country, so some of the sections put forth by the Restatement are of serious concern.

The Restatement contains a number of litigation fuel centers that are not supported by existing law:

  • It recognizes a novel vicarious liability claim against insurers for the independent professional malpractice of retained defense counsel lacking “adequate” malpractice insurance.
  • It states that insurers can be forced to pay punitive damages for reckless behavior, even if the policy excludes punitive damages.

These are clearly minority views and demonstrate that the ALI Restatements are more akin to law review articles advocating for expansions of liability than restatements of existing law. The late Justice Antonin Scalia said as much in a 2015 decision, writing that authors of ALI restatements have, “[o]ver time … abandoned the mission of describing the law, and have chosen instead to set forth their aspirations for what the law ought to be.”

Unfortunately, this Restatement is not a one-off and continues the troubling trend that began with the liability- expanding section on trespasser liability a few years ago. The ALI also is working on a Restatement of the Law of Consumer Contracts that is scheduled to be voted on in 2019. This project is particularly troublesome because “consumer” contract law is not something that exists, there is simply contract law, so once again, the ALI is attempting to restate something that does not exist.

ARKANSAS SUPREME COURT STRIKES DOWN TORT REFORM BALLOT INITIATIVE

In a 6-1 decision, the Arkansas Supreme Court ruled that a ballot initiative that would have made significant changes to the state’s civil justice system was unconstitutional. The court ruled the issues in the measure were not singularly germane enough to be presented as one. The main provisions of Issue 1 included a limit on punitive damages to the greater of $500,000 or three times compensatory damages; a limit on noneconomic damages to $500,000 in all cases; and a limit on private attorney contingency fees to 33.3% of net recovery.

The General Assembly passed a significant legal reform package in 2003, HB 1038. Since the enactment of the legislation, the Arkansas Supreme Court has struck down much of the package on state constitutional grounds. Amending the state constitution through a ballot initiative was the only real path forward to ensuring the constitutionality of legal reform, but now the Court has blocked those efforts as well, leaving no available paths forward to enact civil justice reform.

COOK COUNTY, ILLINOIS BIPA LAWSUITS ON THE RISE AGAIN AFTER TEMPORARY SLOW-DOWN

Illinois lawmakers enacted the Biometric Information Privacy Act (BIPA) in 2008, which provides a private right of action for those whose biometric information is improperly collected, used, sold, disseminated or stored. This has opened Illinois-based businesses up to massive potential liability, but nowhere has it hit quite as hard as Cook County, which has become “ground zero” for BIPA lawsuits. From August 2017 to March 2018, Cook County courts alone have received more than 40 proposed class action complaints claiming violations of the act.

BIPA requires companies to inform an individual in writing and receive a written release prior to taking or retaining his or her biometrics. If a company fails to follow this procedure then any “aggrieved” person can seek the greater of $1,000 or actual damages for each violation negligently committed, and the greater of $5,000 or actual damages for each violation recklessly or intentionally committed.

Following BIPA’s enactment, class-action trial lawyers immediately sought to cash in by targeting businesses with often unfounded allegations of negligent, even reckless handling of employees’ and customers’ biometric information, such as iris scans, fingerprints and facial recognition data used increasingly to keep physical workplaces and sophisticated communications and cyber systems safe. These lawsuits do not allege any harm from collection of the information (which is encrypted) but seek substantial civil penalties along with attorneys’ fees and litigation costs.

Dozens of lawsuits are currently pending in courts throughout the state. For example, Wendy’s, Loews, Southwest Airlines and Amcor Rigid Plastics have each been accused of violating the law by using fingerprint scans to track employee hours. The plaintiffs complain they were not fully informed about the specific purpose and time frame for which their fingerprints were being collected, or that they did not offer written consent to the collection in the first place.

A balanced opinion issued by the Second District Appellate Court of Illinois in late December of 2017, slowed the rate of filings because the court held that “a plaintiff must allege more than a mere technical violation of BIPA’s notice and consent provisions in order to state a cognizable claim.” The plaintiffs alleged that Six Flags violated BIPA when it fingerprinted the plaintiffs without notice of—or an opportunity to consent to—their biometric collection, storage, use, and destruction policies.

Since the court’s decision, at least two Illinois trial courts have followed suit and dismissed BIPA claims; however, on May 30, 2018, the Illinois Supreme Court granted leave to appeal the Second District Appellate Court’s decision, once again opening the flood gates. Following this announcement, plaintiffs’ lawyers filed eight new BIPA cases in the month of June alone.

In 2019, the Illinois Supreme Court will decide this case, Rosenbach v. Six Flags, and determine whether BIPA’s private right of action, requires at least an allegation of actual harm from the collection of biometric information.

Due to the growing controversy surrounding the large volume of BIPA litigation, the Illinois legislature has been urged to amend the statute to limit its reach. Currently, it is considering S.B. 3053, which would carve out exemptions to the statute for entities that “collect biometric data exclusively for employment, human resources, fraud prevention or security purposes; collect biometric data but do not sell, lease or trade such information; or collect, store, transmit or protect biometric data in a manner that is equivalent to the manner in which the entity handles confidential or sensitive information.”

An amendment to the bill would go even further and expressly exclude things such as digital photographs, limit “biometric identifier” and “biometric information” by requiring the data be linked, and exempt entities that do not retain data for more than 24 hours.

If the Illinois Supreme Court reverses the Rosenbach decision, and allows BIPA lawsuits where there is no actual harm, Cook County courts can expect an even greater flood of BIPA lawsuits, and legislation like S.B. 3053 will be even more critical.

Illinois was the only state with a private right of action for violations of a biometric privacy law until California followed its poor example in 2018.

DELAWARE SUPREME COURT OVERRULES TAKE-HOME ASBESTOS LIABILITY PRECEDENT

The Supreme Court of Delaware reversed its longstanding precedent and held that both manufacturers and employers can be held liable for “take-home” asbestos exposure. In Ramsey v. Georgia Southern University Advanced Development Center, the now deceased wife of an industrial plant worker was allegedly exposed to asbestos because she regularly washed her husband’s clothes. Plaintiff argued that due to the lack of safety precautions taken, the clothes were covered in asbestos and this exposure led to her development of lung cancer.

Under the court’s prior decisions, employers owed no duty of care to family members of workers who were exposed to asbestos off-site. In overruling its own precedent, the court said the company was liable for “take-home” asbestos exposure because it was foreseeable that a spouse would do the worker’s laundry, and therefore, it was foreseeable she would have been exposed to the asbestos on clothing. According to the court, the company should have taken precautions to protect the spouse from this type of exposure.

IDAHO ROLLS BACK SEATBELT NON-USAGE ADMISIBILITY

It has become a well-known and scientifically supported fact that seatbelts save lives and prevent injuries when used during a car accident. Since 1984, 49 of the 50 states have enacted some form of a law requiring the use of seatbelts. Federal law also requires auto manufacturers to equip vehicles with proper seatbelts to protect occupants.

While the use or non-use of a seatbelt can have a dramatic impact on the severity of injuries caused by an automobile collision, a disturbing number of states have evidentiary rules that either preclude or limit a defendant’s ability to introduce evidence of a plaintiff ‘s failure to wear a seatbelt.

In 2018, the Idaho legislature took a disappointing step backwards and enacted legislation preventing evidence of the failure to wear a seatbelt from being introduced in a civil action involving negligence. Previously, defendants were allowed to admit this for evidence of comparative negligence, appropriately placing some of the responsibility on the individual who took active steps and decided not to wear a seatbelt while in a car.

H.B. 554 states, “the failure to use a safety restraint shall not be considered under any circumstances as evidence of contributory or comparative negligence, nor shall such failure be admissible as evidence in any civil action with regard to negligence.”

MARYLAND HIGH COURT REFUSES TO APPLY STATUTE OF REPOSE IN ASBESTOS CASES

The Maryland Court of Appeals overturned a state appellate court and refused to apply the state’s statute of repose in asbestos cases. The case involved asbestos claims for wrongful death.

Maryland’s 20-year statute of repose for improvements to real property was first enacted in 1970. The statute was amended in 1991 to include an exemption allowing claims against manufacturers in asbestos-related litigation, but the Maryland intermediate appellate court ruled that any prior asbestos related claims pertaining to an improvement to real property would have to accrue by July 1990—20 years after the enactment of the original statute. The lower court ruled that the 1991 amendment could not revive older claims barred as of its effective date.

Because the plaintiff claimed his exposure to asbestos led to mesothelioma, the central issue at hand was determining at what point injuries from asbestos arise for the purpose of the statute of repose. Based on undisputed records, the plaintiff worked on insulation containing asbestos from May 3, 1970 until June 28, 1970, making the June 28th date his last possible exposure to asbestos. The plaintiff was not diagnosed with mesothelioma until 2013.

The trial court granted the defendants’ motion for summary judgment on the basis that there was no injury that could have led to a cause of action until the asbestos exposure resulted in a disease. The appellate court affirmed the trial court’s decision, also concluding that the injury did not arise until 2013—well outside the twenty-year limitations period set forth in the statute. The Court of Appeals reversed the rulings, holding that an injury arises at the time of last exposure. Since the statute does not bar causes of action that arose prior to July 1, 1970, the statute would not bar the plaintiff ‘s causes of action in this instance.

The high court failed to consider the impact of this decision on the already overwhelmed Maryland courts. The appellate court’s decision would have barred a large collection of extremely old Baltimore City asbestos cases if it had been upheld. The Maryland Legislature even held a hearing in October of 2017 to consider how to manage the large backlog of asbestos cases currently bogging down Baltimore courts. Now, the courts’ doors will swing wide open once again, flooding the state with even more asbestos litigation.

MASSACHUSETTS HIGH COURT ADOPTS ‘INNOVATOR LIABILITY’

This year the Massachusetts Supreme Court adopted the expansive theory of civil liability known as “innovator liability.” The state joins perennial Judicial Hellhole, California, as the only other state to adopt this dangerous theory of liability, which places liability on manufacturers of brand-name drugs when a person took a generic version.

In Rafferty v. Merck, the court held that a brand-name drug manufacturer is subject to liability if a person takes a generic drug it did not make or sell if the person can show the brand-name manufacturer learned of a risk, but did not update its own label.

The Massachusetts high court ruled that allowing a generic drug consumer to bring a general negligence claim for failure to warn against a brand-name manufacturer poses too great a risk of chilling drug innovation. Applying deep pocket jurisprudence, it went on to find public policy is not served if generic drug consumers have no remedy. For that reason, the court abandoned the traditional rule that a manufacturer is only liable for products it makes or sells. It held that a brand-name manufacturer can be liable for a failure to warn claim involving a generic product if it recklessly disregarded a risk.

NEW MEXICO AND NORTH DAKOTA JUDGES STRIKE DOWN MEDICAL LIABILITY LIMITS

Trial court judges in two states this year invalidated laws adopted to protect access to healthcare and ensure that affordable medical liability insurance is available to doctors. Placing reasonable constraints on medical liability reduce and stabilize medical liability insurance rates, improve access to critical specialists for local residents, and lessen the incentive to engage in costly defensive medicine. Statutory limits also make it easier for parties to reach fair settlements. The vast majority of courts have upheld such laws as a legitimate, constitutional public policy decision.

In North Dakota, however, Judge Cynthia Feland ruled that state law that permits plaintiffs to recover their full economic damages, such as medical expenses and lost income, but limits the subjective, intangible portion of awards for items such as pain and suffering to $500,000, is unconstitutional. In a January 2018 ruling in Condon v. St. Alexius Medical Center, Judge Feland found that the law violates equal protection guaranteed by the North Dakota constitution by arbitrarily reducing damages for those who experience severe injuries. She second guessed the legislature’s judgment that the limit was in the best interests of the state, viewing the law as based on assumptions and speculation. In finding the law lacked a rational basis, Judge Feland relied heavily on a similar ruling by the Florida Supreme Court, an outlier that has contributed to that state’s designation as a Judicial Hellhole. Condon v. St. Alexius Medical Center is pending before the North Dakota Supreme Court.

Two months later, Judge Victor Lopez of the Second Judicial Circuit in Albuquerque, New Mexico ruled that the state’s Medical Malpractice Act unconstitutionally restricted a plaintiff ‘s “right to receive an unaltered jury verdict.” His ruling in Siebert v. Okun throws into question a system that has benefited both health care providers and patients for decades. The New Mexico law allows plaintiffs who are injured by medical malpractice to recover all of their medical expenses, without any limit. The law also allows plaintiffs to recover up to $600,000 in additional damages, such as for pain and suffering and lost wages. Punitive damages are not subject to the limit. The Act also created an innovative Patient Compensation Fund, financed by health care providers who meet insurance and other financial requirements, and pay an annual surcharge, to provide a source of funds to compensate those who are injured.

Although the New Mexico Supreme Court has previously ruled that “the Legislature created a balanced scheme to encourage health care providers to opt into the Act by conferring certain benefits to them, which it then balanced with the benefits it provided to their patients,” Judge Lopez found the law invalid.

Both cases are now on appeal before their respective state supreme courts.

TEXAS TRIAL COURT HANDS DOWN MASSIVE JUDGMENT DESPITE TOYOTA VEHICLE EXCEEDING FEDERAL SAFETY STANDARDS

On August 17, 2018, a Texas jury awarded $242.1 million dollars in damages to a couple whose children were injured in a car accident. The jury found the front seats in the family’s Lexus ES 300 were defective and unreasonably dangerous. The accident occurred when the driver of a Honda Pilot rear-ended the Lexus going 40 miles-per-hour while the Lexus was stopped in traffic on the highway. The jury found Toyota Motor Corp. and its non-manufacturing seller to be 95% liable, and the driver who crashed into their completely stopped car only 5% liable.

According to the plaintiffs, Toyota was liable for an alleged design defect and failure to warn that the seat back and restraint system could collapse backward in a rear-end collision. The jury found liability and award damages on a design defect theory despite the fact the product exceeded federal safety standards, there was no evidence of a safer alternative design, and the court had refused to allow Toyota to present its own expert rebuttal testimony. Additionally, the jury found liability for failure to warn despite the fact the plaintiffs admitted they had never read the owner’s manual.

Toyota is appealing the decision and ATRA will file an amicus curiae brief in support.

BEXAR COUNTY, TEXAS TRIAL COURT ENTERS NATION’S LARGEST JUDGMENT IN 2018

In October 2018, a Bexar County, Texas trial judge entered a judgment ordering Amrock, a title insurance and real property valuation company, to pay just under $740 million to HouseCanary, a start-up technology company. Amrock is owned by Rock Holdings, which also owns lending giant Quicken Loans. A jury awarded HouseCanary $706 million in actual and punitive damages, after finding that Amrock maliciously misappropriated Amrock’s trade secrets. Before signing the judgment, the trial court added another $29 million in interest and $4.5 million in attorney’s fees, resulting in the nation’s largest judgment in 2018.

Texas law does not allow the award of speculative damages. For that reason, it is very difficult for a company that has shown modest profits to recover a significant amount of money for lost future profits. But the restrictive nature of Texas’s law on lost-profits damages did not impede the trial court from signing a historic judgment in favor of a start-up company with virtually no history of success in the market.

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