By James N. Westwood, Senior Counsel in the Portland, OR office of Stoel Rives LLP.

On May 5, 2016, in a landmark opinion overruling several precedents, the Oregon Supreme Court recognized the state legislature’s authority to enact constitutionally enforceable damages caps.  Horton v. Oregon Health and Science University, 359 Or. 168 (2016).

Although the Oregon Constitution has been amended more than 200 times since the state’s 1902 adoption of an initiative system for constitutional amendments, the fundamental document is still the one Oregon voters ratified in 1857.  Sections 10 and 17 of Article I, unchanged since statehood, contain “remedy” and “jury guarantee” clauses1 applicable to civil trials.

Horton overruled two Supreme Court decisions.  The first is Smothers v. Gresham Transport, Inc., 323 Or. 83 (2001), a workers’-compensation case in which the court read the remedy clause to prohibit the legislature from abolishing any cause of action that existed at common law in 1857, unless the law retained an equivalent “substantial” remedy for the injury in question.  The second overruled case is Lakin v. Senco Products, Inc., 329 Or. 62 (1999).  In Lakin, the court had read § 17’s jury-trial guarantee to prohibit statutory reduction of the amount of damages available in any civil claim for which a jury trial was available in 1857.  Based on that reasoning, the court found unconstitutional Oregon’s $500,000 statutory limit on award of noneconomic damages (e.g., pain and suffering, emotional distress, injury to reputation, loss of consortium) in a civil action.

Horton involved a medical-malpractice action against OHSU and a physician working there, brought under the Oregon Tort Claims Act.  The defendants admitted liability for surgical injuries to a six-month-old patient.  A jury awarded the infant and his parents roughly $6 million in compensatory damages and another $6 million in noneconomic damages.  The applicable cap for all damages (economic and noneconomic) under the Tort Claims Act was $3 million.  The trial court and the Oregon Court of Appeals, in reliance on Smothers and Lakin, disregarded the Tort Claims Act cap and upheld the jury’s verdict of about $12 million.

The state high court agreed to review the Court of Appeals’ decision and used the case as a vehicle to re-examine its past damages-limitation precedents.  The court substantially overruled Smothers, overruled Lakin explicitly, and remanded the case to the trial court for application of the $3 million Tort Claims Act cap.

The Horton court questioned and rejected the Smothers court’s conclusion that the availability of damages turns on the state of the common law in 1857—a position, the court noted, that neither party was in fact advocating. Horton argued that under § 10, the Oregon legislature could extend the existing damage remedies to other areas or eliminate common-law defenses, but it could not place limits on the damages available. OHSU argued that § 10 does not prevent the passage of legislative damages caps. Analyzing the history of Article I, § 10 and the understanding of legislative authority in 1857, the court ruled that nothing in § 10 should limit the legislature’s authority to alter the common law by statute.

The court, though, retained some limiting factors it recognized in Smothers and in other § 10 cases on the legislature’s passage of damages caps. Courts that review statutory caps, the Horton court wrote, must conduct an “as applied” inquiry in each case. The following factors should be taken into consideration, it explained, when judging the constitutionality of such a cap:

  • If the statute alters the remedy for breach of an existing duty, whether the legislature has retained a remedy in some form that is “not insubstantial” when compared with the award. In that context, “substantial” has yet to be clearly defined.
  • Where a remedy is altered or done away with, whether the quid pro quo (such as waiver of sovereign immunity in exchange for specific remedies, under a tort claims act) strikes a sensible balance. (Where this factor is present, the “substantiality” of the remaining remedy can presumably be smaller, as it seems to be in Horton.)
  • Whether the action modified by statute continues to protect “core interests.” Changed circumstances may no longer call for the protection.  For example, abolition of the torts of alienation of affection and criminal conversation is constitutionally permissible because of changed societal norms.

In Lakin, which the Horton court explicitly overruled, the court held that § 17 of the state Constitution conferred a substantive right to pursue a recovery through trial by jury. Horton held that the text and history of § 17 support only a procedural right—to have one’s claim decided by a jury—and not a substantive right to a particular recovery.  Juries determine facts, not the law.  The Oregon legislature fulfilled its constitutional function—adjusting the remedies available under law—an act that had no effect on the right to a jury trial guaranteed by Article I, § 17.

Just three weeks after releasing its Horton opinion, the Oregon Supreme Court ruled in another closely-watched case involving state tort reform, Rains v. Stayton Builders Mart, Inc., 359 Or. 610 (May 26, 2016).  Horton all but preordained the Rains outcome, especially considering that the facts of the two cases were closely analogous. The plaintiffs in Rains recovered noneconomic damages (under products liability and negligence theories) that also exceeded the $500,000 cap, and the lower courts followed the reasoning of Lakin and Smothers in upholding the award. The Supreme Court, citing Horton, reversed the Oregon Court of Appeals decision in summary fashion and remanded the case for reconsideration.

Horton is a thoroughly reasoned decision, authored by Justice Rives Kistler, who is regarded as the Supreme Court’s most scholarly jurist.  It is likely to withstand future attacks, which may inspire the plaintiffs’ bar to seek an increase in the damages cap or its repeal. Their success in doing so would be a regrettable outcome, though the business community and others who support reasonable limits on tort liability would at least have an opportunity to openly debate the issues. Had Horton judicially nullified the damages limit based on a broad reading of the state constitution, the debate would have ended there—a result inconsistent with democratic principles and the rule of law.

Note

  1. Section 10, traceable to Magna Carta and derived from the Indiana Constitution of 1851, says in relevant part that “every man shall have remedy by due course of law for injury done him in his person, property, or reputation.”  Section 17, worded identically with the 1851 Indiana Constitution, provides, “In all civil cases the right of Trial by Jury shall remain inviolate.”