Arkansas tort law pared back by court ruling

A class-action group of rice farmers won a major appeal at the Arkansas Supreme Court in a ruling that struck down a portion of the state’s comprehensive tort reform statute passed in 2003.

On Thursday (Dec. 8), the Arkansas Supreme Court issued a unanimous opinion that upheld a lower court ruling that a group of rice farmers were harmed by Bayer CropScience’s actions, entitling the farmers to roughly $48 million in punitive and compensatory damages.

The case stemmed from a lawsuit filed in Lonoke County in which farmers contended that Bayer tainted their long-grain rice crops with genetically modified rice. Bayer appealed the original circuit court verdict claiming it was entitled to a new trial and that the damages awarded were “excessive” and in violation of the Arkansas Constitution.

Scott Powell, an attorney with Hare Wynne Newell & Newton and lead counsel for the farmer plaintiffs, commented on the ruling saying, “It is a wonderful victory for our clients who have struggled mightily over the loss of the world rice markets and continue to struggle.”

He also added that it was “a great victory for small businesses in Arkansas.”
Bayer CropScience had not issued a statement as of late Thursday evening.

TORT REFORM PROVISION STRUCK
The Supreme Court ruling had far-reaching ramifications as it addressed a state statute put on the books in 2003, the Civil Justice Reform Act, that capped punitive damages in plaintiffs’ lawsuits at three times the amount of compensatory damages, with a maximum award of $1 million.

Justice Courtney Hudson Goodson wrote the unanimous decision for the state’s high court, which upheld the lower court’s ruling that struck the cap on damages from the 2003 law.  Goodson cited more authoritative language in the Arkansas Constitution.

Goodson wrote, “In this case, we are called upon to construe the meaning of the constitution. When interpreting the constitution on appeal, our task is to read the laws as they are written and interpret them in accordance with established principles of constitutional construction.”

Goodson referenced a 1938 provision of the Arkansas Constitution that prevents the General Assembly from enacting laws “limiting the amount to be recovered for injuries resulting in death or for injuries to persons or property” as the primary logic for striking the damages’ cap.

The court interpreted the 2003 law to only apply to instances between employers and employees, not contractors, which the farmers’ relationship with Bayer CropScience would be. Previous court precedent supported this interpretation.

“As we have made plain, the General Assembly ‘may limit tort liability only where there is an employment relationship between the parties.’” Goodson said.

The Supreme Court left the door open to additional legal challenges of the tort reform law by leaving the argument centered on that one aspect of the farmer-Bayer relationship.

“Because we conclude that the statutory cap is unconstitutional on this basis, we need not address the remaining constitutional challenges to the statute,” Goodson wrote.

RULING REACTION
Groups actively involved in the 2003 Arkansas tort reform battle provided statements in reaction to the Supreme Court’s ruling.

The Arkansas Legislature overwhelmingly approved the tort reform measure in 2003 by a 71-28 margin in the House of Representatives and a 34-1 margin in the Arkansas State Senate. Gov. Mike Huckabee (R) signed the bill into law. A coalition of the state’s larger business lobbying groups, led by the state chamber of commerce, also championed the reform cause.

State Sen. Gilbert Baker, R-Conway, a co-sponsor of the 2003 legislation, said in a statement, “Thursday’s ruling by the Supreme Court severely limits the legislature’s authority to carry out the wishes of the majority of Arkansans who understand the wisdom of tort reform. The democratic process is the major casualty in this legal ruling.”

Baker added, “I understand the constitutional necessity of separation of powers, but at some point the will of the people comes into play.”

Warning that the court’s ruling could “punish” a business out of existence, Randy Zook, president of the Arkansas State Chamber of Commerce and Associated Industries of Arkansas, said in a press release, “This ruling marks a setback in efforts to create an environment that is encouraging to job-creating entrepreneurs and business leaders. The uncertainty presented by the potential for unlimited damage assessments will discourage growth and expansion of Arkansas businesses. The cost of this ruling will be significant.”

The Arkansas Trial Lawyers Association, the state’s largest plaintiff attorneys group which has long opposed major tort reform efforts, hailed the decision.

“Today’s ruling sends a message. It says that twelve citizens in Lonoke County can hold the most powerful interests accountable, even if they are a multi-national, billion-dollar German conglomerate. If you’re going to do business in Arkansas and cause harm to others, you will be held accountable,” Matt Hass, executive director of the Arkansas Trial Lawyers Association, tells Talk Business.

NEXT MOVES

While major factions of the state’s business community publicly and privately condemned the court’s decision on the tort reform provision, the ruling sets up a high-stakes showdown for a next move.

Several representatives from trade groups interested in preserving the 2003 law suggested that an initiative to alter the constitution — either by citizen’s petition in 2012 or by legislative referral in 2013 — may be pushed.

No representatives interviewed by Talk Business were willing to give on-the-record comments, but one person described the court’s decision as “the final straw.”

Another interested party said he foresees an effort to push for a constitutional change that would not address caps on damages, but more clearly shift the authority for tort reform to the General Assembly and “away from black robes.”

In states such as Texas, which many tort reform advocates promote as the poster child for change, pro-business groups have found tremendous success. During the last decade, Texans for Lawsuit Reform (TLR) passed legislation similar to Arkansas’ tort reform law. TLR also succeeded in passing additional laws to curb lawsuits in asbestos and silica litigation.

Most recently, Gov. Rick Perry (R) signed a “loser pays” law that requires losing parties to pay legal fees incurred by opponents. The law also:
• Allows trial judges to expedite decisions of appellate courts at the lower court level;
• Speeds up civil actions in cases involving amounts less than $100,000; and,
• Encourages timely settlements by penalizing parties who turn down fair settlement offers in hopes of larger settlements at trial.

“Given that these reforms were adopted in a state long known as a plaintiff lawyer’s paradise, other reform groups could profit by a study of the experience of the leading Texas reform group, Texans for Lawsuit Reform,” the group’s web site states.

Arkansas lawmakers will likely push harder for similar legislation in the wake of Thursday’s court’s ruling and based on Texas’ successful passage.

The Arkansas Supreme Court’s ruling could also escalate investments by pro-business groups in future races for the state’s highest judicial posts. Five of the seven members of the Supreme Court are expected to retire by 2015.

Arkansas judges are non-partisan, and unlike other states, there have been no races for the state Supreme Court in modern times that have resulted in obscene amounts of money being spent by pro-business and pro-labor groups. Other states have had judicial contests greatly influenced by millions of dollars from in-state and out-of-state special interest groups.

While Arkansas has been immune to the big-dollar influence, the appetite for tort reform may change that.

Said one politically active business leader, “Plans were already underway for greater involvement. This [the court ruling] is only going to speed things up.”