Will tort reform return?

Last year’s epic battle to establish constitutional changes in the Arkansas judicial system ended with the state’s high court kicking off the ballot a business and medical community-led proposal for tort reform. The question circulating in the capitol corridors now is: will tort reform return?

The short answer falls somewhere between “probably” and “possibly,” says Randy Zook, Arkansas State Chamber of Commerce and Associated Industries of Arkansas CEO.

“We learned our lesson. We paid the tuition, we took the course, and didn’t do so well on the final,” said Zook, who led the coalition charge for the tort reform ballot measure last year.

Legislative leadership and the governor still view the state’s position as a business climate liability compared to surrounding states. Supporters of the measure are hesitant to embark on the same journey again and financial backers have expressed caution about a second run. Opponents are gearing up for an expected battle, despite the current rhetoric of uncertainty.

“Tort reform, in my opinion, was either going to go down at the Supreme Court or at the ballot box. It was doomed to fail from the very beginning,” said Jesse Gibson of Gibson Law Firm and current president of the Arkansas Trial Lawyers Association, which opposed the tort reform effort. “The people are with us on the issue of tort reform. I think going forward the best question to ask is: what are we trying to solve? If there’s a demonstrable problem that needs a solution, we’ll gladly look at it and gladly address it in a thoughtful and considerate way.”

THE RECENT HISTORY
Last October, SJR 8 or Issue 1, the so-called tort reform amendment, was kicked off the ballot by the Arkansas Supreme Court.

Referred to voters by the Legislature in 2017, the proposal was officially known as the “Amendment Concerning Civil Lawsuits and the Powers of the General Assembly and Supreme Court to Adopt Court Rules.”

It would have limited attorneys’ contingency fees to one-third of the net recovery; limited punitive damages to $500,000 or three times the compensatory damages unless harm was caused intentionally; and limited “non-economic damages” to $500,000. It also would have given the Legislature the ability to amend or repeal procedural rules prescribed by the Supreme Court for the Arkansas judiciary.

All of those directives rolled into one proposal were the basis of a lawsuit brought by retired Judge Marion Humphrey. In the high court’s majority decision in the Humphrey case, Arkansas Supreme Court Associate Justice Jo Hart cited the complexity of the proposal as the primary reason for tossing it from the ballot.

“The actual text of SJR 8 itself, even by a generous reading, institutes at least seven individual numerated changes or additions to the constitution that would significantly alter the status quo,” Hart wrote in the 6-1 decision.

She added, “In short, allowing the General Assembly to submit so many changes to our constitution under the guise of a single amendment, when the alleged links between those proposed changes are so attenuated and tangential (or even non-existent) as they are in this specific case, would render article 19, section 22’s three-amendment limitation ‘superfluous, meaningless, or inoperative.’”

Polling conducted by Talk Business & Politics and Hendrix College showed the measure was headed for a nearly two-to-one defeat, although proponents said their internal polling showed a path to victory.

STARTING FROM SCRATCH, AGAIN
Gov. Asa Hutchinson is supportive of another effort, although he never staked out a public position on Issue 1 in 2018. Hutchinson, an attorney, tells Talk Business & Politics that reforming the tort system has to be done in dual fashion.

“I have always advocated that tort reform must be a two-step process. First, there must be an amendment to the Constitution adopted which gives the General Assembly authority to set limits on non-compensatory damages. Second, the General Assembly must debate and pass reasonable tort reform. In order to pass tort reform, you have to do it one step at a time,” he said.

Gibson, with the trial lawyers, says tort reform isn’t limited to a constitutional proposal. He’s watching bills being filed in the session that may affect everything from immunity to insurance for signs of limiting a plaintiff’s potential rights.

If tort reform re-emerges in 2019 as a possible constitutional referral from the Legislature, supporters say they are likely to adopt the governor’s suggested approach and keep a measure to a singular issue.

“I can see us specifying caps on punitive damages and allowing the legislature to adjust them upwards, similar to what we had in the Issue 1 proposal,” Zook said. “That would be the only item in there. Not addressing rules for practice, pleadings and procedures – not getting anywhere near it. The court has made it crystal-clear that’s a nuclear zone. Enter it at your own peril.”

But rulemaking is part of the current conversation.

Senate President Jim Hendren, R-Sulphur Springs, notes that tort reform has been a legislative agenda item since the 1990’s when Democrats had strong majorities in both chambers. A previous statutory attempt didn’t pass constitutional muster, and various constitutional changes have fallen short like last year’s Issue 1.

“We need to take some steps to make sure we’re competitive not only in tax policy, but also in our legal reforms,” Hendren said.

He says lawmakers are talking about capping damages or moving rulemaking authority for the judiciary to the legislative branch. Hendren has asked the business and medical community to provide input as to which path would have more value. He’s more in the “probably” camp than the “possibly” camp as to whether another measure will get referred.

“I think there’s a real possibility that the Legislature will. We’re teachable. We got the message from the Supreme Court that they’re not going to allow multiple issues to be put before the voters. Whether you agree or disagree with that, it’s clear that continuing to try to put a complex issue on the ballot is not going to withstand a court challenge,” Hendren said.

AMENDMENT PRIORITIES
But the resurrection of constitutional tort reform faces a couple of significant challenges. Will the business and medical communities that fronted the measure last time be willing to put money toward the cause again? Can state lawmakers be convinced to refer it out again, saving millions of dollars in canvassing efforts? Is tort reform more important than other issues being considered – highway funding, a pre-emptive term limits proposal, ballot access reforms, or a sovereign immunity solution?

“At the end of the day, you only get three strikes to put up. There’s likely going to be something around term limits again, a highway referral, and ballot access reform,” Zook said, in reference to the limitation of three referrals from the legislature.

“I think two things weigh against it,” Gibson said. “Number one, I think it was pretty clear that the voters didn’t have an appetite for any kind of tort reform. I think that works against it. Number two, I think the court ruling in regards to Issue 1 suggests any kind of constitutional effort would have to be extremely limited.”

Sovereign immunity is another thorny legal issue. A year ago, the Arkansas Supreme Court ruled in a case that the General Assembly cannot allow for lawsuits against the State. Chief Justice Dan Kemp cited the 60 years of precedent consistent with that holding, pointing out that the state’s constitution says “the State of Arkansas shall never be made a defendant in her courts.”

A strict interpretation of the ruling would prevent any citizen from filing a lawsuit against a state agency, board or commission. Gov. Hutchinson has asked state services under his direction to consult with his office before considering this defense in legal cases.

Sen. David Wallace, R-Leachville, filed a proposed amendment to allow the legislature to carve out exemptions for being able to sue the state. While it will likely get an airing when constitutional amendment referrals are debated, one big obstacle to its referral to voters may come from the immensely popular Republican governor who has a particularly strong opinion about it. Hutchinson opposes a change to the blanket immunity provision.

“The Supreme Court is finding the right balance on sovereign immunity, and I do not see a need to amend the Constitution,” he said.