Judicial Reform, Law & Principles

Constitutional change required for cap on noneconomic damages

April 28, 2020

A.J. Ferate

In 2009, after years of seeking to promote liability reform, the Oklahoma Legislature had a path to attain the longtime goal of tort reform. The policy effort was designed to lower insurance costs and reduce the practice of “defensive medicine”—performing extra, unnecessary tests that drive up medical costs. Some analysts have even noted that reform also increases research and development investment.

Nor did it take long for the Oklahoma Supreme Court to make it known that the pre-Fallin system was preferred when the Court struck down the reforms. In response, the legislature broke the reform into 20 separate bills and passed them again. This did not end the Court’s assault on lawsuit reform. Piece by piece, the Court has taken steps to find elements of the reform unconstitutional, including perhaps the most recent—and significant—step of striking down the cap on noneconomic damages in April 2019.

This legislative session, Senate Judiciary Chair Julie Daniels seeks to revive the noneconomic damages cap by placing it in the Oklahoma Constitution. The bill, SJR 40, may be the sole remaining approach to assure that the intent of the legislature, as well as the state’s voters, is preserved.

The Design of the Noneconomic Damages Statute
When an individual claims an injury and seeks relief through the courts, there are often three general forms of damages that can be claimed: compensatory, punitive, and general or noneconomic damages. If liability is found by a jury, compensatory damages are assessed by the court to compensate the claimant for the actual loss or harm, including the coverage of medical bills and lost wages. No state applies a cap on these damages.

Punitive damages can be assessed, “for the sake of example and by way of punishing the defendant.” In Oklahoma, 23 O.S. § 23-9.1 outlines seven factors that must be considered to award punitive damages, and if those hazards are met, the statute outlines maximum awards that may be issued.

The other form of damages that may be awarded are noneconomic damages. Generally, these types of damages are highly contentious and often awarded for pain, trauma, reputational damage, or the worsening of prior injuries. The challenge that arises with these damages is that they can be difficult to quantify and can allow a jury the opportunity to inject noneconomic costs that are far greater than compensatory damages. Because of this, defendants and their insurers are subjected to higher risk and increased insurance costs, leading companies to avoid—or even exit—a market due to liability risks.  

To develop greater market predictability, some states began instituting noneconomic damages caps. As early as 1975, California instituted a $250,000 cap on damages that remains unchanged today. Texas, Tennessee, Ohio, and Michigan are just a few examples of other large manufacturing states that have caps in place.

Oklahoma’s Judicial Treatment of the Noneconomic Damages Statute
Oklahoma followed the lead of some of these states and instituted its own noneconomic damages cap in 2009. While the $350,000 cap instituted by Oklahoma did allow limited exceptions for malice, gross negligence, fraud, or reckless disregard, it also placed a limit consistent with other states that implemented similar caps.

Oklahoma’s cap was challenged along with the other provisions of the Comprehensive Lawsuit Reform Act of 2009 in Douglas v. Cox Retirement Properties, Inc. By a 7-2 vote, the Oklahoma Supreme Court held that the reform failed due to the “single subject” clause of the state’s constitution. The “single subject” clause requires that the legislature pass legislation that contains only one subject. The clause, which the Court has expanded the use of in recent years, has been applied inconsistently. Some commentators suggest it is the Court’s go-to clause to overturn legislative policy decisions its membership does not prefer, with even The Oklahoman suggesting that “court rulings have muddied the waters.” Despite stating that “This Court has long rejected a broad, expansive approach to the single-subject rule,” the majority found that “the Legislature's use of the broad topic of lawsuit reform does not cure the bill's single-subject defects.”

In dissent, Justice James Winchester, joined by Justice Steven Taylor, challenges the pharisaical approach of the majority, noting:

At times, even the wording of a single statute on a single subject may result in an all-or-nothing choice for those voting on it. The single-subject dilemma leads me to conclude that this Court should adopt a more deferential approach toward the rule. Based on the majority's present opinion, statutes that were enacted in a comprehensive bill, and that have remained as law for years could be found unconstitutional. The legislature will have wasted its time in working on any comprehensive legislation. Such legislation may be declared unconstitutional immediately, or worse, after a few years codified in the official state statutes a whole comprehensive bill will be struck and cause the chaos that will inevitably follow this opinion. Court opinions containing an overly restrictive interpretation of the single-subject rule will likely have a chilling effect on the legislative process. The result will be an exponential number of bills filed along with an expanded legislative process but with no greater assurance the legislation will pass the single-subject test.

The legislature accepted the Court’s challenge by breaking up the law into 20 separate bills in special session, passing them each.

Then came the direct challenge.

It took a few years, but a direct challenge to the noneconomic damages statute came in Beason v. I.E. Miller Services, Inc. Todd Beason, a drilling rig supervisor, was injured when an 80-foot boom fell on him as it was used to try to move an 82,000-pound mud pump. Mr. Beason lost his arm and faced several surgeries as a result of the injury. Mr. Beason and his wife jointly filed a lawsuit, including a request for noneconomic damages.

The jury found in favor of Mr. Beason, awarding $9 million for Mr. Beason’s compensatory damages, and $6 million in noneconomic damages awarded to Mr. Beason and his wife. Judge Patricia Parrish followed the statute, reducing the jury noneconomic damages award to $700,000 ($350,000 each to Mr. and Mrs. Beason). The Oklahoma Supreme Court took up the appeal, finding the noneconomic damages cap is a “special law.”

A “special law” is generally found in most states to exist if a person or persons receive a particular benefit or punishment that others in the same situation don’t receive. For example, a bill of attainder, a law that inflicts punishment on a specific person, would be an unconstitutional special law. A tax reduction for a specific company in an industry rather than all companies that operate a specific technology would be another example. In this case, the Court expanded the concept of a special law: because the statute did not treat those that survive their personal injury the same as those that died from their personal injury, the cap on noneconomic damages is a special law.

Although the Court’s opinion ignores a significant difference between the living and the dead by considering them to be in the same situation, the Court devalues the fact that there is a constitutional restriction on limiting damages that result in death. To put it simply, the Oklahoma Constitution itself sets apart the deceased from those that survive their injury. Because of this, the Legislature only possesses the power to cap damages on injured plaintiffs. When the legislature exercised that specific allowed authority, the Court rebuked them.

SJR 40
While amending Oklahoma’s Constitution to expand what is already the longest constitution in the nation should always be done as a last resort, the Beason decision leaves no other option for legislators. This legislative session, state Senator Julie Daniels filed Senate Joint Resolution (SJR) 40. As an SJR, procedure dictates that if the bill passes both houses of the legislature, the bill goes to the ballot for the people to adopt as an amendment to the Constitution rather than being delivered to the Governor. If a majority of voters elect to support SJR 40, it becomes part of the Constitution. Senator Daniels’s bill adopts the entirety of 23 O.S. § 61.2, but includes a clause that allows the legislature to increase, but not decrease, the $350,000 cap by statute.

Adopting the proposal would restore a law that allowed the Oklahoma economy to grow and continued to provide recovery for those that are awarded noneconomic damages. Oklahoma’s effort to flatten costs to provide predictable long-term benefit for its citizens and businesses is an important goal that must be reinstated—even if the only way to do that is by amending the Constitution.