Oregon Supreme Court Issues Final Determination – Oregon’s $500,000 Noneconomic Damages Cap is Gone, at Least for Those Not Gone.

From the desk of Jeff Eberhard: Hear Ye Hear Ye! Read all about it. The Oregon Supreme Court has issued a landmark opinion addressing once and for all a topic of heated debate between Oregon’s plaintiff and defense bars. No matter the side, plaintiff or defendant, attorneys will agree that parties who can prove they were injured by a defendant’s negligence should be allowed to recover for their damages. The extent to which that recovery ought to be available, however, finds less bipartisan agreement. Of course, economic damages (e.g. medical bills, lost wages, etc.) are verifiable. But what of noneconomic damages (pain, suffering, emotional distress, etc.)? The legal community has long recognized the difficulty in measuring these types of subjective non-monetary losses. For years the debate has swirled: Can those noneconomic damages simply be statutorily limited to a specific amount? Amid the firestorm of confusion, only one thing was certain. That nothing was clear, and courts were understandably vexed by the statutory provision which limited an injured party’s noneconomic recovery to no more than $500,000. The constitutionality of that limitation faced numerous challenges, all culminating in the present matter which we bring to your attention today.

Case Pointer: What did the Oregon Supreme Court decide? Oregon’s damages cap is dead – at least as to the living. On July 9, 2020, the court put an end to the debate, at least to the extent the cap was available in actions for injuries other than wrongful death. In arriving to its decision, the court undertook an analysis of cases past, including Greist v. Phillips and Horton v. OHSU – two pieces of law which became central to the final ruling. The defense presented three viable arguments, each of which fell short of proving that Oregon’s $500,000 cap on noneconomic damages could survive constitutional scrutiny.

Ultimately, the court agreed that a $500,000 statutory damages cap, without more, was unconstitutional as applied to personal injury cases other than wrongful death. In short, the court stated that the limitation of damages without the conferral of some other benefit – a quid pro quo – was simply too great a burden to place on an injured person’s constitutional right to a complete remedy.

Busch v. McInnis Waste Systems, Inc., 366 Or. 628 (July 9, 2020).

It is easiest to start from the “beginning.” Many years ago, Oregon’s governor ordered a task force created to investigate steadily-rising rising insurance coverage costs. Tort law was becoming ever more accessible, and with increased litigation came an increase in claim recovery. This proved particularly worrisome in the medical malpractice context where medical practitioners can regularly face seven-figure claims. It was undeniable that increased frequencies of claim recovery on claims which themselves were growing ever larger and larger was a significant contributing factor to rising a significant contributing factor to rising insurance premium costs. The issue was receiving national attention, and while debate swirled at the federal level, an Oregon task force was born.  Enter the year 1987. Based on the taskforce’s findings, a series of changes were enacted which collectively represented a significant step in Oregon’s tort reform. At the core of the updates, a limitation to noneconomic recovery based upon the finding that limiting one avenue of potential endless recovery would help to slow the increasing costs facing Oregon’s insurance marketplace. ORS 31.710 had come to life (at the time it appeared under the number 18.560).

ORS 31.710 limited a plaintiff’s recovery for noneconomic damages arising from emotional injury or distress, death, loss of care, comfort, companionship, etc. to $500,000. Cases challenging the cap arose swiftly, many court opinions simply created more questions than they answered. Courts seemed to agree that, as applied to claims for wrongful death, the statutory cap withstood constitutional muster, but as applied to bodily injury, the law was less clear. The Oregon Supreme Court had been presented with this question on several occasions in the past, but this time it was prepared to make a final determination. Thirty three years later, the statutory cap was declared unconstitutional as applied to a bodily injury’s claimed noneconomic damages.

The facts of the underlying case involved a significant injury. Plaintiff, a pedestrian in downtown Portland, was crossing a street on which he had the right of way. He was hit by one of defendant’s garbage trucks, which came to a stop with his leg underneath and attached to his body by a one-inch piece of skin. The leg could not be saved and the amputation was completed at a local hospital. Plaintiff’s consciousness throughout the ordeal resulted in a $13.5 million jury verdict against the defendant. Just $3 million of that figure represented economic damages. The rest? $10.5 million for pain, suffering, loss of enjoyment of life, and other related noneconomic damages which, as defendant argued to the trial court, must be limited to $500,000 pursuant to ORS 31.710(1). The trial court agreed and applied a $10 million reduction to the jury’s noneconomic damages award. Plaintiff countered with the argument that the reduction violated Article I, section 10 of the Oregon Constitution which provides:

“No court shall be secret, but justice shall be administered, openly and without purchase, completely and without delay, and every man shall have remedy by due course of law for injury done him in his person, property, or reputation.” (Emphasis added).

Naturally, plaintiff appealed on those grounds, obtaining a favorable result at the first appellate level. Defendant presented a number of arguments to the Oregon Supreme Court which required a complex analysis of its previous opinions addressing the damages cap in order to resolve.

This issue was not the first time the damages cap was before the Oregon Supreme Court, and two specific previous cases proved central to the analysis of the issues and arguments raised by defendant. First, Greist v. Phillips, a 1995 wrongful death action in which the $500,000 cap was enforced (i.e. constitutional as applied) to a plaintiff following an award of $1.5 million in noneconomic damages. Second, and more importantly, the 2016 case of Horton v. Oregon Health & Science University (OHSU) was directly applied for the first time at the Supreme Court level since it was published.

First, defendant pointed to the 1995 Oregon Supreme Court case of Greist v. Phillips, in which the court had concluded that a full award of noneconomic damages plus $500,000 in noneconomic damages was a “substantial” remedy for a breach of common law duty (i.e. injuries caused by negligence). It was defendant’s position that Greist was controlling, but the Supreme Court disagreed. The court ultimately determined that Horton – not Geist as Defendant was suggesting. Recall that Greist, a wrongful death case, upheld the application of ORS 31.710’s $500,000 cap to a noneconomic damages award of $1.5 million (the plaintiff received 100% of the economic damages award). The Greist court reasoned that $500,000 towards noneconomic damages in that instance was a reasonable amount because “the statutory wrongful death action in Oregon has had a low limit on recovery for 113 years of its 133-year history.” Defendant McInnis sought to have the court isolate the notion that $500,000 in noneconomic damages is a substantial amount and end the analysis there. Unfortunately, no such luck, as the court was quick to note that the focus would be misplaced should Greist be controlling, as a substantial amount of damages does not necessarily equate to a substantial remedy.

Thus, the Court was convinced that Horton controlled. In Horton, a pediatric surgeon negligently severed blood vessels during an operation on a six-month-old baby, resulting in the child’s need for lifelong medical care. The child’s parents filed suit against OHSU and the surgeon. A jury awarded $6 million in noneconomic damages. When the defendants moved to reduce the total damages award to $3 million pursuant to two Oregon statutes, ORS 30.265 and ORS 30.271 (a statute with similar damages limitations to that contained in ORS 31.710, but which are only applicable in claims against the State), which governed the scope of and limitations on liability of the State and its agents, departments, actors, etc., the trial court granted the reduction only as to OHSU, but not as to the surgeon.

The Oregon Supreme Court seized the potential opportunity to address the overarching question of a statutory damages limitation in the context of a remedy clause argument. The final test, it determined, was to consider “the extent to which the legislature has departed from the common-law model measured against its reasons for doing so.” Put another way, the court was posturing to apply a framework to the case now before it that would require it to weigh the legislature’s intent behind enacting ORS 31.710 against the departure from (in this instance, the degree to which it would hamper) plaintiff’s right to a remedy under Article I, section 10 of the Oregon constitution. In very short, the Oregon Supreme Court determined that the damages cap imposed by ORS 30.271(2)(a) was constitutional as applied to the plaintiff in Horton in part on the grounds that the $3 million maximum ($1.5 million against any single claimant for causes of action arising during the applicable time period) was not “insubstantial in light of the overall statutory scheme, which extends an assurance of benefits to some while limiting benefits to others.” Additionally, the court felt that the amount of post-reduction damages owed to the plaintiff was still “sufficiently ‘substantial’ to remain constitutionally adequate.” While it provided a useful guiding light (and ultimately, the framework which was applied to the damages award in Busch), Horton specifically left open the question of whether statutory damages caps which did not involve Oregon’s sovereign immunity and which did not provide some alternate avenue for recovery were constitutional.

The time had arrived, and more was needed than a simple argument premised on substantiality of the award. Defendant had two more such arguments loaded and ready. Defendant’s second argument had to do with the nature and purpose of noneconomic damages as well as the inherent differences between noneconomic damages and their economic counterparts. The court noted that defendant was correct to identify their differences, but was misguided in asserting that those differences were enough to skirt the constitutionality arguments against a statutory noneconomic damages cap. Article I, section 10 (“the remedy clause”) applies to compensation for injuries, and economic and noneconomic damages alike are intended to compensate a plaintiff for injuries sustained. Thus, a restriction on noneconomic damages would have to survive the same constitutional scrutiny as a limitation to economic recovery, at least in the court’s eyes (“defendant does not persuade us that this court has treated or should treat any difference in [economic and noneconomic] damages as significant in our remedy-clause analysis”). In short, Oregon’s remedy guarantee was designed to allow a plaintiff to recover all types of damages from a defendant to the extent they could prove that the defendant caused them to suffer the harm. That economic damages are inherently different from noneconomic damages (i.e. objective versus subjective) is not enough for them to avoid established constitutional principles.

The court then turned its sights to defendant’s third and final argument – that the legislature’s reasons for enacting the $500,000 cap made it constitutional. Recall that at the “beginning,” the legislature had responded to a taskforce’s recommendations with the purposes of addressing the availability and cost of insurance in light of a broadening of tort liability in the 60s and 70s. There was no question that the legislature had implemented the damages cap with the goal of reducing insurance costs and increasing insurance availability – plaintiff took no issue with that fact and did not argue to the contrary. Instead, Plaintiff responded by noting the complete lack of any alternate avenue for recovery – a quid pro quo – where a plaintiff’s remedy is reduced.

The net effect of ORS 31.710’s $500,000 noneconomic damages cap is that injured persons may have their remedies limited without any apparent alternate means for recovery. The lack of a quid pro quo itself is not a violation of the remedy clause, but its absence has historically cut in favor of a constitutional violation. Certainly, it is much easier for the legislature to say it had balanced the scales between a departure from one’s common-law right to a complete remedy against its reasons for departing from that right in the first place where there exists some other means for the affected party to recoup what they are owed. ORS 31.710 came with no such alternate avenue, a fact which would prove fatal to its test of constitutional muster.

Horton provided the basis for the court’s quid pro quo analysis. In reaching its decision that the statutory limitation on the plaintiff’s damages award in Horton was constitutional, the court looked to ORS 30.265(1). That section waives the State’s sovereign immunity up to the damages limits that OHSU and the pediatric surgeon sought to apply. That, the Supreme Court reasoned, allowed a deserving plaintiff would be able to collect damages against any liable state/state-associated defendant(s) who would otherwise have been judgment-proof under principles of sovereign immunity. Thought of another way, this waiver’s net effect was a specific conferral of a benefit on injured persons – the benefit of being able to bring a claim without fear of a sovereign immunity defense. No such waiver in ORS 31.710. Notably, the defendant in Busch had no claim to sovereign immunity. The defendant simply had a claim to a statutory limitation which would leave the plaintiff with a $10 million reduction to their jury award. There was no question that a statute resulting in reduction of that size would need an extremely good countervailing reason for being enacted in the first place.

Was the legislature’s original pair of goals (reducing cost of insurance and increasing its availability) enough to balance the scales? The Supreme Court concluded that, no, they were not. Yes, the legislature had acted in the public’s interest when it enacted ORS 31.710, but what of the interests of injured persons? The Court stated there was no such consideration. It was clear that ORS 31.710’s noneconomic damages cap was intended to confer benefits only upon society in a general sense without offering any benefit to those it would act to restrict. Without more, the Supreme Court determined that the bare $500,000 limitation was too great a burden to place on an injured party considering the relatively light public interest counterweights.

And so, on July 9, 2020, Chief Justice Martha Walters wrote for a 5-2 court, that:

“[A]pplication of ORS 31.710(1), as a limit on the noneconomic damages that a court can award to a plaintiff, violates Article I, section 10.”

In so holding, the Oregon Supreme Court closed a major chapter in Oregon’s legal debate. As applied to plaintiffs who survive their injuries, ORS 31.710’s $500,000 cap on noneconomic damages is, officially, unconstitutional. Between the majority opinion’s failure to set out a rule for the future and two strong dissenting opinions, this issue is not over. 33 years have passed since the damages cap statute passed, and, in my view, it will be somewhere between 3 and 33 more years before the Busch opinion is fully understood.