Can litigation climate change aid business?

On the surface, the recently enacted tort reform package sounds business friendly. The reforms, recently signed into law by Gov. Walker, are designed to create an economic environment that allows the private sector to create 250,000 jobs.

But one person's comprehensive tort reform is another person's invitation to injustice. Do these tort modifications really signal that Wisconsin is open for business and ready to create jobs, or do they merely allow corporations to run roughshod over the consumers they sometimes victimize?

Climate change

Wisconsin Manufacturers & Commerce has long been a proponent of tort reform, arguing that it is needed to restore fairness and predictability to the state's legal system, and improve the competitive standing of Wisconsin companies.

James Buchen, WMC's vice president of government relations, expects the reforms to improve the business climate by bringing Wisconsin's laws in line with those of other states. "Opponents have tried to characterize this new law as somehow cutting off access and limiting redress for people who have been injured," he noted. "The basic laws are still there and they are all fundamentally still the same. It's just around the edges where the state addressed more questionable things."

The reform package modifies the state's product liability laws to help manufacturers and small businesses. It requires expert witnesses to base their opinions on sound science and well-established theories, and raises the standards for qualifying people as experts when they testify. It also eliminates the risk contribution theory in manufacturing lawsuits, stemming from a Wisconsin Supreme Court ruling that allowed plaintiffs to sue any lead paint manufacturer that sold paint in the state – without proving which paint product caused harm in individual properties.

The package also includes a cap on punitive damage awards, limiting noneconomic damages to $750,000 in medical malpractice cases at nursing homes, and limits punitive damages to $200,000 or double the amount of compensatory damages, whichever is higher. In addition, the law does not allow plaintiffs to introduce as evidence, in either civil or criminal cases, internal reports on abuse in nursing homes.

Neither of the experts IB spoke to claimed that Wisconsin's civil liability system was wildly out of control, that jury verdicts have left people scratching their heads, or that the state has dishonest judges, but they believe that Wisconsin's laws were out of step with those of other states. One of the hopes is that these changes will encourage businesses in other states to relocate to Wisconsin. "I think this is part of the mix that people look at when assessing a state's business climate," Buchen said. "This will help improve the rankings of Wisconsin's business climate, which at the end of the day is about perception. It's about business people from here or other states making decisions about whether they are going to expand or where they are going to relocate."

While the lead-based paint controversy caused manufacturers heartburn, attorney Jud Wyant, a partner in Racine's Wyant Law Office, said it sprang from a sensible market-share allocation platform. In the case of lead paint, it was impossible to determine which manufacturers to attach the shares to – in part because the product was banned in the 1970s – so multiple paint manufacturers were targeted.

Wyant said the reform package will help retailers who unknowingly stock defective merchandise. In the case law that developed under the state's previous product liability law, the operator of a hardware store who sells a hammer whose head flies off and hits somebody in the eye is considered in the stream of commerce, even though all the operator did was hang the hammer on a peg board. "We had what is called joint and several liability, which means anybody in the line could be held responsible for the whole amount, so this certainly takes a lot of pressure off the retailers," Wyant said.

Buchen said the modifications would curtail what he called the routine practice of plaintiff attorneys "naming anybody they can in these lawsuits" to get a judgment. "Most of the time, these people don't have a judgment against them, but they end up having to spend money to defend themselves, and that's not fair," he said.

Opponents of the new law have argued that consumers would have limited redress against corporate wrong doers, especially victims of nursing home abuse. Buchen said they would still have the ability to sue and subpoena witnesses. "There is certainly abuse in nursing homes, but there is nothing here that limits your ability to sue the negligent," he said. "Those provisions were about protecting internally generated information, primarily used for quality improvement, from discovery under the theory that you are not going to get any kind of internally generated information if people feel it can be used against them in court."

Final argument

Wyant said it might take five or six years to determine whether the law has its intended effect. "If you measure the number of product liability cases and the magnitude of the jury verdict over time," he stated, "you'll see whether it has an effect."

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