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Dishonorable Mentions

This report’s Dishonorable Mentions generally comprise singularly unsound court decisions, abusive practices, legislation or other actions that erode the fairness of a state’s civil justice system and aren’t otherwise detailed in other sections of the report.

TROUBLESOME CONSUMER CONTRACTS RESTATEMENT

The American Law Institute (ALI) is scheduled to vote on its Restatement of Law, Consumer Contracts in May of 2020. This Restatement is the latest in a troubling series of work published by the ALI. ALI Restatements receive great deference from judges around the country; therefore, this Restatement is of serious concern.

According to the ALI Style Manual, Restatements are supposed to present “clear formulations of common law… as it presently stands or might appropriately be stated by a court.” The Restatement of Law, Consumer Contracts deviates from this most basic objective by attempting to create out of whole cloth a separate area of contract law for “consumer contracts” where it does not appear that any court has articulated a separate set of consumer contract rules that operate differently than the general law of contracts. And, rather than “restating” existing law, the project plainly seeks to promote major public policy innovations rather than its stated purpose.

In many ways, this Restatement is no different than an article in a law journal advocating expanded civil liability, and judges should treat it that way as the late Justice Antonin Scalia suggested. Among the troubling aspects of the Restatement of Law, Consumer Contracts:

  • Undermining pre-dispute arbitration agreements.
  • Expanding the unconscionability doctrine, which would provide courts with a new basis for invalidating terms in contracts between businesses and consumers.
  • Creating a “deceptive contract” theory that establishes a novel basis for a consumer to void any “contract or term adopted as a result of a deceptive act or practice.” This would be a broad and amorphous new common law rule.
  • Permitting the re-writing of contract terms that would give courts unfettered discretion to refuse to enforce all or part of any consumer contract, as well as reform contract terms to “operate against the business.”

Unfortunately, this Restatement is not a one-off and continues the troublesome trend that began with the liability-expanding section on trespasser liability several years ago and continued with the 2018 Restatement of the Law of Liability Insurance. The ALI now has turned its attention to several new projects, including ones on remedies and conflicts of law. ATRF will follow the process closely in hopes that the ALI correctly presents the law as it stands.

SIXTH CIRCUIT RULES TENNESSEE DAMAGES CAP UNCONSITUTIONAL

In late December 2018, U.S. Court of Appeals for the Sixth Circuit found Tennessee’s statutory limit on punitive damages unconstitutional. In Lindenberg v. Jackson National Life Insurance Co., the jury awarded the plaintiff $3 million in punitive damages, which the district court judge reduced to $700,000 in accordance with Tennessee’s statutory limit on punitive damages.

Despite recognition that federal courts should be careful in adopting substantive innovations in state law and that Tennessee statutes should receive a “strong presumption” of constitutionality, the Court found the punitive damages limit violated the right to a jury trial and was therefore unconstitutional. The vast majority of courts have upheld such laws as a legitimate, constitutional public policy decision.

ALASKA SUPREME COURT ALLOWS ‘PHANTOM DAMAGES’

In August 2019, the Alaska Supreme Court ruled that “an injured party is allowed to introduce the full, undiscounted medical bills into evidence at trial.” The Court stated that the lower court erred when it excluded evidence of the medical bills that were not discounted because the amounts actually billed by the providers were relevant evidence of the reasonable value of the medical services.

By interpreting the law in this way, damage awards will be improperly inflated. There is a presumption that the amount a healthcare provider accepts as payment for treatment is the value of the medical care (rather than initially invoiced amounts, which may be much higher). Phantom damages provide a windfall to plaintiffs and their attorneys at the expense of defendants.

KANSAS SUPREME COURT STRIKES DOWN STATUTORY LIMIT ON NONECONOMIC DAMAGES

In June 2019, the Kansas Supreme Court struck down the state’s statutory limit on noneconomic damages in personal injury cases for violating the right to a trial by jury. The Court found it interferes with the jury’s determination of compensation owed to plaintiffs.

The state law permitted plaintiffs to recover their full economic damages, such as medical expenses and lost income, but limited the subjective, intangible portion of awards for items such as pain and suffering. Statutory limits ensure liability insurance is available at a reasonable cost and safeguards against “runaway juries” that award huge verdicts. Limits also make it easier for parties to reach fair settlements. The vast majority of courts have upheld such laws as a legitimate, constitutional public policy decision.

OREGON SUPREME COURT ISSUES TWO LIABILITY-EXPANDING DECISIONS

In March 2019, the Oregon Supreme Court limited the application of Oregon’s statutory “social host” immunity. The Court refused to grant immunity to an employer that hosted a happy hour after an employee was injured while intoxicated at a work-related event. She claimed that her supervisor pressured her to attend the event. The Court said the statute only granted immunity for claims against servers and social hosts when voluntary intoxication was a cause of the injuries.

In June 2019, the Oregon Supreme Court decided a criminal case that indicated comparative fault will not be evaluated in tort cases if the defendant was reckless in committing the tort. Even though this was a criminal case, the Court indicated that this would be the standard for torts as well by stating that, “comparative fault applies only to fault of the type to which contributory negligence would have been a defense.” As a result, if a defendant in a tort case is found to be more culpable than grossly negligent, the defendant will be held fully liable for damages.

UTAH SUPREME COURT STRIKES DOWN MEDICAL LIABILITY LAW

In July 2019, the Supreme Court of Utah ruled a state law that required medical malpractice claimants to obtain a “certificate of compliance” from a state agency was unconstitutional. The Court found the law violated the Separation of Powers doctrine because the law gave an agency the power to terminate a claim. The case arose after the patient’s widow attempted to obtain a certificate of compliance, as previously required by Utah law, failed, and then filed suit against the hospital claiming the certificate requirement was unconstitutional.

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