Last week the Oregon Supreme Court invalidated a statutory cap on noneconomic tort damages. The plaintiffs in Klutschkowski v. PeaceHealth asserted a medical malpractice claim to recover for injuries their son had sustained during birth. Plaintiffs contended that the damages cap violated the right to a remedy of Article I, Section 10 of the Oregon Constitution, and the right to jury trial of Article I, Section 17. The Court applied the reasoning of the 2001 case Smothers v. Gresham Transfer, which held that if the common law recognized a right to recover when the Oregon Constitution was adopted in 1857, then a court may enforce a statute abolishing the remedy only if the legislature provides a constitutionally adequate substitute remedy. The Court concluded that the claim at issue in this case did exist in 1857 and could not be limited by a statutory cap.
Justice Jack Landau wrote a lengthy concurring opinion, acknowledging that the majority properly applied the Smothers analysis, but questioning Smothers and other cases requiring "imaginative reconstruction of nineteenth-century case law" in order to resolve issues of state constitutional law. Justice Landau challenged "the notion that this state's constitution today means no more than what it meant in 1857" and characterized the "hyper-originalism" required by the case law as "untenable." He next disputed the historical interpretation of the remedy clause adopted in Smothers: "My own view is that it is unlikely that the framers intended the remedy clause to serve as a limitation on legislative authority." He suggests that the Court in future cases "should invite advocacy . . . to address the issues that I have raised."
The question now is whether other members of the judiciary will take up Justice Landau's call to broadly re-think how they interpret the Oregon Constitution.
In a case involving issues of statutory interpretation, the scope of the initiative power, and the prohibition on impairment of contract, a judge yesterday ordered Clackamas County to cooperate with TriMet in the construction and operation of the Portland-Milwaukie light rail line. TriMet, represented by Ater Wynne litigators Steve Blackhurst and Lori Irish Bauman, filed suit earlier this year to enforce contracts that TriMet and the County signed in 2010 and 2012. The County resisted performing certain contractual duties following voter approval of an ordinance requiring a countywide vote on the use of resources for public rail. In granting summary judgment for TriMet, Judge Henry Breithaupt held that the ordinance does not apply to the Portland-Milwaukie line, which is currently under construction and set to begin operation in 2015.
The Oregonian's report on the ruling is here.
Last week the Oregon Court of Appeals again addressed the appropriate ratio of punitive to compensatory damages when compensatory damages are modest. One week after affirming an award of punitive damages that was 200 times compensatory damages in Lithia Medford LM, Inc. v. Yovan, the court, in Evergreen West Business Center, LLC v. Emmert, reinstated a jury award of punitive damages 600,000 times compensatory damages.
In Evergreen, the jury's verdict and damages awards were supported by evidence that the defendant LLC member had a substantial net worth and that he made a calculated decision to breach his fiduciary duties to the LLC in order to profit at its expense. The defendant breached his fiduciary duties by dealing behind the backs of the other LLC members to acquire real property that was owned by the LLC, but under threat of foreclosure.
Finding for the LLC, the jury had awarded $1 in compensatory damages and $600,000 in punitive damages. The trial court reduced the punitive damages award to $4 in order to maintain the 4-to-1 ratio that has been approved by the Oregon Supreme Court as consistent with the Due Process Clause in non-personal-injury cases.
Among his arguments on appeal, defendant contended that, as a member of the LLC, he did not owe it any fiduciary duty. In particular, he claimed the LLC statute provides that members of a manager-managed LLC who are not also managers owe no duties to the entity or the other members solely by reason of being a member. The Court of Appeals concluded that the statute was inapplicable because the defendant's fiduciary duty was not based solely upon his status as a member, but rather upon the fact that the defendant entered into a relationship of confidence with the company when he promised to prevent the foreclosure of the property on behalf of the LLC.
Next, the court discussed the punitive damages award of $600,000. Relying on the Oregon Supreme Court's decision in Hamlin v. Hampton Lumber Mills, Inc. and its own decision in Lithia, the court held that the reprehensibility of the defendant's conduct, which is the most important indicator of reasonableness of a punitive damages award, supported an award that exceeded a single-digit multiplier of nominal damages. Given the defendant's net worth and the gravity of his tortious conduct, the $600,000 in punitive damages was sufficiently admonitory and did not violate his right to due process.
See our discussion of Lithia here.
An Oregon Supreme Court opinion that received signficant media attention this week has implications for the litigation of trade secret cases in the state. The opinion focused on the Open Courts provision of the Oregon Constitution, and the immediate issue addressed by the Court was whether decades' worth of internal Boy Scout sex abuse files would be made public.
The files had been produced in discovery by the Boy Scouts in a case in which plaintiffs claimed abuse by a scouting volunteer. The files were maintained as confidential during discovery pursuant to a protective order. The files were later admitted into evidence in a Multnomah County trial in which the Boy Scouts were found liable. After the trial, news organizations including The Oregonian, the Associated Press and The New York Times, sought to view the files, citing Article I, Section 10 of the state Constitution, which provides that "No court shall be secret, but justice shall be administered, openly and without purchase, completely and without delay." The trial court judge ordered the files released, but with the names of victims and the people who reported the abuse redacted.
Both the media parties and the Boy Scounts sought mandamus review by the Oregon Supreme Court, with the media parties advocating for an absolute right of the public to view evidence admitted at trial, in particular in this case without redactions.
The Court rejected the media parties' view, confirming that the Open Courts clause does not create an individual right to observe court proceedings, but rather dictates how the institution of the courts operate. The principle of open justice allows the public to attend and view the administration of justice by the courts. Justice Robert Durham, writing for the Court, concluded that limiting post-trial access to evidence admitted at trial is not in violation of that principle.
The Court nonetheless held that the trial court had the power to make public evidence admitted at trial, including evidence that had been produced subject to a protective order. In particular, a court may conclude that granting a request to inspect evidence after the completion of a trial will foster public understanding of the administration of justice. In this case the judge did not abuse his discretion in ordering the files released with names redacted.
The Court's rejection of an absolute right of access to trial evidence means that courts can continue to protect the interests of parties to trade secret litigation. The result is consistent with the position of TechAmerica, which filed an amicus brief in the case. TechAmerica, the leading trade association for the electronics industry, argued that trial courts must be allowed to limit access to trial evidence in appropriate cases in order, for example, to avoid public disclosure of trade secrets in appropriate cases. Ater Wynne attorney Lori Irish Bauman filed the brief on behalf of TechAmerica.
In McDowell Welding & Pipefitting, Inc. v. U.S. Gypsum Co. et al., the Oregon Supreme Court recently held that specific enforcement of a settlement agreement taking the form of an executory accord is an equitable claim, as opposed to a legal claim, and is not subject to a jury trial.
The case involved a dispute over the defendants’ alleged failure to pay for work that plaintiff had done on a construction project. In answer to the plaintiff’s allegations, the defendants claimed as an affirmative defense that plaintiff had agreed to release its claims in return for an agreed-upon sum. The defendants also counterclaimed for specific performance of the settlement agreement. On the defendants’ motion, the trial court agreed to try defendants’ counterclaim for specific performance of the settlement agreement before trying plaintiff’s claims for breach of the construction contract.
In holding that the plaintiff did not have a constitutional right to a jury trial on the issue of specific performance of the settlement agreement, the Court noted that the right to a jury trial does not extend to cases that would have been tried to an equity court at the time the Oregon Constitution was adopted. After considering the three forms a settlement agreement may take – executory accord, accord and satisfaction, or a substituted contract – the Court found that the settlement agreement at issue was an executory accord since the defendants alleged that the plaintiff agreed to release its claims only after the defendants made the promised payment. The Court observed that executory accords were historically not cognizable at law. In response to the plaintiff’s alternative argument that the defendants’ affirmative defense required a jury trial, the Court noted that because the affirmative defense involved an executory accord, it too was an equitable claim not subject to a jury trial.
The Supreme Court affirmed the trial court’s finding that the parties had agreed to a settlement and remanded the case to the trial court for a determination of prejudgment interest.
In a much-anticipated ruling, the Oregon Supreme Court today in Hughes v. Peacehealth held that there is no common law wrongful death cause of action in Oregon. Plaintiffs in numerous wrongful death cases over the years have argued in favor of a wrongful death claim outside of the statutory claim allowed under Oregon law. Today, the Supreme Court unequivocally ruled that no such claim existed at the time of the drafting of the Oregon Constitution in 1857.
At issue in the case was whether the plaintiff could pursue--under a common law theory--non-economic damages in excess of the $500,000 limit imposed by statute. Plaintiff argued that the limitation violates both Article 1, section 10 and section 17 of the Oregon Constitution. Those sections protect remedies available at common law and the right to a jury trial, respectively. Shooting down both arguments, the Court stated, "[T]he view expressed by this court in previous cases--that wrongful death in Oregon is purely statutory and has no secure basis in the common law as it existed in 1857--is correct." You can access the opinon here.
On December 28, 2007, the Oregon Supreme Court held that the damage cap in the Oregon Tort Claims Act (OTCA) violates the Remedy Clause in Article 1 Section 10 of the Oregon Constitution when it was applied to claims against employees of public bodies. In Clarke v. OHSU the plaintiff claimed over $15,000,000 in damages as a result of the negligence of OHSU and certain of its staff members. The OTCA limited the available damages to $200,000.
The Remedy Clause states that “every man shall have remedy by due course of law for injury done him in his person, property, or reputation.” In order to establish that the legislature has violated the Remedy Clause by abolishing a cause of action, a plaintiff must first show that the common law of Oregon recognized a cause of action for the alleged injury in 1857, when the drafters wrote the Oregon Constitution. Once this is established a plaintiff must then show that the legislature has not provided an adequate substitute remedy for the common law cause of action it abolished.
The opinion, written by Chief Justice Paul J. De Muniz, held that the damage limitations in the OTCA were constitutional as applied to the claims against OHSU, because OHSU was an instrumentality of the state and therefore would have been protected from lawsuits in 1857 under the doctrine of sovereign immunity. The court also held, however, that the OTCA requirement that OHSU be substituted as defendant in the place of its staff members—which resulted in the cap on damages being applied to the claims against the staff members—violated the Remedy Clause. Employees of public bodies were liable for negligence in 1857. By subjecting claims against such employees to the damage cap, the legislature violated the Remedy Clause because the substituted remedy was inadequate: “an emasculated version of the remedy that was available at common law.”
Justice Thomas A. Balmer, joined by Justice Rives Kistler, concurred, noting that the remedy for medical malpractice claims against OHSU “should have been increased long ago by the legislature.” The concurrence also emphasized that while the OTCA provisions were unconstitutional because they did not provide a substantial remedy to medical malpractice claims as a class, there are situations in which statutory limits on damages are constitutional even though the statutes might “limit the damages that can be recovered by a particular plaintiff for a particular claim.”
The Ohio Supreme Court also issued an opinion dealing with damage caps last week. It upheld as constitutional caps on noneconomic and punitive damages included in recent tort reform legislation.
In an En Banc decision, the Oregon Supreme Court in Juarez v. Winsor Rock Products, Inc. sidestepped the one issue the parties and many others in Oregon have argued recently; namely, whether Oregon recognizes a cause of action for "common law wrongful death."
Following the workplace death of Felix Juarez, his adult children and mother brought a claim for "loss of society, companionship, guidance, emotional support, services and financial assistance." Because in this situation the workers' compensation system only allows a burial payment and no compensation to the adult children and parents of the decedent, and because the workers' compensation system provides the exclusive remedy for workplace injuries, plaintiffs sued in civil court. There they sought the typical statutory wrongful death damages and argued that the workers' compensation system violates Article I, section 10 of the Oregon Constitution by depriving them of a common law remedy (a wrongful death cause of action) available in 1857 when the Constitution was adopted.
Applying the methodology adopted in an earlier case, Smothers v. Gresham Transfer, Inc., the court concluded that the plaintiffs' claims for "loss of society, companionship, guidance, emotional support, services and financial assistance" did not include an injury to one of the rights protected by Article I, section 10. Accordingly, without even deciding whether Oregon recognizes a cause of action for "common law wrongful death," the court affirmed the lower court's dismissal of the lawsuit.
You may view the entire opinion at: http://www.publications.ojd.state.or.us/S52352.htm