Arkansas Supreme Court sides with farmers, strikes down punitive damages cap

In a decision handed down on December 8, 2011, the Arkansas Supreme Court struck down the punitive damages cap found in the Civil Justice Reform Act of 2003. The Court ruled that this legislative enactment directly violated a separate part of the Arkansas Constitution. UPDATE: Watch coverage of this ruling here:

The case arose out of two genetically modified strands of rice that contaminated the US long-grain rice supply. Arkansas is the leading producer of long-grain rice, and 52% long grain rice grown in the US was exported to other countries prior to 2006. The USDA had not granted regulatory approval of genetically modified rice, and no foreign government had authorized its use for human consumption. The world wide reaction to the contamination of the US long-grain rice supply was profoundly negative, which resulted in the decrease of in exports of 622,972 metric tons of American rice to other countries from 2005-2008.

On April 15, 2010, a Lonoke County jury found that the producer of the genetically modified rice, Bayer Cropscience, was negligent in allowing the genetically modified rice to contaminate the American rice supply. The jury awarded a group of Arkansas rice farmers a total of $8 million in compensatory damages, and $42 million in punitive damages. Bayer appealed to the Arkansas Supreme Court, arguing that the punitive damages cap was constitutional. The Supreme Court disagreed, and held that the trial court was correct because the cap "limit[ed] the amount to be recovered for injuries resulting in ... injuries to persons or property" in violation of the Arkansas Constitution.

Punitive damages cannot be awarded unless there is evidence of conduct that shows a deliberate intent to injure, or a conscious indifference that shows a reckless disregard of the consequences of one's actions. The purpose of punitive damages is to serve as a warning or example to defendants and others. Before the trial began on March 23, 2010, the trial court declared the punitive damages cap was unconstitutional, and that there was sufficient proof that Bayer's conduct was recklessly indiffierent to the dire consequences of contamination for the trial to move forward on punitive damages.

Several proponents of tort reform have been critical of the Court's decision. According to one state senator, "the democratic process is the major casualty in this legal ruling. I understand the constitutional necessity of separation of powers, but at some point the will of the people comes into play." There are two flaws in this argument: First, each justice on the Arkansas Supreme Court is democratically elected, and the vote of the Supreme Court was unanimous in this case. Second, the writing of our constitution is a very important part of the democratic process, and our constitution trumps contrary laws written by legislators — only the people can amend the constitution by popular vote. That is just how a constitutional system works.

Similarly, the Arkansas State Chamber of Commerce responded by saying that the ruling is a "setback in efforts to create an environment that is encouraging to job-creating entrepreneurs and business leaders," because "the uncertainty presented by the potential for unlimited damage assessments will discourage growth and expansion of Arkansas business." However, this group apparently discounts the fact that rice farmers are small business owners, too. Furthermore, rice farming is a major industry in Arkansas, and Bayer's actions caused serious harm to one of East Arkansas' largest employers, Riceland Foods.

The reaction to this ruling by the State Chamber of Commerce is curious — why is it so afraid of having Arkansas citizens sitting on a jury, as the voice of the community, deciding the appropriate punishment for people that harm Arkansas citizens and businesses?

Several representatives from trade groups in favor of the 2003 law have suggested an initiative to amend the constitution, by citizen petition or through legislative referral in 2012 or 2013. The danger to our State is that punitive damages caps mean that irresponsible companies can recklessly disregard the consequences of their actions and get away with it.

At the Chaney Law Firm, we believe that juries should decide what actions should be punished, what actions are safe and unsafe, and what it will take to fix what can be fixed, to help what can't be fixed, and to make up for what went wrong.

Update on America Invents Act of 2011

In a rare showing of bipartisanship, the Senate passed the America Invents Act last week. Since I last reported on the Act (when it had a different name), I sent a letter to my congressional team containing the analysis I shared here several weeks ago. Before the Senate's vote last week, I was honored to receive a call from Senator Boozeman's office requesting my input on several provisions in the Act. His office told me only two patent attorneys in the state wrote to the Senator to comment on the Act, and his staff appreciated the help in understanding the sometimes-esoteric patent laws.

Conservative former Senator opposes tort reform

Fred Thompson, former U.S. Senator from Tennessee, opposes changes to the civil justice system in Tennessee sought by tort reform advocates. His reasoning?

As someone who practiced in the courts of Tennessee for almost 30 years, I believe that a Tennessee jury of average citizens, after hearing all the facts, under the guidance of an impartial judge and limited by the constraints of our appellate courts, is more likely to render justice in a particular case than would one-size-fits-all rules imposed by government, either state or federal.

The civil justice system has checks and balances designed to ensure that each party entering the system receives fair treatment. Each side gets a lawyer to passionately advocate for its position. A judge mediates the case so that the parties have access to evidence they need to present their case. The judge also decides whether a party's claim has enough merit to try before a jury.

After months or years of legal process, the claims of a lawsuit are narrowed down enough to try to a jury. A jury views evidence that is carefully vetted for authenticity, reliability, and relevance. The jury passes judgment on the credibility of evidence and testimony of the witnesses. Only then does the jury decide how wins and how much should be awarded.

The beauty of our civil justice system is that it permits a jury of our peers to decide disputes between citizens based upon the individual facts of each case. Tort reform seeks to change that fundamental right, and even conservatives like Fred Thompson recognize that tort reform is a bad idea for justice.

BP showed us how liability caps work – poorly

This morning, the Arkansas Democrat Gazette reported on the Arkansas Congressional delegation's involvement in hearings about the Deepwater Horizon oil spill. Congress passed a law in 1990 capping oil companies' liability for oil spills at $75 million. Now, current leadership is considering a repeal of that law. Congressman Boozman supports repeal because he doesn't "want the taxpayer to be stuck with the liability."

This discussion illustrates two things. First, liability caps remove an incentive for companies ensure that they place public safety first. The Deepwater Horizon spill will wind up costing far, far more than $75 million. But, with liability for the spill limited to a fraction of the profits generated by the well and by BP generally, BP had no incentive to place the safety and reliability of its well over profits.

Second, when liability caps are in place, the taxpayer winds up footing the bill for harm caused by the wrongdoer. Whether its BP avoiding liability for environmental damage or a careless motorist avoiding liability for hurting another driver, someone else winds up footing the bill. All too often it is the government, whether it's the Environmental Protection Agency cleaning up oil or Medicare paying for medical treatment that should rightfully be charged to a negligent motorist.

It's strange to me that Congressman Boozman recognizes that we don't want to shift private liability onto the taxpayers, yet he still supports tort reform. Tort reform, at its core, is about shifting financial responsibility for harm caused by a private party to someone else, which all too often is the government payroll.