On May 8, a broad national coalition of 35 business associations and tort reform advocates sent a letter to the federal Advisory Committee on Civil Rules regarding third party litigation funding. The letter asks the committee to amend Rule 26 of the Federal Rules of Civil Procedure to require disclosure of a litigation financing agreement in any civil action filed in federal court.
Category: Current Issues
Lawsuit Against Burford Capital Reveals Dangers of Litigation Financing
Third party litigation funding or “litigation financing” is a form of investing in which hedge funds and other financiers invest in a lawsuit in exchange for a portion of any settlement or judgement award. The investment provides cash to plaintiffs to litigate a claim, while the financier—thanks to its sophisticated underwriting—anticipates the case to end in a large enough judgement or settlement to satisfy its obligations.
Wisconsin Civil Justice Council, Business Coalition Call for Additional Liability Protections to Help Reopen and Restart the Wisconsin Economy
Wisconsin Civil Justice Council (WCJC) and a coalition of 40 Wisconsin businesses and chambers of commerce are calling for the Legislature to enact civil liability protections to help Wisconsin businesses as the state begins to reopen the economy. The Wall Street Journal recently editorialized calling for quick action, noting plaintiff attorneys are already targeting reopening businesses.
In the Legislature’s first COVID-19 bill (2019 Act 185), WCJC worked with legislators to enact protections for health care workers and to take good first steps in protecting manufacturers, sellers and distributors of medical equipment to fight COVID-19. Now, WCJC is calling for additional protections for those manufacturing, selling and distributing medical equipment, as well as protections for employers seeking to keep their employees and customers safe and for persons rendering aid.
WCJC sent this memo to the Legislature last week outlining details of these civil liability protection measures. Wisconsin Manufacturers & Commerce, on behalf of 40 trade associations and chambers of commerce including WCJC and National Federation of Independent Business – Wisconsin, also sent a similar letter to the Legislature. The goal is to enact measures to protect Wisconsin businesses and their employees from being sued, for example, by a plaintiff alleging contracting COVID-19 at the place of business though the plaintiff never actually got sick. WCJC stands ready to work with legislators and the rest of the Wisconsin business community on these important reforms.
The wave of COVID-19 related lawsuits is already starting, as plaintiff attorneys file frivolous lawsuits against hand sanitizer manufacturers, health care providers and hospitals, and other essential businesses. These lawsuits will seriously undermine efforts to restart and rebuild the Wisconsin economy, so it is vitally important that Wisconsin has appropriate liability protections for employers and their workers from the very real threat of frivolous lawsuits related to COVID-19.
States, Federal Government Seek to Curb Coronavirus Lawsuits
As COVID-19 strains the health care system and economy, lawsuits related to the coronavirus are already beginning. Some states and the federal government are taking action to limit liability for businesses and health care workers acting in good faith to help address the pandemic. WCJC is working with Wisconsin legislators to do the same. President of the U.S. Chamber Institute for Legal Reform (ILR) Harold Kim has stated that “limiting litigation abuse is essential to ensuring the stability and economic recovery from COVID-19.”
Already, lawsuits related to COVID-19 have been filed across the country. Legal Newsline recently reported on plaintiff attorneys looking to cash in on the pandemic. Litigation targets range from false advertising claims to medical malpractice lawsuits to securities lawsuits.
- A lawsuit has been filed against the maker of Purell hand sanitizer, alleging the claim that Purell sanitizer kills 99.9 percent of germs is misleading. Similar false advertising claims have been filed against drug manufacturers, and manufacturers of protective equipment could also be at risk.
- USA Today recently reported on lawsuits against cruise lines, colleges, and insurers.
- Employees, including some government employees and workers at essential businesses, are suing their employers arguing they were exposed to coronavirus.
- Businesses are seeing price gouging complaints from private parties and state attorneys general.
- Health care providers are suing their hospitals and clinics for failing to provide personal protective equipment. Patients are in turn suing their health care providers for medical malpractice.
- At least two securities lawsuits have already been filed by shareholders about stocks decreasing in value due to COVID-19.
- Legal Newsline has reported that grocery stores and pharmacies could be the next target of litigation.
- Consumers are filing lawsuits when they are unable to obtain refunds for services no longer offered due to the pandemic, such as gym memberships, tuition payments, and events.
- Thousands of banks have stated hesitations about participating in the federal government’s small business loan programs due to concerns about taking on legal responsibility for preventing fraudulent claims.
- The National Law Journal predicts False Claims Act litigation will likely follow the passage of the federal CARES Act stimulus package. (WCJC successfully advocated for the repeal of Wisconsin’s False Claims Act in 2015 and successfully helped remove provisions in Gov. Evers’ 2019-21 state budget that would have revived false claims lawsuits.)
ILR President Kim said this early litigation is just “the tip of the iceberg.”
States including New York, Kentucky and Michigan have already taken bipartisan action to protect health care workers fighting COVID-19 on the frontlines from frivolous lawsuits. Protecting providers from liability will allow those treating COVID-19 patients to act quickly and effectively without fear of facing expensive lawsuits when they are acting in good faith. Liability protections will give providers flexibility to treat more patients and treat them in innovative ways during this crisis.
WCJC is looking at enacting similar provisions in Wisconsin, as well as working with Wisconsin Manufacturers & Commerce on provisions to protect manufacturers of personal protective equipment and employers who are working to keep their essential employees safe.
Some liability reforms to protect businesses during COVID-19 have already passed at the federal level. The Families First Coronavirus Response Act (FFCRA) included liability protection for N95 face mask manufacturers. After passage of the bill 3M said it will almost double production of the masks to make 2 billion this year.
ATRA Releases 2019-20 Judicial Hellholes Report
The American Tort Reform Association recently released its 2019-20 Judicial Hellholes report. The annual report highlights some of the worst-ranking civil justice climates in the country.
Topping the report this year are Philadelphia, California and New York City. Wisconsin neighbors Illinois and Minnesota also made the top ten list, at #5 and #9, respectively.
The report also takes a closer look at three civil justice topics growing across the country: the expansion of public nuisance law and locality litigation, increased employment liability and reduction of arbitration, and growth of privacy and security litigation.
Wisconsin was lauded in last year’s Judicial Hellholes report for positive civil justice reforms, including 2017 Wisconsin Act 235 and the Wisconsin Supreme Court’s Mayo decision. Act 235 – authored by Republican Sens. Tom Tiffany (Hazelhurst) & Dave Craig (Big Bend) and Reps. Mark Born (Beaver Dam) & John Nygren (Marinette) – included landmark reforms to Wisconsin’s rules of procedure regarding discovery and class actions, as well as a nationally recognized, groundbreaking requirement that litigation funding deals be disclosed in civil cases.
ILR Names Top 10 Most Ridiculous Lawsuits of 2019
The U.S. Chamber Institute for Legal Reform recently released its list of Most Ridiculous Lawsuits of 2019. Number one this year was a lawsuit against Blistex, alleging that the packaging of their lip balm prevented the plaintiff from accessing the lip balm left at the bottom of the tube. Also making the top ten this year were silly lawsuits over food labels, the TV show Dexter, the video game Fortnite, and an online review of an animal hospital.
Federal Appeals Court Rules on ACA Individual Mandate
The federal Fifth Circuit Court of Appeals ruled on Dec. 18, 2019, that the Affordable Care Act’s (ACA) individual mandate is unconstitutional. However, the court remanded the case back to the federal district court in Texas to decide how much of the rest of the ACA is unconstitutional.
In December 2018, the district court ruled the entirety of the ACA unconstitutional because it found the unconstitutional individual mandate was “essential” to the ACA. Congress set the tax penalty at zero dollars, yet left in place the ACA’s individual mandate in the federal tax reform bill in December 2017. 18 other states, led by Texas, argued that the remaining mandate, without an active tax penalty, violates the Commerce Clause of the U.S. Constitution, and Congress does not have the constitutional authority to compel citizens to purchase health insurance. (Wisconsin initially led the lawsuit, but Attorney General Josh Kaul removed the state from the lawsuit earlier this year.)
While the appeals court agreed with the district court that the individual mandate is unconstitutional, it declined to strike down the entirety of the law. Instead, the court directed the district court to determine which other specific ACA provisions are “inseverable from the individual mandate.” The appeals court ruling was 2-1, with judges appointed by President George W. Bush and President Donald Trump in favor, and a judge appointed by President Jimmy Carter dissenting.
It is expected that the case will ultimately be appealed to the U.S. Supreme Court, but likely not until after 2020.
PFAS Update: AG Holds Listening Session in Marinette, Foam Bill Passes Committee
The Wisconsin Legislature and state agencies are continuing to address PFAS chemicals. Recently, Wisconsin Attorney General Josh Kaul held a listening session on PFAS in Marinette. Meanwhile, an Assembly Committee has passed a bill to address PFAS in firefighting foams.
PFAS (per- and polyfluoroalkyl substances) are man-made chemicals found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. The most extensively studied PFAS compounds are PFOA and PFOS, which have been phased out of domestic manufacturing over the past decade. Competing studies debate whether or not these chemicals have negative health effects and, if they do, at what level they are harmful.
AG Listening Session
AG Kaul travelled to Marinette for two public listening sessions on Dec. 18.
In the Marinette area, Tyco and parent company Johnson Controls International began investigating PFAS in groundwater from its PFAS-containing firefighting foams in 2017. The Wisconsin Department of Natural Resources (DNR) referred Tyco to the Department of Justice (DOJ) for civil prosecution in June 2019, alleging Johnson Controls failed to report the contamination when it first detected PFAS in 2013.
Johnson Controls/Tyco are currently working with DNR on developing a full remediation plan, but the company has already set aside $140 million to address the contamination, installed treatment systems, began removing PFAS in groundwater, and provided bottled water and treatment systems to affected residents.
At the listening session on Dec. 18, Kaul said he couldn’t comment on the ongoing Tyco investigation but noted that DOJ takes environmental cases like these very seriously. The AG focused the listening session on hearing from the public how PFAS contamination in the area has impacted them.
Wisconsin Legislation
The Assembly Committee on Environment voted on Dec. 11 to recommend passage of AB 323, which would prohibit the use of firefighting foams that contain intentionally added PFAS in training, unless the testing facility has appropriate containment and treatment measures. DNR would determine containment and treatment measures by rule. The Assembly Committee on Environment held a public hearing on the bill on Sept. 3.
The Senate Committee on Natural Resources & Energy has also scheduled an executive session to vote on the bill on Jan. 8.
Authored by Rep. John Nygren (R-Marinette) & Sen. Rob Cowles (R-Green Bay), the bill passed the committee on a bipartisan 8-1 vote. Rep. Gary Hebl (D-Sun Prairie) voted no, arguing the legislation does not go far enough to address PFAS.
Supporters of the bill include American Chemistry Council, American Petroleum Institute, Wisconsin Manufacturers & Commerce, Wisconsin Paper Council, and Wisconsin Rural Water Association.
Meanwhile, Wisconsin Democrats have introduced a separate bill that would circumvent rulemaking processes and require DNR to establish and enforce PFAS standards by rule for drinking water, groundwater, surface water, air, solid waste, beds of navigable waters, and soil and sediment if DNR deems it harmful to human health or the environment. SB 302/AB 321, also known as the “CLEAR Act,” has not yet received a hearing.
Looking ahead, Assembly Speaker Robin Vos (R-Rochester) told the Wheeler Report in December that bills from the Speaker’s Task Force on Water Quality will be announced in January. This bill package could include measures to address PFAS chemicals.
Continue reading about PFAS regulation in Wisconsin.
WCJC Submits Comments on PFAS Scope Statements
The Wisconsin Department of Natural Resources (DNR) held a preliminary public comment period in November seeking feedback on three scope statements that would regulate PFAS chemicals at the state level. Scope statements are the first step in the Wisconsin rulemaking process.
PFAS Background
PFAS (per- and polyfluoroalkyl substances) are man-made chemicals found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. The most extensively studied PFAS compounds are PFOA and PFOS, which have been phased out of domestic manufacturing over the past decade. Competing studies debate whether or not these chemicals have negative health effects and, if they do, at what level they are harmful.
Gov. Tony Evers approved the three scope statements on PFAS in August. The scope statements would:
- Adopt groundwater standards. (SS 090-19). Under this scope statement, DNR would likely promulgate the Department of Health Services’s (DHS) recommended standards of 20 ppt combined for PFOA and PFOS and a 2 ppt preventive action limit. This rule would apply to all regulated facilities that may impact groundwater.
- Adopt surface water quality standards for PFAS. (SS 091-19). Under the scope statement, DNR could also change Wisconsin Pollution Discharge Elimination System (WPDES) permit implementation procedures related to PFAS chemicals, including additional monitoring and new effluent limitations. Currently, DNR can address PFAS discharges in WPDES permits on a case-by-case basis. The proposed rule would set a uniform standard and procedures.
- Adopt maximum contaminant levels (MCLs) for drinking water. (SS 089-19). MCLs for drinking water would mostly affect municipal water systems.
Public Hearing & Comments
DNR held a public hearing on Nov. 12 to address all three scope statements. Testifying in support of the scope statements were Clean Wisconsin, Wisconsin Conservation Voters, and an individual from De Pere, Wis.
MEG Wastewater, an organization of owners and operators of wastewater facilities in Wisconsin, provided comments in support of the advisory committee to DNR as the department continues with the rulemaking process. MEG noted their support for regulations based on credible science. MEG is part of the Municipal Water Coalition, an alliance of groups representing both municipal water and wastewater utilities.
Also providing comments was Scott Manley, Executive Vice President of Wisconsin Manufacturers & Commerce, on behalf of the Water Quality Coalition, a coalition of industries, job creators, and taxpayers in the state, as well as scientists and legal scholars, which supports balanced, science-based environmental standards to regulate PFAS. WCJC is a participating member of the Water Quality Coalition.
The Water Quality Coalition recommended that DNR narrow the scope statements to regulate PFOA and PFOS only. As drafted, the scope statements provide DNR broad discretion to regulate any of the over 4,000 PFAS compounds in a single rulemaking process. Not all of these PFAS compounds are health hazards, and some are even federally approved for use by the Food & Drug Administration.
According to the Water Quality Coalition, the scope statements lack the required detail and specificity to comply with the administrative rulemaking requirements in Ch. 227. Furthermore, proposed rules seeking to regulate such a wide variety of compounds would make it unworkable for the public and Legislature to provide meaningful feedback on the practical application of the regulations.
WCJC individually provided written testimony outlining the liability issues associated with setting too strict of standards for such a broad array of chemicals. If DNR regulates under the scope statements as written, Wisconsin businesses, utilities, hospitals, and farmers could face millions of dollars in cleanup costs, legal enforcement action by state agencies, and lawsuits by plaintiff attorneys for the existence of potentially thousands of chemicals that have not yet been shown by federal or state agencies to cause negative human health effects. Setting any enforcement standards creates legal evidence of a significant public health threat, giving plaintiff attorneys the opportunity to successfully sue industry based on these standards without proving any actual occurrence of illness. Read WCJC’s full written comments.
Read all written comments here.
Next Steps
After the comment period, the DNR Board can approve the scope statements. DNR plans to ask the board for approval in January 2020. Once the board approves the scope statements, DNR can begin work on drafting the rules and economic impact analyses before sending the rule to the Legislature for review. At the Nov. 12 hearing, DNR estimated rules would be finalized and enforceable by 2022.
There will be multiple opportunities for public comment during the rulemaking process. WCJC and the Water Quality Coalition intend to continue advocating for balanced, science-based regulation of PFAS chemicals in Wisconsin.
Public Hearing Scheduled for Proposed Wisconsin PFAS Regulations
On Oct. 23, the Wisconsin Department of Natural Resources (DNR) Board voted to approve a preliminary public hearing and comment period on three scope statements proposing to regulate PFAS chemicals. The hearing on all three scope statements will occur on Nov. 12, 2019 at 1:00 p.m. Written comments are due Nov. 19.
PFAS (per- and polyfluoroalkyl substances) are man-made chemicals that are found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. PFAS are present in the bloodstream of 98 percent of Americans. Competing studies debate whether or not PFAS have negative health effects and, if they do, at what level they are harmful.
WCJC is part of the Water Quality Coalition, a coalition of industries, job creators, and taxpayers in the state, as well as scientists and legal scholars, which supports balanced, science-based environmental standards to regulate PFAS. Unnecessarily strict standards would be costly to Wisconsin industry and would open up the state for frivolous lawsuits and potentially millions of dollars in liability.
Gov. Tony Evers had approved the scope statements on PFAS in August. The scope statements would:
- Adopt groundwater standards. (SS 090-19). Under this scope statement, DNR would promulgate the Department of Health Services’s (DHS) recommended standards of 20 ppt combined for PFOA and PFOS and a 2 ppt preventive action limit. This rule would apply to all regulated facilities that may impact groundwater.
- Adopt surface water quality standards for PFAS. (SS 091-19). Under the scope statement, DNR could also change Wisconsin Pollution Discharge Elimination System (WPDES) permit implementation procedures related to PFAS chemicals, including additional monitoring and new effluent limitations. Currently, DNR can address PFAS discharges in WPDES permits on a case-by-case basis. The proposed rule would set a uniform standard and procedures.
- Adopt maximum contaminant levels (MCLs) for drinking water. (SS 089-19). MCLs for drinking water would mostly affect municipal water systems.
Co-chair of the Legislature’s Joint Committee for Review of Administrative Rules (JCRAR) Sen. Stephen Nass (R-Whitewater) requested DNR hold the preliminary public hearing and comment period on each of the scope statements, pursuant to JCRAR’s authority under Wisconsin’s rulemaking statutes (Wis. Stat. Ch. 227). The JCRAR co-chairs’ authority to request preliminary public input was established in the Regulations from the Executive in Need of Scrutiny (REINS) Act passed in 2017.
With the DNR Board’s approval, the agency is now authorized to hold the preliminary public hearing and comment period on the scope statements. After the comment period, the DNR Board can approve the scope statements. DNR plans to ask the board for approval in January 2020. Once the board approves the scope statements, DNR can begin work on drafting the rules and economic impact analyses.
The rules will not be enforceable until DNR drafts final rules, and the governor and legislature approve them.