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: National Efforts
U.S. Chamber Institute for Legal Reform Poll: Bipartisan Majority of Americans Support COVID-19 Liability Protections
A bipartisan majority of Americans support protecting businesses from lawsuits related to coronavirus, according to a U.S. Chamber Institute for Legal Reform (ILR) poll released earlier this month.
“The global pandemic has caused tremendous economic harm to our nation. As employers plan to reopen safely and sustainably, the last thing they need is to face a financially crippling lawsuit despite their best effort to comply with public health guidelines,” said ILR President Harold Kim.
61 percent of poll respondents generally support coronavirus lawsuit protections. Support for liability protections grew when respondents were asked about specific sectors. Provided businesses are following the latest health guidelines, 84 percent support protecting essential businesses like grocery stores and pharmacies. 82 percent support protecting restaurants, stores and other businesses from lawsuits by people claiming to have contracted coronavirus there. 74 percent support protecting companies who ask sick employees to stay home. 75 percent support lawsuit protections for hand sanitizer and cleaning supply companies. Majorities of Republicans, Democrats, and Independents all expressed their support for these policies.
Wisconsin Civil Justice Council and a coalition of businesses are asking the Wisconsin Legislature to adopt these types of reforms to protect Wisconsin businesses as the state begins to reopen.
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.
U.S. Chamber Releases Research on Third Party Litigation Financing
Recent research from the U.S. Chamber Institute for Legal Reform (ILR) looks at how the third party litigation financing industry has over the last decade grown exponentially, fueling abusive litigation. According to the ILR paper, third party litigation financing is now at least a $10 billion industry. These investors in lawsuits encourage filing of frivolous cases and often drive up the cost of litigation and settlements, as well as presenting a variety of ethics issues.
The ILR policy paper recommends several approaches lawmakers can take to address third party litigation financing, including some that have already been enacted in Wisconsin.
Wisconsin was the first state to enact third party litigation financing transparency requirements in 2017 Act 235, authored by Sens. Tom Tiffany (R-Minocqua) & David Craig (R-Big Bend) and Reps. Mark Born (R-Beaver Dam) & John Nygren (R-Marinette). Former Wisconsin Gov. Scott Walker signed the historic legislation into law just over two years ago. The law provides that, unless stipulated or otherwise ordered by the court, a party shall provide to the other parties any agreement under which any person, other than an attorney permitted to charge a contingent fee for representing a party, has a right to receive compensation that is contingent on and sourced from any proceeds of the civil action, by settlement, judgement, or otherwise.
Other policies recommended by ILR to address third party litigation financing include banning fee sharing arrangements between lawyers and non-lawyers and banning third party litigation financing in class actions.
Wisconsin Lawsuit Climate Ranked 13th in U.S.
The U.S. Chamber Institute for Legal Reform recently ranked Wisconsin as the 13th best litigation climate in the country.
The high ranking in fairness and reasonableness of the state’s liability system comes after the state legislature passed significant tort reforms in 2017 Act 235, led by Rep. Mark Born (R-Beaver Dam), Rep. John Nygren (R-Marinette), Sen. Dave Craig (R-Big Bend) and Sen. Tom Tiffany (R-Hazelhurst). The legislation included common-sense reforms such as how to handle electronic documents and to address the high transactional cost of litigation. Act 235 also made Wisconsin the first state in the nation to require third party litigation funding transparency.
In the 2019 Lawsuit Climate Survey, Wisconsin jumped seven spots from 20th to the 13th best ranked liability system in the country. Wisconsin beat neighboring states Minnesota (20th), Michigan (33rd), and Illinois (50th). After passing the class action reforms in Act 235, Wisconsin also achieved a top-ten ranking in treatment of class action suits and mass consolidation suits in the 2019 Survey. Wisconsin was ranked 27th in this category in 2017.
Institute for Legal Reform Issues Reports on Rise of Public Nuisance Lawsuits
The U.S. Chamber Institute for Legal Reform (ILR) recently issued two reports analyzing the rise of public nuisance lawsuits by municipalities. The papers address the history, issues, and potential solutions to the rise of these types of lawsuits, which seek to hold private businesses liable for broad issues including lead paint, contaminants such as PFAS and PCBs, opioids, and even the global issue of climate change. Plaintiffs are using an ever-broader “public nuisance” theory to support their claims.
The first ILR report, Mitigating Municipality Litigation, focuses on opioid, climate change, and data privacy lawsuits. First, the report analyzes how municipal lawsuits have increased in recent decades. The report points to the “big tobacco” settlements of the late 1990s as an example of the ineffectiveness of municipal lawsuits. Municipalities are incentivized by the prospect of large settlements like the tobacco settlement and what are perceived as low risk contingency fee arrangements with private plaintiff attorneys. However, settlement money does often not actually go to recovering legitimate municipal costs or helping actual injured victims.
The report describes further issues with these types of lawsuits. With thousands of local entities able to sue individually, municipal litigation deprives defendants of certainty and finality and can prolong settlements, increasing costs and delaying implementation of remediation programs.
Furthermore, municipalities who use outside plaintiff attorneys reduce public accountability. As the report states, contingency fee arrangements with outside counsel “reward aggressive, duplicative litigation that forces large, rapid settlements” to the benefit of plaintiff attorneys, not municipalities, victims, or defendants.
Finally, the report discusses several ways states can disincentivize municipalities from filing these types of lawsuits and gives examples of states with statutes already in place. Solutions include:
- Restrict municipalities’ authority to sue. The report notes that a now repealed Wisconsin statute once prevented municipalities from bringing public nuisance lawsuits.
- Require attorney general approval of municipal lawsuits.
- Codify the municipal cost recovery rule.
- Restrict municipalities’ ability to hire outside counsel, cap contingency fees, and impose other transparency requirements.
- Ban municipalities from filing lawsuits against certain industries.
- Enter into state level settlements that waive municipal claims.
- Narrow the definition of a “public nuisance” claim and limit other causes of action.
- Shorten the time period in which municipalities may file complaints. The report highlights Wisconsin’s statute of repose in its products liability act.
- Bar recovery when the plaintiff also contributes to the nuisance.
- Require plaintiffs to prove specific damages.
- Restrict courts from hearing certain types of claims.
The second ILR report, The Misuse of Public Nuisance Actions, analyzes how public nuisance theory has expanded beyond its traditional scope and argues legislatures, not courts, should decide how to remediate large public crises like global warming, the opioid crisis, and lead paint.
First, the report overviews the history of the public nuisance tort and discusses cases that have created precedent for public nuisance claims by municipalities. The discussion notes a Wisconsin court of appeals lead paint decision City of Milwaukee v. NL Industries. The appeals court in this case ruled against lead paint manufacturers and in favor of the city’s public nuisance argument, holding that evidence attributing paint to specific manufacturers was unnecessary because use of the paint and advertising for the paint in the city was a community-wide public health nuisance.
The report then discusses emerging public nuisance litigation in the areas of mortgage lending, PCBs, and opioid manufacturing and how municipalities are circumventing traditional limitations on the public nuisance tort to give standing to their claims.
Overall, the report argues that municipal public nuisance lawsuits are an inappropriate venue to create public policy. Instead of courts, the legislature and agencies should determine public policy solutions to widespread issues like environmental contamination and the opioid crisis.
The American Tort Reform Association also issued a report on public nuisance lawsuits earlier this year.
Connecticut Court Dismisses Local Governments’ Lawsuit Against Opioid Manufacturers
In January 2019, a Connecticut state court dismissed one of many lawsuits against opioid manufacturers because the local governments did not have standing to sue. Specifically, the court held the cities were indirectly harmed by the opioid epidemic, and therefore did not have standing to sue.
Local governments, with the aid of contingency fee private attorneys, have brought numerous lawsuits like the Connecticut case against drug manufacturers throughout the country, including in Wisconsin. To date, there are roughly 1,000 lawsuits against opioid manufacturers filed by local governments. A recent report from the American Tort Reform Association outlined the rise in recent years of private plaintiff attorneys bringing these types of lawsuits against businesses on behalf of local governments.
Citing a 1992 U.S. Supreme Court decision, Holmes v. Securities Investor Protection Corp., the Connecticut court held that it must consider three factors to determine whether plaintiffs have direct enough cause to sue:
- How indirect is the injury;
- How complicated is it to decide who gets what money;
- Whether directly injured parties could sue instead.
The court then analyzed the local governments’ lawsuit against the many drug companies and determined that they had not met the three factors.
First, the court determined that alleged injury to the local governments caused by opioid addiction was too attenuated and any injury to the local governments was too indirect.
Second, the court held that deciding who should get the money would require the court to engage in “rank speculation,” and noted that each city is completely different in terms of how the opioid epidemic has affected their respective services.
Third, the court held that there are clearly other directly injured parties, those who became addicted to prescription drugs who could, and have, sued the drug companies. The court said the lawsuit by the cities is not about the victims, but instead is about obtaining money for local government services.
Based on these factors, the court dismissed the lawsuit brought by the local governments. The court decision is City of New Haven v. Purdue Pharma, L.P., et al.
ATRA Report Highlights Rise of Public Nuisance Lawsuits
A recent report from the American Tort Reform Association (ATRA) outlines the rise in recent years of private plaintiff attorneys bringing lawsuits against businesses on behalf of local governments. Local litigation seeks to hold private businesses liable for broad issues including lead paint, contaminants such as PFAS and PCBs, opioids, and even the global issue of climate change. Plaintiffs are using vague “public nuisance” theory to support their claims.
For example, in the climate change cases, municipalities are using state and federal common laws of public nuisance to seek damages from fossil fuel companies. The localities argue fossil fuel companies should pay for infrastructure protecting against rising sea levels and temperatures because their carbon emissions contribute to global warming. Despite losses at the federal circuit court level, activist local governments are continuing to pursue climate change cases for political purposes, claiming they are drawing attention to the issue that Congress and the executive branch have “failed” to act upon.
In the opioid cases, plaintiff localities are accusing pharmaceutical companies of downplaying risks and illegally touting benefits of opioid products to medical professional prescribers, which plaintiffs claim led to the “public nuisance” of the opioid crisis. Over 1,000 opioid lawsuits across 40 states are ongoing. Many local lawsuits have been consolidated into federal court in Ohio, while others are being pursued in state courts. The local lawsuits are in addition to – and undermining – over 40 state attorneys general who are investigating and suing at the state level.
A recent decision in California state courts has further opened the door to broad public nuisance litigation. Plaintiff localities in the case argue the defendants’ promotion of then-legal lead paint created the current “public nuisance” of lead paint in homes. A California appeals court ordered the three defendants to pay a $409 million abatement fund to find and remediate residential lead paint. Although the defendants stopped promoting and selling lead paint once science began to show its harmful effects and the plaintiffs failed to show the defendants actually caused any real harm, the three defendant companies were held individually liable for the statewide issue that involved may additional actors, including homeowners, landlords, and even the state of California itself.
The ATRA report argues that not only do duplicative local lawsuits violate what in many states are constitutional powers given to the attorney general, they also cost local and state government more money in legal fees that could go to real policy solutions. ATRA suggests solutions including transparency laws for local governments retaining outside counsel and giving state attorneys general author to intervene in local lawsuits in order to curb costly and ineffective local litigation.
Federal District Court Strikes Down ACA Mandate
A federal district court in Texas has ruled that the Affordable Care Act’s (ACA) individual mandate is unconstitutional. The court further found that, because the individual mandate is “essential” to the ACA, the remaining provisions of the law are also invalid.
Congress zeroed out the tax penalty appropriation, yet left in place the ACA’s individual mandate, in the federal tax reform bill in December 2017. Wisconsin, along with 18 other states, has led the lawsuit arguing 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.
The district court did not place an immediate injunction on enforcement of the law, so there will be no immediate impact to 2019 coverage under the ACA. It is expected that the case will be appealed eventually to the U.S. Supreme Court.
2018-19 ATRA Judicial Hellholes Report Highlights Wis. Accomplishments
The American Tort Reform Association recently released its 2018-19 Judicial Hellholes report. While the report’s focus is to recognize some of the worst-ranking civil justice climates in the country, the report also highlights several “Points of Light,” including civil justice reform accomplishments in Wisconsin over the past year.
The report recognizes the Wisconsin Supreme Court’s decision to uphold the constitutionality of a $750,000 limit on noneconomic damages in medical malpractice cases (Mayo v. Wisconsin Injured Patients and Families Compensation Fund, 2018 WI 78). WCJC had filed an amicus brief in the case, successfully arguing that the liability limit is constitutional.
The report also highlights civil justice reforms in AB 773 (signed into law as 2017 Wisconsin Act 235). Act 235 enacted several e-discovery and class action reforms to lower the costs of litigation for businesses, as well as groundbreaking provisions requiring transparency in third-party litigation funding.