October 2018 Issue
By Caleb Talley | Photography by Jamison Mosley
Pending a ruling from the Arkansas Supreme Court, voters could see Issue 1 on their ballots in November. The ballot measure would cap attorney’s fees and damage awards, as well as give the legislature the power to adopt, amend or repeal rules regarding pleading, practice or procedure prescribed by the state Supreme Court.
The proposed amendment was introduced into the legislature in 2017 as Senate Joint Resolution 8, a bill sponsored by Sen. Missy Irvin and 67 other state lawmakers. It drew overwhelming support, passing the House by a margin of 66 to 33 and the Senate by 20 to 11, securing it a place on the 2018 election ballot.
Issue 1, if passed by a majority of voters, would limit the fee paid to attorneys if the claimant recovers money from a civil lawsuit, also known as a contingency fee, to one-third of the net amount recovered. The amendment does not define what net money recovered would mean, but it does require the state legislature to define it in legislation during the 2019 session. The Arkansas Legislature would also be given the authority to change the maximum percentage for contingency fees by a two-thirds vote (66.6 percent) in the future.
Issue 1 would also limit the punitive damages awards for claimants in lawsuits for personal injury, property damage or wrongful death to the greater of $500,000 or three times the amount of compensatory damages awarded. Punitive damages are damages meant to punish and deter wrongful conduct.
Non-economic damages awarded in lawsuits for personal injury, property damage or wrongful death would be limited to $500,000 for each claimant or for all beneficiaries. Non-economic damages, according to the amendment, are those that cannot be measured in money, which include pain and suffering, mental and emotional distress, loss of life or companionship, or the visible result of an injury.
If passed, Issue 1 would decrease the supermajority requirement from a two-thirds vote to a three-fifths vote (60 percent) for the state legislature to amend or repeal court rules regarding pleading, practice or procedure prescribed by the state Supreme Court. It would allow the legislature to amend the maximum contingency fee percentage allowed, increase the restrictions on punitive damages, but not decrease the restrictions and increase the restrictions on non-economic damages.
Leading the fight for Issue 1 is Arkansans for Jobs and Justice, a legislative question committee led by state Chamber of Commerce President Randy Zook and consulted by former Arkansas Attorney General Chief of Staff Carl Vogelpohl. The committee has raised more than $2.3 million and spent nearly half of that to get their message out to voters that Issue 1 is good for Arkansas.
And while Issue 1 was the product of a 2017 resolution, Vogelpohl, the committee’s campaign manager, sees its genesis in a 2003 effort to implement tort reform.
“I think it’s important that you start back in 2003,” he says. “An overwhelming majority of the Arkansas Legislature passed tort reform for the state in 2003. Over a series of court rulings, the Supreme Court said in order to have tort reform in Arkansas, you have to pass a Constitutional amendment… Issue 1 really is a continuation of that effort.”
In 2003, the Arkansas Legislature approved the Civil Justice Reform Act, a law that put a $1 million cap on punitive damages in civil suits, limited who could testify as an expert witness, limited evidence of medical costs and allowed defendants to reduce their liability by naming non-parties at fault.
In a series of rulings that followed, the Arkansas Supreme Court struck down the law’s major provisions, saying the Legislature had exceeded its authority and invaded the powers granted by the Constitution to the Supreme Court.
According to Vogelpohl, Arkansas has a problem when it comes to recruiting doctors and growing businesses. The nexus of those problems, he says, is the state’s legal environment. “When we look at the formula for what it takes to recruit doctors, to compete economically, Issue 1 is part of that formula,” he says. “It’s not the only piece, but it’s the only piece that’s on the ballot in November.”
Vogelpohl cites the recent decision by Arkansas Children’s Hospital to stop treating adults in its burn unit and UAMS shutting down its cardiac surgery program due to staffing issues as examples of the impact poor physician recruitment can have on the state.
“The best doctors in America can decide where they want to practice,” he says. “They have to start eliminating places based upon certain reasons. And a very easy way for them to eliminate Arkansas is to look at our state and go, ‘Well, I can have liability protection, living in the Mid-South, by going to Texas or Mississippi or Louisiana or Tennessee or Missouri.’”
But the other piece of the tort reform puzzle, he says, is the impact the measure could have on growing jobs in Arkansas. “Studies have shown that if you remove the liability burden on a state like Arkansas, it can generate up to 23,000 jobs,” Vogelpohl says. “Companies don’t want to locate where health care is bad for their employees. It goes to the overall community health aspect.”
And, he says, lawsuits are expensive for businesses, especially small businesses with smaller margins.
“If you have a meritless lawsuit in America, it costs money to defend it,” says Vogelpohl. “If you don’t respond to a demand letter, it’s at your peril. If you’re a small business owner, you have to turn around and hire an attorney to respond. And if you don’t, you do it at your peril. Well, that costs you real money.
“The National Federation of Independent Business – these are their statistics, not mine – says in America that 75 percent of small business owners worry about frivolous lawsuits,” he adds. “I’ve heard the back and forth on whether or not Issue 1 does or doesn’t stop frivolous lawsuits… It provides a way and a mechanism for those conversations to happen in the legislative body where I think it appropriately happens as opposed to through some other process.”
When it comes to access to justice, a common concern among those who oppose Issue 1, Vogelpohl says the measure keeps contingency fees low but not too low that they would prevent attorneys from taking a case.
“I bet you, in Arkansas today, there are Arkansans who are paying well over a third of their settlement in a contingency fee,” he says, going as far to compare some attorneys to payday lenders. “They say, ‘Well, we should be able to charge whatever we want.’
“I don’t know that the access to justice is harmed by a 33 percent contingency fee cap,” he adds. “Now, that’s 10 percent in Florida. That seems pretty restrictive. But there doesn’t seem to be a shortage of billboards advertising lawyers in Florida. So, access to justice seems to be, okay.”
As for granting the Legislature authority over the Supreme Court’s rulemaking processes, Vogelpohl points critics to the federal system. “Everything that the Supreme Court does for their rules have to be approved by Congress,” he says. “They can be approved, rejected, modified, amended. The Supreme Court continues to do exactly what they do. The Legislature has to actually enact a law through their process before you can make any changes.”
According to Vogelpohl, Issue 1 would not shield large corporations from lawsuits, a point of contention often raised when debating the measure.
“Issue 1 still allows victims to receive 100 percent of economic losses for lost wages, medical bills, loss of property,” he says. “It still provides non-economic damages; for a married couple that can be up to a million dollars of non-economic damages – $500,000 for each member of the couple. The punitive damages are $500,000, or three times compensatory.
“If we’re here to punish wrong doers, if a corporation needs to be punished, Issue 1 doesn’t prevent unlimited economic damages in cases of intentional misconduct,” Vogelpohl adds. “Nobody’s shielded from lawsuits. Bad actors will still be punished.”
As for cases of neglect, rather than intentional misconduct, Vogelpohl says it will be up to a judge and jury to decide, saying the rules could be changed is they’re not found adequate. He also warns of confusing the ability to sue with quality of care.
“Trial lawyers are not somehow the arbiters of quality,” he says. “I think that’s a real important distinction to make. We all want high quality care for our loved ones. We all want high quality of services and goods and safety… [Issue 1 opponents] want to make you believe that if Morris Bart is not on billboards, that somehow the world is less safe. But Morris Bart is not in charge of safety. Morris Bart doesn’t care what happens to your loved ones unless he can get money out of it.”
In September, Circuit Court Judge Mackie Pierce disqualified Issue 1 from the ballot, ruling the measure failed to meet the single-subject requirement. Defendants immediately appealed, and a final ruling is expected by mid-October.
“This was a decision that was always going to be made by the Supreme Court,” says Vogelpohl. “So, my hope is, just for clarity sake, that they let people vote. This is a legislative-referred initiative. Let the people vote.
“If you believe in tort reform, this is probably the time [to show it],” he adds. “And if you oppose it, this is also probably the moment. If voters don’t make a decision this year, we’ll continue to have this tortured conversation in Arkansas in the future.”
Arkansans for Jobs and Justice enjoy the support of large corporations such as Walmart and Tyson Foods, as well as powerful organizations like the Arkansas Hospital Association (AHA) and the Arkansas Medical Society. AHA has donated $500,000, according to current reports, to the committee. The Arkansas Medical Society has donated $261,178. Both Tyson and Walmart have contributed $150,000.
There are several groups of Arkansans taking the fight to Vogelpohl and the committee he represents. Among them is the Family Council Action Committee, the Little Rock-based conservative education and research organization known for its willingness to scrap in the public arena. It’s not often one finds them at odds with the Arkansas Chamber of Commerce.
Leading the Family Council in their efforts to persued voters of the dangers posed by Issue 1 is Jerry Cox, the organization’s founder and president. According to Cox, Issue 1 puts a price tag on human life and shields big businesses from being held accountable for wrongdoing.
“We are opposed to Issue 1 because it puts a price tag on human life,” he says. “And the way it does that is by shielding big corporations, corporate nursing homes, trucking companies and other big corporate interests from accountability through a lawsuit if they injure or kill someone out of their reckless behavior.”
Cox and the Family Council aren’t opposed to tort reform. But Issue 1, he says, goes well beyond that.
“We’ve said over and over again that there is good tort reform and there’s bad tort reform issue,” Cox says. “Issue 1 happens to be bad tort reform… We told them over and over again, this is not good tort reform. We supported other measures that we considered responsible and workable. But the powerful lobbyists and big corporate interests out there just bulldozed their way through the legislature.”
According to Cox, the Legislature could have addressed the issue of tort reform by instituting fines for frivolous lawsuits or creating measures that protect good doctors.
“In other states, they’ve passed laws that say if a doctor follows the recommended standard of care, that they can’t be held liable if something goes wrong,” he says. “Same thing with hospitals. If they’re administering drugs according to FDA protocols, even if they find out later on that that drug caused cancer or seizures or something like that, then they would be exempt.
“Those are examples of responsible tort reform,” Cox continues. “But what Issue 1 does is pretty much just carpet bombs the entire civil justice system. And that’s not the kind of tort reform we need.”
Cox, like Vogelpohl, points to 2003 as the genesis for Arkansas’ current tort reform movement. The Legislature’s move to enact tort reform legislation that included a $1 million cap on punitive damages in civil suits and limited who could testify as an expert witness came at the request of the Arkansas nursing home lobby following a massive judgement against a Mena nursing home.
The law was passed in response to a $78 million judgement against a Mena nursing home following the death of a woman due to malnutrition and alleged neglect. The Arkansas Supreme Court reduced the award to $26 million.
“We’re not new to the battle,” says Cox. “In 2003, the nursing homes went to the legislature and tried to get their own version of tort reform passed. The nursing homes were asking that certain things be excluded from evidence if they get sued when they injure or caused the death of an elderly person.
“One of the things they wanted to exclude was state inspection reports,” he adds. “They said the state inspection report is irrelevant to the fact that Mrs. Jones died in our nursing home. Well, I beg your pardon. I believe it is relevant, and that’s what they tried to get excluded.”
Issue 1, according to Cox, puts an arbitrary price tag on the elderly, as well as children and stay-at-home mothers. Because they have no income, he says, they have no economic value, and therefore fall under the non-economic cap of $500,000.
“What economic value is that child,” he asks. “A child has no income, so you can’t say, ‘Well, he was going to work for the next 60 years and make this much money,’ because you don’t know. When you start looking at what that child is worth under Issue 1, as opposed to what a wealthy businessman would be worth, that child is worth a whole lot less. And to us, that’s not fair.
“Stay-at-home moms do a tremendous amount of work,” Cox adds. “But sit down with a calculator and try to figure out how much that mom is worth. Well, she had no career so we don’t know. We don’t have a paycheck and paystub to look at. So once again, Issue 1 caps the only damages that her husband and her children can collect if somebody’s negligence causes her death.”
Cox and those like him who oppose Issue 1 fear the measure would greatly restrict the access to justice for those who can’t afford to pay attorneys out of pocket. Capping contingency fees, he says, would make it less likely for an attorney to take a complex or time-consuming case, regardless of merit.
“I believe Issue 1 takes away the poor man’s key to the courthouse,” Cox says. “That’s because a poor man can’t go out here and pay a retainer up front to a lawyer to handle his case. The only way a poor man is going to be able to get a lawyer is through a contingency fee.
“The one place a poor man ought to stand toe to toe with any of these big companies should be in court,” he adds, “Where no matter how big the company is, if they wrong the little man, the little man ought to be able to take them to court and obtain justice.”
He also dispels the belief that Issue 1, if passed, would open a window for more physicians to return to Arkansas. Using the Texas example, Cox says that more doctors were coming to the Lone Star State, per capita, before tort reform was passed. And the number of physicians there grew with the state’s population, not as a result of tort reform.
Cox also cites the decline in quality of care among Texas nursing homes as a negative side effect of tort reform legislation. According to Families for Better Care’s annual Nursing Home Report Card, Texas consistently ranks last and has received an ‘F’ since at least 2013. U.S. News & World Report put Texas dead last in nursing home quality, as well. Arkansas came in 19 spots higher.
The Family Council president also questions the economic prosperity promised by supporters of Issue 1, suggesting Arkansas might already be doing better than some neighboring states that have implemented similar legislation.
“Mississippi passed tort reform a few years ago,” says Cox. “Nobody talks about the booming economy in Mississippi. Nobody says we want to be just like them. Louisiana passed tort reform. As far as the economy goes, I think our economy is probably just as good or better than theirs is.”
Arkansas has experienced record low unemployment throughout much of 2017-18, he points out.
“We have the world’s largest retailer here,” Cox says. “If our litigation environment was terrible, then you wouldn’t have Walmart here. You wouldn’t have J.B. Hunt here. You wouldn’t have Tyson Foods here, Riceland Foods and all these big corporations. They would all move down to Texas if things were so much better down there.”
Cox admits that some reform in the state’s civil justice system is warranted, but he fears Issue 1 goes too far.
“Something does need to be done in that area to bring some balance to that judicial system,” he says. “But Issue 1 doesn’t do that. It creates an imbalance that goes the other way.”
The Family Council Action Committee has raised more than $150,000 in their campaign against Issue 1, adding to the more than $3.3 million raised in total by opposing committees. Attorneys and law firms make up the list of top donors, with the most coming from attorney Brad Hendricks ($603,737).
Paul Danielson was elected to his first term on the Arkansas Supreme Court in 2006, three years after the Court heard the Mena nursing home case. After 10 years on the bench, he retired back to his hometown of Booneville.
But now he’s back in the public eye, working to educate friends and neighbors on Issue 1. He believes the measure is complex and misleading, and perhaps even intentionally so.
“I’m encouraging everyone to get out there and continue to talk about it, educate people, because I think it’s important,” says Danielson. “It’s very confusing. One of the problems that I have with it is that it’s leading by calling it tort reform… One of the features is to take the rulemaking authority from the Arkansas Supreme Court and give it to the legislature. What most people don’t realize is that rule making is not limited to civil or personal injury actions.
“It will give the rulemaking authority in all areas of the law – civil, criminal, domestic probate – to the legislature,” he adds. “They will have the ultimate authority for rulemaking in all areas of the law. A lot of people don’t realize that. That’s why it’s misleading to call it tort reform. It’s literally judicial reform.”
A major sticking point for Danielson, a longtime jurist, is the assumed threat it poses to the separation of powers by granting authority rulemaking authority to the Arkansas Legislature.
“Once you eliminate the checks and balances, then you no longer have three, coequal branches of government,” he says. “Having served on the Arkansas Supreme Court, it would relegate it to nothing more than a state agency and the judiciary would be totally at the mercy of the legislature.
“I think of our government as a three-legged stool,” Danielson adds. “If you cut one of those legs off, it’s not likely to stand.”
According to the former associate justice, there are ways in which the Supreme Court can change rules of practice, pleading and procedure and the rule of evidence that does not involve handing the authority to lawmakers.
“A lawyer or lawyers could write to us and ask us to look at a rule change, or the public could say we think this rule should be looked at,” he says. “We would always refer them to the civil practice committee. That committee is appointed by the court; they’re very carefully selected, have experienced lawyers who are actually trying cases. They’re in the arena.”
There are rules and mechanisms already in place, he says, to address the concerns expressed by those who support Issue 1 – frivolous lawsuits, excessive verdicts and unreasonable contingency fees.
“If you have a frivolous lawsuit, we have a rule called Rule 11. There are sanctions against a lawyer who files a frivolous lawsuit… For excessive verdicts, we have a procedure called remittitur. If the court believes that the verdict is out of line with the evidence, the court can grant remittitur.”
In fact, he says, it was this process of remittitur that reduced the 2003 Mena nursing home verdict from $78 million to $26 million. “Legislators didn’t wait on that. They were so anxious to get the Civil Justice Reform Act passed,” he says.
“We have a committee on professional conduct, under the authority of the Arkansas Supreme Court, and that code prohibits excessive contingency fees,” Danielson says. “In other words, if someone is charging excessive fees, a complaint can be filed and they can be disciplined for it.
“And it’s not just limited to plaintiff’s lawyers like what they’re proposing in Issue 1,” he adds. “It’s all lawyers. I don’t think it’s fair that you limit what a plaintiff’s lawyer can charge, but not limit the defense lawyers.”
According to the retired Supreme Court justice, Arkansas doesn’t have a lawsuit problem. The state ranked 36th in the nation in lawsuit climate, according to the U.S. Chamber of Commerce’s Institute for Legal Reform. Neighboring tort reform states like Texas (39th), Mississippi (44th), Missouri (49th) and Louisiana (50th) fared worse.
Danielson also questions the motive of Issue 1 backers in regard to punitive damage caps. “The punitive damage cap is written by someone that doesn’t understand punitive damages,” he says. “They don’t understand what it’s for or what it’s about. It’s not intended to compensate. It’s not compensatory. It is to punish.”
Punitive damages, he says, are meant to modify the behavior of individuals or companies found negligent or causing intentional harm. Punitive damages have to vary by case, he says.
“A $500,000 verdict is not going to change the behavior of Exxon Mobil,” Danielson says, using the oil company as an example. “That $500,000 is chump change to them. It totally defeats the purpose of punitive damages. It’s totally inconsistent to say we’re going to have a fixed amount of money, because you don’t know the assets of the defendant.
“You can have a small business, and $500,000 would certainly change their behavior,” he adds. “But Exxon Mobil is not going to change for that. They’re more likely to have their bean counters say it’s cheaper to pay the damages than it is to fix the problem.”
Danielson queries the desire by Issue 1 supporters to attract businesses looking to relocate to a state with a weakened justice system.
“If someone is bringing their business to our state because we are not going to hold them accountable for any wrongdoing they might commit, do we really want them here?”
Editor’s note: Issue 1 supporters Lt. Gov. Tim Griffin, Sen. Missy Irvin and Rep. Bobby Ballinger were asked to comment on the measure but failed to do so.