Wisconsin’s Tort Reform Four Years Later: A Proven Victory for Manufacturers

WDC Journal Edition: Spring 2015
By: Allen C. Schlinsog, Jr., Reinhart Boerner Van Deuren s.c.

The November 2010 elections in Wisconsin gave the Republican Party control of the governor’s office as well as both houses of the state legislature for the first time since the 1969 legislative session. Until 2008, when conservative Justice Michael J. Gableman was elected, the Wisconsin Supreme Court similarly had long been controlled by a liberal majority.

Responding to the historic budget deficits and propelling forward a “pro-business” platform, the Republican governor and legislature moved quickly after gaining political control to pass several new laws that sparked well-publicized and unprecedented protests, recall elections, and public dysfunction of the sharply-divided Wisconsin Supreme Court (including an alleged physical altercation between justices). As part of his pro-business agenda, within the first month of taking office, Wisconsin Governor Scott Walker signed into law the most sweeping changes to product liability law Wisconsin has ever seen.

Although there had been many past opportunities to modernize our product liability law, Wisconsin’s liberal Supreme Court and Democratic-controlled governor’s office refused to do so. The Wisconsin Supreme Court created a market-share liability cause of action and refused to i1mpose any Daubert-like protections against unreliable expert opinions. Wisconsin had no general statute of repose; and plaintiffs could establish product defects by the consumer contemplation test as opposed to the reasonable alternative design test a majority of states applied. Fast dockets combined with the many plaintiff-friendly product liability laws made Wisconsin a risky and unfavorable venue for manufacturers.

That all changed in January 2011 with the Omnibus Tort Reform Act (2011 Wisconsin Act 2). It changed these and many additional aspects of Wisconsin tort law, including limiting punitive damages, adjusting comparative negligence, limiting distributor liability, rewarding manufacturers’ compliance with standards, and penalizing plaintiffs’ use of intoxicating substances. These new laws now allow manufacturers to better manage the risk of doing business in Wisconsin by limiting liability and reducing defense costs.

This Article2 examines how courts have treated Act 2, and analyzes Act 2’s impact on Wisconsin litigation. Four years after its passage, Act 2 remains good law. The changes to the law will lead to better results for companies defending Wisconsin suits, and already appear to be reducing the number of lawsuits filed in the state.

I. Act 2 Dramatically Changed Wisconsin Law.

Market-Share Liability Limited

The legislature directly attacked the Wisconsin Supreme Court’s decision in Thomas v. Mallett,3 in which the court had created a new risk contribution theory of recovery (also known as market-share liability). In a sharp departure from traditional product liability law, the risk contribution theory allowed plaintiffs to bring a claim by merely alleging that a general type of product, not the specific manufacturer’s product, caused an injury.

Manufacturers could be jointly and severally liable simply by making that type of product, even absent evidence that the claimant used the product they made.

Act 2 now generally requires plaintiffs to prove that the defendant produced the specific product alleged to have caused the injury. Even so, Act 2 does allow plaintiffs to utilize the risk contribution theory under very limited circumstances, such as if the claimant cannot identify the specific product that caused the injuries and no other recovery is available. But before liability may be apportioned, the claimant must prove: (1) the injury could be caused only by a manufactured product chemically identical to the product that allegedly caused the injury; (2) the manufacturer’s product is chemically and physically identical to the product that caused the injury; and (3) the defendant manufactured its products when and where the injury occurred.

Daubert Analysis Adopted to Limit Unreliable Expert Testimony

The legislature also directly addressed the judicial and executive branches’ historical refusal to adopt stricter controls on the admission of expert testimony by finally aligning Wisconsin’s expert testimony rules with the federal rules. Wisconsin, long following the Walstad relevancy rule, allowed expert testimony if it generally assisted the judge or jury in understanding the evidence, leaving trial judges only a very limited gatekeeping function. By contrast, the federal rule, following the Daubert reliability analysis, called for a more robust gatekeeping function, requiring judges to exclude all testimony not deemed relevant and reliable.

In 2004, former Democratic Governor Jim Doyle vetoed legislation that would have adopted the Daubertrule. The Wisconsin Supreme Court also refused to adopt the Daubert standard on several occasions.4Wisconsin courts essentially reasoned that if the expert opinions were unreliable, it was the duty of opposing counsel to demonstrate that during cross-examination; and, it was the province of the jury—not the court—to determine how much weight to give the opinions.

Now, finally under a Daubert regime with Act 2’s passage, Wisconsin judges play a more active gatekeeping role, being required to independently determine whether expert opinions are reliable before allowing them to be presented to the jury. If manufacturers are successful in disqualifying experts through Daubert challenges, many more cases may be subject to summary judgment dismissal.

The Reasonable Alternative Design Test Adopted

Act 2 also adopted the reasonable alternative design test for Wisconsin. The Wisconsin Supreme Court had required Wisconsin courts to determine whether a product was defective by applying the consumer contemplation test of the Restatement (Second) of Torts.5 The consumer contemplation test was easy for plaintiffs to satisfy. A product would be defective—and strict liability could be imposed—where a product was in a condition not contemplated by the ultimate user and dangerous to an extent beyond that which would be contemplated by the ordinary consumer.6 As long as a plaintiff could testify that she did not appreciate the hazard at issue, defendants were not able to obtain summary judgment on the ground that the product was not defective. In the end, Wisconsin was one of less than 10 states that followed this test.

Following the lead of the Restatement (Third) of Torts, Wisconsin now joins the vast majority of other states in adopting the reasonable alternative design test for design defect and inadequate instructions or warnings claims. Act 2 now requires claimants to prove a product is defective by presenting a reasonable alternative design or a reasonable instruction or warning that would have reduced or avoided any foreseeable risks of harm. Plaintiffs also must prove that the omission of such alternative design or warning rendered the product not reasonably safe. Coupled with the new controls on expert testimony, manufacturers now should be able to weed out unsupportable defect allegations short of trial.

New Statute of Repose

Act 2 created a 15-year statute of repose on product liability claims. A manufacturer is not liable to a claimant for damages if the alleged defective product was manufactured 15 years or more before the claim accrues, unless the manufacturer specifically represents that the product will last for more than 15 years.

Distributor Liability Limited

Innocent sellers and distributors of allegedly defective products also are shielded from liability if they received the products in sealed containers and if they had no reasonable opportunity to inspect or test them. Instead, plaintiffs must first attempt to sue the product manufacturer.

Punitive Damages Capped

The new law limited damages available to plaintiffs who ultimately are successful. Punitive damages now are capped at either $200,000 or double the amount of compensatory damages, whichever is higher.

Apportioning Fault to Reduce Manufacturers’ Liability

Act 2 modified Wisconsin’s comparative negligence rules by permitting a manufacturer to reduce its liability for damages based on the claimant’s percentage of responsibility for the injury resulting from misuse, alteration, or modification of the allegedly defective product. This is also true for strict liability claims. There, if a claimant is found to be more responsible for the injury than the defect in the product, recovery is barred.

New Statutory Defenses to Manufacturer Liability

Act 2 codified several additional defenses that previously were not uniformly applied. First, if a manufacturer can prove that the plaintiff was intoxicated or under the influence of a controlled substance at the time of the injury, it is entitled to a rebuttable presumption that the intoxication or drug use was the cause of the injury. Second, a manufacturer is entitled to a rebuttable presumption that the product was not defective based on a showing that, at the time of sale, the product complied in material respects with applicable federal or state standards, conditions, or specifications. Third, an action must be dismissed if the manufacturer can demonstrate that the claimed damage was caused by an inherent characteristic of the product.

II. Act 2’s Impact on Wisconsin Litigation

Slightly more than four years have now passed since Act 2 was signed into law. Although many expected to see several decisions interpreting Act 2 by now, few exist. The courts that have analyzed Act 2 have upheld and applied the law.

Many recent courts applying Act 2 have focused on the Daubert standard for admissibility of expert testimony under Wis. Stat. § 907.02(1).7 Wisconsin Stat. § 895.044 also has generated a number of cases interpreting the mandatory monetary sanctions for frivolous claims or filings imposed by Act 2.8 Courts have declined to apply Act 2 only in instances in which an action was commenced prior to the initial applicability of the Act on February 1, 2011. For example, courts have declined to apply the § 907.02(1) Daubert standard to expert witnesses testifying in chapter 980 discharge petition trials because the discharge petitions did not “commence” “actions” or “special proceedings”; instead, these petitions were considered part of the underlying chapter 980 commitments that were commenced several years prior to Act 2’s initial applicability.9 Past challenges to Act 2 have focused on the constitutionality of the Act’s retroactive application to appeals that were pending when Act 2 took effect.10

We are beginning to see the chilling effect that such tort reform legislation can have on new litigation. Our review of the courts’ published statistics reveals that the number of civil cases filed in state court has dropped significantly. The number of civil state court cases filed since 2005 peaked in 2010, just prior to passage of Act 2. Since then, the number of civil state court cases has fallen by nearly 40%. In 2013, alone, the number of state court civil filings fell by 17%, and the number of product liability cases fell by 43%. Although we will need to evaluate future years to determine whether this is a permanent change, there is now a clear incentive for plaintiffs to file their cases elsewhere. Our research is detailed in the chart of civil cases below.11

15WDCChart.png

It remains to be seen whether these changes will stay Wisconsin law for long. Wisconsin’s population is evenly divided between Republicans and Democrats. The Wisconsin Supreme Court currently exhibits a slim 4-3 conservative majority, which is predicted to view Act 2 favorably. But because justices are elected in Wisconsin and because these elections have become highly politicized (a recent Supreme Court election resulted in a state-wide recount and was decided by a margin of just 7,006 votes), this balance could change. The governor’s office and both houses of the legislature currently are controlled by the Republican party that passed Act 2, but with the expectation of hard fought future elections, control of the executive and legislative branches also could change in the coming years.

Conclusion

As designed, Wisconsin’s new tort reform legislation is a significant benefit to manufacturers doing business here, and it makes the state a more attractive home for companies considering a Wisconsin presence. Eliminating most marketshare liability, preventing junk science and unreliable expert opinions from being heard by juries, requiring evidence of a reasonable alternative design, and imposing limits on punitive damages all allow manufacturers to limit their liability and better manage the risk of doing business in Wisconsin. More cases now should be subject to dismissal or summary judgment under the new law.

But the defense bar should not take these changes for granted. Given the highly political environment enveloping all branches of Wisconsin government, it is not safe for the defense bar or their manufacturer clients to assume that this tort reform legislation will remain unchallenged. Manufacturers must protect these gains and be watchful for future attacks by the plaintiffs’ bar and any retreat by the Wisconsin Legislature and Supreme Court.

Allen Schlinsog is Chair of the Litigation Department and Product Liability & Safety Practice Group at Reinhart Boerner Van Deuren s.c. He practices out of Reinhart’s Wisconsin offices, and is admitted to the bars of the States of Wisconsin, Illinois, and Arizona.

References

1 Special thanks to Katherine M. O’Malley and Reinhart Boerner’s Product Liability Group for assisting with this article.
2 Much of this Article and the general discussion of the legislative changes is re-printed from an article published by this author for the American Bar Association in 2012, and is re-printed with permission of both the ABA and the author. See Allen C. Schlinsog Jr., Wisconsin’s Tort Reform: A Victory for Manufacturers (ABA 2012), available at: http://apps.americanbar.org/litigation/committees/products/articles/spring2012-wisconsin-tort-reform.html.
3 2005 WI 129, 285 Wis. 2d 236, 701 N.W.2d 523.
4 See State v. Fischer , 2010 WI 6, ¶ 7, 322 Wis. 2d 265, 778 N.W.2d 629; State v. Plude , 2008 WI 58, ¶ 64 n.21, 310 Wis. 2d 28, 750 N.W.2d 42 (Ziegler, J., concurring).
5 See Horst v. Deere , 2009 WI 75, ¶ 68, 319 Wis. 2d 147, 769 N.W.2d 536.
6 See Green v. Smith & Nephew AHP, Inc. , 2001 WI 109, ¶40, 245 Wis. 2d 772, 629 N.W.2d 727.
7 See Rupert v. Tandias , No. 2013AP1705, 2014 WL 223732 (Wis. Ct. App. Jan. 22, 2014) (unpublished) (holding that the Daubert standard for admissibility of expert testimony applies to medical standard-of-care testimony in a medical malpractice case); State v. Giese , 2014 WI App 92, 356 Wis. 2d 796, 854 N.W.2d 687 (finding an expert’s opinion about retrograde extrapolation of blood alcohol content admissible under Wis. Stat. § 907.02 because it was the product of reliable principles and methods and based upon sufficient facts and data); State v. Alvarez , No. 2014AP753-CR, 2015 WL 158899 (Wis. Ct. App. Jan. 14, 2015) (publication decision pending) (holding that the arresting officer’s testimony was admissible under the Daubert standard because (1) it was related to whether the defendant intended to deliver THC and (2) the officer’s training and experience qualified him to give an expert opinion); Nationwide Agribusiness Ins. Co. v. August Winter & Sons, Inc. , No. 2014AP488, 2014 WL 4920799 (Wis. Ct. App. Oct. 2, 2014) (unpublished) (holding that exclusion of an expert witness’ testimony was proper because it was not based upon “sufficient facts”); In re Termination of Parental Rights to Erica W. , No. 2013AP422, 2014 WL 223755 (Wis. Ct. App. Jan. 22, 2014) (unpublished) (allowing a speech pathologist to give an expert opinion on a parent’s ability to meet a child’s needs based upon her personal knowledge and experiences, noting that Wis. Stat. § 907.02(1) mirrors Federal Rule of Evidence 702).
8 See Conrad v. Crooks , No. 2013AP2085, 2014 WL 1058996

(Wis. Ct. App. Mar. 20, 2014) (unpublished) (imposing mandatory sanctions under Wis. Stat. § 895.044(2)(b) after plaintiff failed to withdraw a frivolous complaint against an attorney and the attorney’s malpractice carriers after plaintiff had been served with safe harbor letters); Conrad v. Batz , No. 2013AP1367, 2014 WL 1316623 (Wis. Ct. App. Apr. 3, 2014) (unpublished) (holding that, regardless of whether a suit had “commenced,” plaintiff was “using” the suit to leverage money from defendants, and awarding defendants actual costs of the action, including attorneys’ fees, because plaintiff did not withdraw her frivolous complaint within twenty-one days after defendant moved for damages); Neri v. Barber , No. 2013AP713, 2014 WL 958864 (Wis. Ct. App. Mar. 13, 2014) (unpublished) (dismissing a claim and imposing sanctions upon a plaintiff that commenced and failed to withdraw a frivolous claim for damages against insurance companies and defense attorneys after a federal copyright suit).

9 See, e.g. , In re Commitment of Alger , 2015 WI 3, ___ Wis. 2d ___, 858 N.W.2d 346.

10 See, e.g. , Gibson v. Am. Cyanamid Co ., 760 F.3d 600 (7th Cir. 2014) (holding that Wis. Stat. § 895.046 could not be retroactively applied in light of the Wisconsin Constitution’s guarantee of Due Process when Act 2 was enacted during the pendency of plaintiff’s appeal of products liability claims that were based upon “risk contribution” theory).
11 Figures for 2014 are not yet available.