Update on South Carolina Tort Reform, Punitive Damages Caps, Etc.

I have previously blogged about tort reform efforts in the South Carolina General Assembly this year.  (See prior posts here and here for context).  This issue has been consuming a great deal of my time in the last couple of months, and it seemed to be an appropriate time to provide an update.

As you may recall, there was an effort brewing to legislatively overturn Branham v. Ford Motor Co.  Some members of the Legislature viewed the case as judicial activism and a movement away from the comments to Restatement (Second) of Torts § 402A, which have been codified at S.C. Code § 15-73-30 as the legislative intent of South Carolina's Defective Products Act .  The first effort to overturn the case came in the form of a "renewal" of sorts of South Carolina's Defective Products Act.  Basically, the amendment to the tort reform bill was to strike the prior act (S.C. Code §§ 15-73-10, 20, and 30), and then renew it in identical form as S.C. Code §§ 15-73-11, 21, and 31.  The rationale behind this amendment was that by renewing the statute, the Legislature would re-affirm that South Carolina follows the Restatement (Second) of Torts, and not the Restatement (Third) (as suggested by the court in Branham).

After the initial amendment to renew the language of the Defective Products Act, the focus shifted.  Instead of renewing the language, the effort shifted toward a dialogue about adopting the Restatement (Third) of Torts as South Carolina's products liability law.  Therefore, over the last couple of weeks, I have spent a substantial amount of time drafting papers on what the court did in Branham, options for compromise, distinctions between the Restatement (Second) and Restatement (Third), and what other states have done with regard to adopting either of them. 

In short, my research revealed that although there are some worthwhile provisions of the Restatement (Third) of Torts, this is not something (in my opinion) that South Carolina should do "on the fly," by amendment, and toward the end of a legislative session.  If we are going to talk about substantial changes to the products liability law in South Carolina, this blogger's opinion is that it should take the form of a separate bill and should involve debate and input from members of the bar who practice in this area.  Adopting the Restatement (Third) would change South Carolina's products liability law overnight.  As a lifelong South Carolinian, I can say (with pride) that we do not do anything very quickly.  Adopting the Restatement (Third) should not be an exception based on the differences between it and current South Carolina law.  I welcome your comments on this issue.

After spending yesterday at the Legislature with my colleague Gray Culbreath, President of the South Carolina Defense Trial Attorneys' Association, we learned that the effort to overturn Branham no longer appears to be a focus of the tort reform bill.  Instead, the focus is on capping punitive damages, and there is no language to adopt the Restatement (Third) or to overturn Branham.  The most current form of the bill, as given second reading by the Senate yesterday evening, can be found at the following link:

http://www.scstatehouse.gov/sess119_2011-2012/prever/3375_20110531.htm

My understanding is that the provisions relating to the capping of punitive damages are based in large part on a Florida statute, with some variations.  Because I have been focused on the Branham issue, I have not fully analyzed the punitive damages provisions.  However, a quick review reveals that the bill provides for bifurcation of trials where punitive damages are at issue and a cap on punitive damages of the greater of three times the amount of compensatory damages or $500,000.  However, there are some exceptions in the bill that either increase this cap or remove it altogether, based on certain conduct.   

There is an article in The State today about the Senate's debate and the current status.  You can find it here, and cut and pasted below.

Senate caps lawsuit awards

By JOHN O’CONNOR -  joconnor@thestate.com

The South Carolina Senate agreed to limit lawsuit awards Tuesday, ending years of debate about whether to make the state legal system more business-friendly.

The bill would create a tiered system of damages based upon the degree of negligence or criminal behavior involved. Most lawsuits would cap punitive damages at $500,000, or three times actual costs, whichever is greater.

But that cap rises to $2 million, or four times actual damages, under several circumstances, including if an injury resulted because of an unreasonable profit-based decision or if the person or business that caused the injury was subject to a felony conviction.

The cap is lifted entirely if the person or business that caused the injury is convicted of a felony, intended to harm or was under the influence of drugs and alcohol.

The vote knocks out a key issue pushed by Senate Republican leadership, Gov. Nikki Haley and business interests in the session’s final week. The bill heads back to the House, which approved a $350,000 cap, or three times actual damages, with no exemptions earlier this year.

Business groups noted the caps are still among the highest in the Southeast, but they supported the compromise.

“It’s a decent day’s work,” said Rick Scott, president of the South Carolina Trucking Association. “This puts us close to being competitive; … it is a move forward.”

Attorneys said despite debating the need for years, the bill addressed a problem which did not exist.

“We still do not believe there is a need to put caps on punitive damages,” said Mark Joye with the South Carolina Association for Justice.

The bill has churned in the Senate for weeks as others issues, such as the budget, took precedence and those who opposed the caps sought to avoid a vote. But Haley and the state Republican Party dialed up the pressure Tuesday, with the governor insisting on the House version of the bill and telling lawmakers she would include their vote on her end-of-session report cards.

Lawmakers huddled all day, but it took a late afternoon five-minute recess that stretched more than three hours for the two sides to finally parse the bill’s language. Business lobbyists huddled near the House chamber poring over the latest revision, while lobbyists for trial lawyers did the same thing across the lobby.

Senators shuttled back and forth between the two groups with the others’ thoughts.

The bill now heads back for the House to agree or disagree with the Senate version. In a letter to Senators Tuesday, Haley said she supports the House version of the bill. If the House insists on its version, House and Senate lawmakers will have to work out a compromise.

“We got as good a bill as we can under the circumstances,” said Sen. Gerald Malloy, D-Darlington and an opponent of the caps. “We need to lean on the Senate to try to maintain the Senate position.

Reach O’Connor at (803) 771-8358

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