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June 11, 2012 Articles

Wisconsin's Tort Reform: A Victory for Manufacturers

By Allen C. Schlinsog Jr.

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 a pro-business platform, the Republican governor and legislature moved quickly after gaining political control, passing 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 agenda, within the first month of taking office, Wisconsin Governor Scott Walker signed into law the most sweeping changes to products liability law Wisconsin has ever seen.

Although there had been many past opportunities to modernize Wisconsin's products liability law, Wisconsin's liberal supreme court and Democratic-controlled governor's office refused to do so. In the past several years, the Wisconsin Supreme Court created a market-share liability cause of action and refused to impose 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 that a majority of states now apply. Fast dockets combined with the many plaintiff-friendly products liability laws made Wisconsin a risky and unfavorable venue for manufacturers.

That all changed in January 2011 with the Omnibus Tort Reform Act (OTRA). It changed these and many additional aspects of Wisconsin products liability 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 will allow manufacturers to better manage the risk of doing business in Wisconsin by limiting liability and reducing defense costs.

It remains to be seen whether these changes will be Wisconsin law for long. Wisconsin's population is evenly divided between Republicans and Democrats, and the state is critical to both parties in the next presidential election. The Wisconsin Supreme Court currently exhibits a slim 4–3 conservative majority, which is predicted to view OTRA favorably. But, because justices are elected in Wisconsin and because these elections have become highly politicized (the last supreme court election resulted in a statewide recount and was decided by a margin of just 7,006 votes), this balance could change in April 2013 when one of the conservative justices stands for reelection. The governor's office and both houses of the legislature currently are controlled by the Republican party that passed OTRA (the senate by only one seat following the subsequent recall of two Republican senators), but with threatened efforts to recall Governor Walker and the expectation of hard-fought future elections, control of the executive and legislative branches also could change in the coming years.

Because the supreme court and legislature might attempt to reel back this tort reform in the future, the defense bar and its manufacturer-clients must diligently monitor these attempts and do everything possible to protect these reforms. Many of these advances and their favorable effects on manufacturers are discussed below.

Market-Share Liability Limited
The legislature directly attacked the Wisconsin Supreme Court's decision in Thomas v. Mallett, 2005 WI 129, 285 Wis. 2d 236, 701 N.W.2d 523 (Wis. 2005), 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 products 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.

OTRA now generally requires plaintiffs to prove that the defendant produced the specific product alleged to have caused the injury. Even so, OTRA does allow plaintiffs to use 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 that (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.

The legislature imposed two additional significant limitations. The plaintiff must name as defendants the manufacturers who collectively made at least 80 percent of all products sold in Wisconsin during the relevant period. In addition, a manufacturer may not be liable if more than 25 years have passed between the date it last manufactured the product and the date the claimant's cause of action accrued.

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, calls 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 adopted the Daubert rule. The Wisconsin Supreme Court also refused to adopt the Daubert standard on several occasions. 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). Wisconsin courts essentially reasoned that if the 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 OTRA's passage, Wisconsin judges will play a more active gatekeeping role, being required to determine independently 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.

Reasonable Alternative Design Test Adopted
OTRA 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. See Horst v. Deere, 2009 WI 75, ¶ 68, 319 Wis. 2d 147, 769 N.W.2d 536 (Wis. 2009). 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. Green v. Smith & Nephew AHP, Inc., 2001 WI 109, ¶ 40, 245 Wis. 2d 772, 629 N.W.2d 727 (Wis. 2001). As long as a plaintiff could testify that he or 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 fewer 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. OTRA 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. The plaintiff 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
OTRA creates a 15-year statute of repose on products 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 limits 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
OTRA modifies 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
OTRA codifies 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.

As designed, Wisconsin's new tort reform legislation is a significant benefit to manufacturers doing business there, and it makes the state a more attractive home for companies considering a Wisconsin presence. Eliminating most market-share 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.

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.

Keywords: litigation, products liability, Wisconsin

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