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LWDN Quick Flash ~ Jun 2011

Major Tort Reform in Tennessee

Summary of Tennessee Civil Justice Act of 2011
Enacted June 16, 2011

This Quick Flash will summarize major tort reform and other pro-defense laws enacted in Tennessee.  On June 16, 2011, Governor Bill Haslam signed into law the “Tennessee Civil Justice Act of 2011” (copy attached).  
 
The tort reform provisions are very pro-business.  The most significant changes are a $750,000 cap for noneconomic damages (physical impairment, pain and suffering, loss of consortium, loss of enjoyment of life, etc.), and a cap on punitive damages (2 times the amount of compensatory damages, or $500,000, whichever is greater).
 
The Tennessee Civil Justice Act enacts several changes to the substantive, remedial, and procedural law of Tennessee.   It amends the Tennessee Medical Malpractice Act, the Tennessee Consumer Protection Act, and the Tennessee Product Liability Act.
 
The caps on noneconomic and punitive damages, and other statutory changes, will take effect for actions which accrue on or after October 1, 2011.

I. Cap on Noneconomic Damages (Section 10)
“Noneconomic Damages” are defined as damages for “physical and emotional pain; suffering; inconvenience; physical impairment; disfigurement; mental anguish; emotional distress; loss of society, companionship, and consortium; injury to reputation; humiliation; noneconomic effects of disability, including loss of enjoyment of normal activities, benefits and pleasures of life and loss of mental or physical health, well-being or bodily functions; and all other nonpecuniary losses of any kind or nature.”

“Economic Damages” are defined as damages for “objectively verifiable pecuniary damages arising from medical expenses and medical care, rehabilitation services, mental health treatment, custodial care, loss of earnings and earning capacity, loss of income, burial costs, loss of use of property, repair or replacement of property, obtaining substitute domestic services, loss of employment, loss of business or employment opportunities, and other objectively verifiable monetary losses.”
$750,000 Cap on Noneconomic Damages – noneconomic damages are capped at $750,000 per each “injured plaintiff.”

$1,000,000 Cap for “Catastrophic Loss or Injury” – the cap is increased to $1,000,000 for a “catastrophic loss/injury.”  This is defined as (1) a spinal cord injury resulting in paraplegia or quadriplegia; (2) amputation of two hands, two feet, or one of each; (3) third degree burns over 40% or more of the body, or third degree burns up to 40% or more of the face; or (4) wrongful death of the parent leaving a surviving minor child of a deceased parent with custody or visitation rights.

Cap Includes Derivative Claims for Loss of Consortium – the caps apply to any derivative claim for noneconomic damages.  This specifically includes claims of a spouse or children for loss of consortium.   A claim for noneconomic damages awarded for an injured plaintiff cannot exceed the aggregate total of the cap.

Comparative Fault – the caps applies to multiple defendants who may be found at fault under comparative fault.  The total liability of co-defendants at fault to an injured plaintiff cannot exceed the aggregate total of the cap.

Exceptions to the $750,000/$1,000,000 cap:
1. Intentional Tort – the defendant intended to inflict serious physical injury, and the plaintiff was in fact injured.

2. Intentional Falsification/Destruction/Concealment of Records Containing Material Evidence of Defendant’s Liability – the defendant intentionally falsified, destroyed, or concealed records containing material evidence to evade liability.  However, that this exception does not apply to (1) the good faith withholding of records pursuant to privileges and other laws of discovery, (2) the management of records in the normal course of business in compliance with the defendant’s document retention policy, or (3) the management of records in the normal course of business in compliance with state or federal regulations.

3. Intoxicated Defendant – the defendant was under the influence of alcohol, drugs, or other intoxicant (does not apply to intoxication by prescription drugs in accordance with a prescription).
$750,000/$1,000,000 Damages Caps Not Disclosed to the Jury.  The court will apply the cap after the jury returns its verdict.

 
Trier of Fact is Required to Make Specific Findings Regarding Damages – if liability is found, the trier of fact is required to make separate findings to specify the amount of damages for each claimant:
  
Past Damages
1. medical and other costs of health care;
2. other economic damages; and
3. noneconomic damages.

Future Damages – including periods over which they accrue, on an annual basis
1. medical and other costs of health care;
2. other economic damages; and
3. noneconomic damages.

II. Cap On Punitive Damages (Section 10)
Punitive damages are limited to the greater of two (2) times the total amount of compensatory damages, or $500,000.

Exceptions to the Punitive Damages Cap:
1. Intentional Tort – the defendant intended to inflict serious physical injury, and the plaintiff was in fact injured.

2. Intentional Falsification/Destruction/Concealment of Records Containing Material Evidence of Defendant’s Liability – defendant intentionally falsified, destroyed, or concealed records containing material evidence to evade liability.  However, that this exception does not apply to (1) the good faith withholding of records pursuant to privileges and other laws of discovery, (2) to the management of records in the normal course of business in compliance with the defendant’s document retention policy, or (3) the management of records in the normal course of business in compliance with state or federal regulations.

3. Intoxicated Defendant – the defendant was under the influence of alcohol, drugs, or other intoxicant (does not apply to intoxication by prescription drugs in accordance with a prescription).
Punitive Damages Caps Not Disclosed to the Jury.  The court will apply the cap after the jury returns its verdict.

 
Safe Harbor from Punitive Damages
1. “Seller” of Product – the seller of a product other than manufacturer shall not be liable for punitive damages unless the seller (1) exercised substantial control over that aspect of the design, testing, manufacture, packaging or labeling of the product that caused the harm for which recovery of damages is sought; (2) the seller altered or modified the product and the alteration or modification was a substantial factor in causing the harm for which recovery of damages is sought; or (3) the seller had actual knowledge of the defective condition of the product at the time the seller supplied the product.

2. Drug or Medical Device Manufacturer – no liability for punitive damages if the drug or device was manufactured and labeled in accordance with federal Food And Drug Administration and federal regulations.

3. Compliance with Applicable Federal and State Regulations Setting Forth Specific Standards – a defendant will not be liable for punitive damages in any civil action if the defendant can show by a preponderance of the evidence that the defendant was in substantial compliance with applicable federal and state regulations setting forth specific standards applicable to the subject activity, and that the applicable regulations intended to protect a class of persons or entities that includes the plaintiff.

III. Tennessee Medical Malpractice Act − Definitions  of “Health Care Provider” and
“Health Care Liability Action” (Sections 8 and 9)

The Tennessee Medical Malpractice Act is amended to provide a definition of “health care provider,” as well as a “health care liability action.”  These definitions are intended to eliminate uncertainty about the applicability of the Tennessee Medical Malpractice Act, and to make the definitions apply as broadly as possible. 
Also, Tennessee Code Annotated is amended throughout to change the words “medical malpractice” to “health care liability,” and “medical malpractice action” to “health care liability action.”

IV. Tennessee Consumer Protection Act (Section 14)
The Tennessee Consumer Protection Act (“TCPA”) is amended to restrict the allegedly “unfair or deceptive trade practices” to which it applies.  The following specifically amendments are made part of the TCPA:

1. Securities – the TCPA does not apply to the marketing or sale of a security as defined in the Tennessee Securities Act.
2. No Punitive Damages Allowed, Only Treble Damages – the TCPA permits treble damages, and punitive damages may not also be awarded.
3. TCPA Does Not Apply to Class Actions

V. Tennessee Product Liability Act − “Seller” of Product, Other than the Manufacturer, is No Longer Subject to Suit (Section 12)

The Tennessee Product Liability Act is amended to provide that no “product liability action” can be  maintained against any seller other than the manufacturer.  The following exceptions apply:
1. the seller exercised substantial control over the aspect of the design, testing, manufacture, packaging or labeling of the product that caused the alleged harm;

2. the seller altered or modified the product, and the alteration or modification was a substantial factor in causing the harm;

3. the seller gave an express warranty, as defined under the Uniform Commercial Code;

4. the manufacturer or distributor of the product is not subject to service of process in Tennessee, and service of process cannot be obtained under the long-arm statute; or

5. the manufacturer has been judicially declared insolvent.

Punitive Damages − the Tennessee Product Liability Act is further amended to provide that no manufacturer or seller, other than a manufacturer of a drug or device, can be liable for punitive damages if:

1. the product alleged to have caused the harm was designed, manufactured, packaged, labeled, sold, or represented in accordance with the terms of approval, license, or similar determination of a government agency; or the product was in compliance with applicable Tennessee or federal statutes, stand ards, rules, regulations, orders, or other action of government agencies relevant to  the alleged product risk, and the product was in compliance at the time it left the  control of the manufacturer or seller.

VI. Venue for Lawsuits against Out-of-State Business Entities (Sections 2, 3, 4, 5, and 6)

The Tennessee “transitory” venue statute (Tenn. Code Ann. § 20-4-101) is amended to restrict the venue where a lawsuit can be filed against a business entity.

Under the existing venue statutes, a business entity (corporation, limited liability company, partnership, etc.), whether a Tennessee entity or an out-of-state entity, can be sued (1) where the cause of action arose, or (2) where the defendant resides, or (3) where the defendant is “found.”
Under the amended venue statutes, a Tennessee business entity can only be sued in (1) the county where all or a substantial part of the events or omissions giving rise to the cause of action accrued, or (2) the county where the Tennessee business entity maintains its principal office.
Under the amended venue statutes, an out-of-state business entity can only be sued in (1) the county where all or a substantial part of the events or omissions giving rise to the cause of action accrued, (2) the county where the defendant’s registered agent for service of process is located; or (3) if the defendant does not maintain a registered agent within this state, the county where the person designated by statute as the defendant’s agent for service of process is located.

The amended venue statutes specify the venue in which both Tennessee and out-of-state business entities can be sued, and limit venue from a county where the defendant-entity  is merely “found.”

VII. Section 7 – Appeal Bond

The maximum amount of an appeal bond in a civil action is reduced from $75,000,000 to $25,000,000.  An appeal bond cannot exceed the lesser of $25,000,000 or 125% of the judgment amount.   The trial court is not permitted to include punitive damages in the judgment amount for determining the amount of the required bond.

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Tenn. Civil Justice Act of 2011.pdf39.16 KB