If At First You Don’t Succeed: Wisconsin Supreme Court Approves Caps In Med Mal Cases

Life is about many things, and one of the most important is perseverance. Walt Disney went bankrupt several times before he built Disneyland. He passed on a cartoonist named Charles Schultz, who eventually did alright drawing a group of kids and a dog named Snoopy. Thomas Edison found 1,000 ways not to invent a lightbulb. Michael Jordan lost almost 300 games, missed 9,000 shots, and failed to make 26 game-winning baskets. We count them among the greatest of their fields. They all kept shooting.

So did the Wisconsin legislature. In 1975, it established a system of guaranteed payments and controlled liabilities in cases involving medical malpractice. Health care providers were required to maintain $1 million/$3 million in liability insurance and pay annual assessments to a compensation fund. The fund guaranteed payment of all settlements and judgments for damages—economic or noneconomic—exceeding the coverage amount. In 1986, the legislature capped noneconomic damages at $1 million. In 1995, it reduced the noneconomic cap to $350,000. In 2005, the Wisconsin Supreme Court held that although statutory caps can be constitutional, the $350,000 cap violated the equal protection guarantees of the state constitution. Ferdon ex. rel Petrucelli v. Wis Patients Comp. Fund, 2005 WI 125 (a case we’ve previously reported). The legislature then upped the noneconomic cap to $750,000. That’s where things stood when a very serious injury dispute reached the courts.

Facts

In May 2011, Ascaris Mayo went to a hospital emergency room complaining of abdominal pain and a high fever. She was advised to consult her gynecologist because of her history of fibroids. The next day she went to another emergency room, where she was diagnosed with sepsis caused by an untreated infection. Many of her organs failed, and all four limbs were amputated due to dry gangrene. She brought suit and was awarded almost $9 million in economic damages and $15 million in noneconomic damages. The fund moved to reduce the noneconomic award consistent with the cap. The trial court ruled that as applied, the cap violated state equal protection and due process guarantees. The court of appeals ruled that the cap was unconstitutional on its face. A divided Supreme Court overruled Ferdon and concluded that the cap was constitutional on its face and as applied. Mayo v. Wis. Injured Pat. and Fam. Comp. Fund, 2018 WI 78, 2018 Wisc. LEXIS 306.

Analysis

In large part, the case turned on the proper standard to be applied to constitutional law challenges. Generally, a statute can be challenged as unconstitutional “on its face” or “as applied” to the particular case. Under the first, a challenger must show that the law is unenforceable under all circumstances. Under the second, the law must be unenforceable as to the particular challenger because of an actual violation of his or her rights. Moreover, there are two different levels of scrutiny. If a fundamental right if involved—like the right to vote or to be free of discrimination—a court will strictly scrutinize a statute to determine if it serves a compelling state interest. If no fundamental right is involved, the court merely determines whether there was a rational basis for the statute.

The 2005 ruling in Ferdon created a third level of scrutiny: “rational basis with teeth.” The problem was that the court gave no guidance on how to apply the test. Consequently, it allowed judges to apply their own policy choices as to whether caps should be imposed, and if so, to what degree. That allowed the Ferdon majority to ignore the guaranteed-payment feature of the law in deciding that the $350,000 cap was unconstitutional. So the Mayo Court scrapped the test and overruled Ferdon.

Mayo argued that the cap created two differently treated classes: one fully compensated despite the noneconomic cap amount and one not so. With Ferdon gone and no fundamental right to noneconomic damages involved, the court examined Mayo’s allegations under the rational relationship test. Under the test, the existence of some inequality was permissible if there is any reasonable basis to justify the classifications. The standard is met if the classifications are: (1) substantially distinct, (2) germane to the purpose of the law, (3) open to additional members, (4) equally subject to the applicable law, and (5) different enough to suggest legislation for the public good. The majority found that the amended law met all of the criteria.

It also found that the legislative goals of the statute supported the damage caps. The goals were to lower health care costs and insurance rates, encourage doctors to practice in Wisconsin, reduce the expensive practice of “defensive” medicine, make economic damages more predictable in order to control premium adjustments, and to protect the fund. Under the rational-basis review standard, whether those goals were actually met did not matter. The Court found no reason to hold the statue as unconstitutional on its face.

As for Mayo’s “as applied” challenge, the Court found that it failed the test. Mayo was not treated differently from others in her class. Moreover, the cap as applied was neither arbitrary nor unrelated to a legitimate government interest. Whether the fund had sufficient assets to pay the judgment was irrelevant. The legislature had made a policy decision. Given that the legislature had a constitutional right to abolish malpractice claims altogether, its choice to set a cap was permissible.

The two dissenters—part of the Ferdon majority—did not mention the rejection of the “rational basis with teeth” test. But the dissent argued that none of the legislative goals have worked out in fact. The fund has remained solvent, doctors have not fled, they will not be personally liable for judgments, and there is no proven correlation between awards and insurance hikes. But that point is weak, for circumstances can change. The legislature had the right to make policy choices that paid dividends in the future if not in the present.

Finally, the dissenters believed that Ferdon should remain the law because it was the right law. But in fact, Ferdon wasn’t. The Court had overstepped its role by inserting individual justices’ public policy views into the process.

Learning Point: Mayo points to the need to be watchful. Since Ferdon, the Wisconsin Supreme Court has undergone a change in personnel that has shifted judicial philosophy more center. This has allowed a return to the proper application of a longstanding constitutional test.

But even more, a threshold question exists as to whether the imposition of a cap can ever be subject to an equal protection/due process challenge. The problem is that the class of people affected by the cap could just as easily not be affected by a cap. The reason is simple: noneconomic damages are inherently subjective, and no one has a right to them in any particular amount. The jury awarded Mayo noneconomic damages of $15 million. It could have awarded her $750,000. There is no minimum required award of noneconomic damages. A jury has discretion in awarding damages, and in a personal injury case, the courts are reluctant to interfere. So it is difficult to argue that a cap on noneconomic damages creates a class of disadvantaged persons.

The Wisconsin result is a good one, and there will probably be more opportunities in other states to sustain caps on economic damages. Keep shooting.