By David Marburger
Libel suits are about to become far less risky and far less common for the press in Ohio. The Ohio Supreme Court ruled 6-1 on Dec. 7 that Ohio's tort reform laws apply to libel, a decision that dramatically reduces the incentive for seasoned lawyers to take on libel cases representing people who claim they have been defamed.
A tort is a civil wrong. Negligence in a car accident is a tort. Medical malpractice is a tort. Libel is a tort. During the 1990s, led by Republicans and insurance companies, a wave of criticism of big jury verdicts against companies and hospitals in injury suits led to "tort reform."
Ohio's legislature adopted laws that limit how much a jury can award for an injured person's pain and suffering, called noneconomic damages, limit how much a jury can award against a company or hospital in punitive damages, and erect obstacles to sustaining large jury awards for pain and suffering and punitive damages on appeal.
In 1999, the Ohio Supreme Court ruled that the newly-adopted tort reform laws violated Ohio's constitution. Five years later, in 2004, the legislature adopted modified versions, and those laws have withstood constitutional challenges so far.
Since 2004, the tort reform laws routinely applied to cases where a defendant's negligence or medical malpractice caused physical injury to the person suing—the plaintiff.
The Ohio Supreme Court's Dec. 7 decision applied the laws to libel for the first time. In that case, nurse Ann Wayt sued Affinity Medical Center near Canton for defamation. The medical center had fired her, and Wayt said that she was fired because she had been active in organizing a nurses’ union at the center. The center said in a report to a state agency that it fired Wayt for neglecting patients.
After Wayt could not land another full-time nursing job, she sued the medical center for libel. At trial, the jury awarded her $800,000 in damages for injury to her reputation and humiliation, and $750,000 in punitive damages.
The medical center then demanded that the trial court apply the tort reform laws to limit the jury's award. The trial court ruled that the tort reform laws did not apply to libel, and the court of appeals agreed.
But, in an opinion by Justice Patrick Fisher, the state's highest court reversed, holding that the tort reform laws apply to libel. The court addressed only the statutory cap on compensatory damages—injury to reputation and humiliation—not the statutory cap on punitive damages. That was because the medical center did not properly present the punitive damage issue to the court.
The crux of the tort reform laws as they apply to libel:
Caps on damages for injury to reputation, humiliation: The maximum award for injury to reputation and humiliation—called noneconomic loss—is $350,000, but only if the defamed person also proves damages for actual economic loss. Examples of actual economic loss: where the libel caused the defamed person to lose employment or lose business customers. If the defamed person has no actual economic loss, the maximum awardable for injury to reputation and humiliation is $250,000.
Caps on punitive damages: The maximum allowed for punitive damages is 2 x the award of compensatory damages. Compensatory damages would be the damages for injury to reputation, humiliation, and any actual economic damages, such as lost business customers or lost employment. A defendant business that employs fewer than 100 full-time employees enjoys an added limit on punitive damages.
With or without tort reform, juries are allowed to award an amount covering the defamed person's attorneys' fees as punitive damages. Under tort reform, an award of attorneys' fees is not included when applying statutory maximum for punitive damages.
No automatic employer liability for punitive damage liability for egregious conduct of a reporter or editor:
Even under the First Amendment, the norm has been that, if a reporter or editor published with the particularly egregious conduct—publishing a known falsehood, for example—the news organization was responsible for that conduct automatically by virtue of its role as the employer. So, the news organization was automatically liable for punitive damages if the employee's bad conduct warranted punitive damages.
Under tort reform, the news organization is no longer automatically liable for the conduct of a journalist that warrants punitive damages. The news organization is liable for the journalist's punitive-damage liability only if the plaintiff proves that the news organization knowingly okayed the journalist's bad-faith conduct, participated in it, or endorsed it afterward.
Hiding information from the jury: The tort reform laws bar the court, witnesses, litigants, and counsel from letting the jury know that there is any limit on the amount of punitive damages that the jury may award.
2-stage trial: The trial court must divide a trial into two stages if a litigant asks for a two-stage trial. Defendants typically want a two-stage trial, because it tends to make it easier to guard against large overall damage awards.
In the first stage, the jury would decide whether the defendant is liable for libel, and therefore liable for compensatory damages. If the jury decides that the defendant is liable, and awards compensatory damages, then the trial would go to its second stage—whether the defendant is liable for punitive damages.
Easier to challenge award for injury to reputation on appeal: Without tort reform, an appellate court usually must defer to the amount that the jury chose to award a defamed person for injury to reputation and humiliation. Under tort reform, the appellate court is not supposed to defer to the jury's judgment about how much money to award for those noneconomic damages.
Applying tort reform to libel will drive away seasoned lawyers from taking on libel suits against the press. Without tort reform, good lawyers have had to overcome a formidable defense motion for summary judgment—where the defense argues that the trial court should decide the case without trial because First Amendment or common law protections of speech prevent the plaintiff from winning. But good lawyers knew that they had a reasonable chance of scoring a multimillion-dollar verdict if they could get the case to a jury by beating a defense motion for summary judgment. Juries in libel cases tend to punish publishers for what they tend to see as an intentional wrong: That damaging story did not appear in the paper by accident.
Although First Amendment and common law protections of speech would make it hard to sustain a multimillion-dollar libel verdict on appeal, a big verdict puts lots of pressure on the publisher and its insurer to settle for big dollars. That's how plaintiffs' lawyers got compensated for their services. They'd get 40% of that settlement. A $2 million settlement yields $800,000 for the lawyer.
Most plaintiffs in libel suits don't have actual economic damages. Most seek only noneconomic damages for injury to reputation and humiliation plus punitive damages. Under tort reform, even if plaintiffs' counsel can overcome the inevitable defense motions for summary judgment, the most they can hope for at trial is $750,000 in most cases. At 40%, a $300,000 paycheck sounds great, but it's not attractive to seasoned lawyers. They would not receive that paycheck until after performing several years of comprehensive legal services for nothing, and they want a bigger payoff assuming the risk of losing altogether after years of work.
Plus, after the defense appeals, the actual payout in a settlement will be less than $750,000, which drops the lawyer's best-chance compensation to below $300,000. Again, that sounds like a lot, but to seasoned lawyers that best-case scenario is too little compensation for too much risk and too much intense legal work spread over years of effort.
So, the press can expect that the Ohio Supreme Court's decision in the Wayt case will cause libel suits by experienced lawyers to dry up.
Publishers may wonder why, during the last 14 years of tort reform in Ohio, their high-priced legal talent didn't tell them, or the courts, that those laws applied to libel. In fact, media lawyers studied the tort reform laws when the legislature passed them, and concluded for good reason that they didn't apply to libel.
For centuries, the courts in England and America held that reputation was a form of property, and that libel was a trespass upon the plaintiff's property. The tort reform laws apply to a loss of property, but they define "property" in a way that excludes injury to reputation.
That left only injury to the "person," which courts have viewed for centuries as only bodily injury. Because injury to reputation is not a physical injury, there appeared to be no principled way to apply the tort reform laws to libel. Chief Justice Maureen O'Connor elaborates on that analysis in her dissent in the Wayt case.
The majority in the Wayt decision, however, ruled that injury to reputation is indeed injury to the "person," and so tort reform applies to libel.
David Marburger is the founding general counsel of the Ohio Coalition for Open Government, a retired partner at Baker Hostetler in Cleveland and a nationally recognized expert in media law. He now practices at Marburger Law LLC. To contact him, send email to firstname.lastname@example.org.