Governor Vetoes Tort-Reform Bills Passed by Legislature
Four tort reform bills recently were passed by the Minnesota House of Representatives and the Minnesota Senate. Despite vetos by Gov. Dayton, the substance of these bills are likely to reappear in legislation either later in this session or in future legislative sessions.
The proposed laws were intended to go into effect during the summer of 2012. One proposed new law applies only to class action lawsuits and would permit interlocutory appeals on class certification issues to be filed and decided before the case moves forward. Four of the bills would have mandated that: (1) certain claims would need to be asserted within four years of the date the cause of action accrues, rather than the current six year statute of limitations; (2) conciliation courts would be able to resolve claims below $10,000 (or $5,000 if the claim involves a consumer credit transaction, or $15,000 if the claim involves money or property subject to forfeiture); (3) courts awarding attorneys’ fees in certain types of cases would be required to consider additional factors to determine what constitutes a reasonable amount of attorneys’ fees; and (4) pre-judgment interest and post-judgment interest would be calculated using market-driven interest rates rather than a flat interest rate.
The tort reform bills were introduced in both the Minnesota Senate and House in the 2011 Session. The Senate considered and passed all four bills at that time. The House ran out of time at the end of the 2011 Session and did not consider them until the 2012 Session. The House passed all four bills on February 1, 2012. The Senate then passed two of the four bills on February 1, 2012 and the remaining two bills on February 8, 2012. Governor Dayton vetoed the bills on February 10, 2012. Despite the Governor’s veto, some of the proposals are likely to reemerge in future legislative sessions.
The tort reform bills’ sponsors in the House, Rep. Pat Mazorol (R-Bloomington) and Rep. Doug Wardlow (R-Eagan), contend these reforms will improve the business climate in Minnesota by reducing the number of lawsuits filed, decreasing litigation costs, and making litigation outcomes more predictable. Opponents expressed concern that the reforms will make it harder for consumers, small businesses, and those with less power to file lawsuits against large corporations.
“Our reforms are the first step to creating a more competitive business climate that encourages businesses to stay and grown in Minnesota,” Rep. Wardlow explained in a February 1, 2012 press release. “The reforms aim to improve fairness in litigation, leading to speedier resolutions, all the while decreasing costs and increasing financial certainty for businesses.”
“Minnesota businesses operate in a climate permeated by the fear of frivolous lawsuits and windfall verdicts that can lead to layoffs, decreased production, or shutdowns,” Rep. Mazorol explained in the press release. “When businesses incur unnecessary and burdensome costs, the consumer is forced to pay increasingly higher prices for products and services. These reforms will drastically reduce the rate of excessive claims that eat up court time and prevent businesses from investing in jobs and innovation.”
Certain causes of action must be brought within 4 years rather than 6 years. Minnesota law currently requires that certain claims must be asserted within six years of the date the cause of action accrued. S.F. No. 373 proposes shortening the statute of limitations to four years for nine of the ten types of claims covered by the current law. The six-year statute of limitations would continue to apply to one type of claim (those arising out of domestic abuse).
The bill’s sponsors contended that Minnesota currently has the longest statute of limitations in the country, and this bill would bring Minnesota in line with other states. Supporters argued that a shorter statute of limitations would benefit Minnesota businesses by decreasing the amount of time they are exposed to lawsuits related to these claims. Opponents and the Governor responded that a shorter statute of limitations would harm consumers and small businesses, who would have less time to secure legal representation and to save the money needed to bring a lawsuit asserting these claims.
Currently, Minnesota Statutes Section 541.05, subdivision 1 (2011), requires that (except where the Uniform Commercial Code requires otherwise) the following claims must be asserted within six years of the date the cause of action accrued:
1) Causes of action upon a contract or other obligation, express or implied, as to which no other limitation is expressly prescribed;
2) Causes of action upon a liability created by statute, other than those arising upon a penalty or forfeiture or where a shorter period is provided by Minnesota Statutes Section 541.07;
3) Causes of action for a trespass upon real estate;
4) Causes of action for taking, detaining, or injuring personal property, including actions for the specific recovery thereof;
5) Causes of action for criminal conversation, or for any other injury to the person or rights of another, not arising on contract, and not hereinafter enumerated;
6) Causes of action for relief on the ground of fraud, in which case the cause of action shall not be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud;
7) Causes of action to enforce a trust or compel a trustee to account, where the trustee has neglected to discharge the trust, or claims to have fully performed it, or has repudiated the trust relation;
8) Causes of action against sureties upon the official bond of any public officer, whether of the state or of any county, town, school district, or a municipality therein; in which case the limitation shall not begin to run until the term of such officer for which the bond was given shall have expired;
9) Causes of action for damages caused by a dam used for commercial purposes; or
10) Causes of action for assault, battery, false imprisonment, or other tort resulting in personal injury, if the conduct that gives rise to the cause of action also constitutes domestic abuse as defined in Minnesota Statutes Section 518B.01.
S.F. No. 373 proposed shortening the current six-year statute of limitations to a four-year statute of limitations for nine of the ten causes of action listed above. The proposal did not change the current six-year statute of limitations for the tenth cause of action on the list above: a six-year statute of limitations would continue to apply to causes of action for assault, battery, false imprisonment, or other tort resulting in personal injury if the conduct that gives rise to the cause of action also constitutes domestic abuse under Minnesota law.
Conciliation courts may resolve disputes involving greater dollar amounts. Minnesota law currently allows conciliation courts to resolve claims where the amount of money or property claimed in a dispute does not exceed $7,500; or $4,000 if the claim involves a consumer credit transaction; or $15,000 if the claim involves money or personal property subject to forfeiture. S.F. No. 149 proposed permitting conciliation courts to resolve disputes where the amount claimed in the dispute does not exceed $10,000; or $5,000 if the claim involves a consumer credit transaction; or $15,000 if the claim involves money or personal property subject to forfeiture.
Supporters of the bill contend that increasing the dollar amounts involved in claims resolved by the conciliation courts will enable the judicial system to resolve more cases quickly and will reduce the civil trial court caseload. This proposal has not met with strong opposition, and similar measures have been proposed in past legislative sessions. It may be likely that this proposal could be resubmitted in the near future.
Currently, Minnesota Statutes Section 491A.01, subdivision 3 (2011), provides that the conciliation court has jurisdiction to hear, conciliate, try, and determine civil claims if the amount of money or property that is the subject matter of the claim does not exceed:
1) $7,500; or
2) $4,000 if the claim involves a consumer credit transaction (as defined in the statute); or
3) $15,000 if the claim involves money or personal property subject to forfeiture (as defined in particular statutes).
S.F. No. 149 proposed permitting conciliation courts to resolve disputes involving greater dollar amounts in two of the three categories of claims. The dollar limits would then be set at:
1) $10,000; or
2) $5,000 if the claim involves a consumer credit transaction (as defined in the statute); or
3) $15,000 if the claim involves money or personal property subject to forfeiture (as defined in particular statutes).
In class action lawsuits, parties will have the right to challenge the court’s decision on class certification issues early in the lawsuit with an interlocutory appeal. Currently, when a group of people asks the court to certify them as a “class” that may bring a class action lawsuit, the court’s order either granting or denying the request for class certification cannot be appealed until after the entire lawsuit is resolved. S.F. No. 149 proposed permitting an appeal of a court order on class certification before the case moves forward. All discovery and other proceedings would stop until the appeals court decides the class certification issue.
Supporters of the bill claim that the early appeals process, before the entire case goes forward, would save the state judicial system approximately $41,000 each year and will prevent companies from spending money defending against class action lawsuits that might be thrown out on appeal. Opponents argued that the courts already provide a process for appeals at the end of the case and that companies could use an early appeal simply to stall the case for a period of time by putting all discovery and other proceedings on hold until the appeal is decided.
Minnesota currently does not have a law permitting an interlocutory appeal in class actions. S.F. No. 149 proposed creating a new statute, Minnesota Statutes Section 540.19, to read:
“A court order certifying a class action, refusing to certify a class action, or denying a motion to decertify a class action is appealable as a matter of right. While an appeal under this subdivision is pending, all discovery and other proceedings in the district court are automatically stayed, except that upon the motion of a party the district court may life the stay, in whole or in part, for good cause shown.”
While this proposal was vetoed by Gov. Dayton, reforms to class action suits have been a frequent topic of discussion at the Capitol, and it is possible that further efforts to reform class action suits will be brought up in subsequent sessions.
In cases where attorneys’ fees may be awarded to the prevailing party, courts must consider additional factors when determining what constitutes reasonable attorneys’ fees. Currently, Minnesota law permits attorneys’ fees to be awarded to a prevailing party in certain types of cases. The statutes typically allow the court to award “reasonable” attorneys’ fees. The new law passed by the Minnesota legislature but vetoed by the Governor would have provided additional factors that the court must consider when determining what amount of attorneys’ fees is reasonable.
S.F. No. 429 proposed additional factors the court must consider when awarding attorneys’ fees in certain situations where the prevailing party has recovered money damages and is entitled to an award of attorneys’ fees. The newly approved law requires that, when a statute provides for attorneys’ fees to be awarded to a party that has been awarded money damages, the court setting the amount of attorneys’ fees to be awarded to the prevailing party must consider the following, in addition to other factors:
1) The court must consider whether the amount of attorneys’ fees sought by the prevailing party is reasonable when compared to the amount of money damages awarded to the prevailing party; and
2) The court must consider whether the amount of attorneys’ fees sought by the prevailing party is reasonable by comparing the amount of money damages sought by the prevailing party to the amount of money damages actually awarded to the prevailing party.
3) The court may not award attorneys’ fees incurred by a party after the party was served with an offer of judgment if: (1) an offer of judgment is made (under Rule 68 of the Rules of Civil Procedure) by one party to another party who claims money damages pursuant in whole or in part to a statute that provides for the award of attorneys’ fees; and (2) the party claiming attorneys’ fees does not obtain a verdict in excess of the offer of judgment, exclusive of attorneys’ fees. A party that rejects an offer of judgment must disclose the amount of attorneys’ fees it has incurred as of the date of the service of the offer of judgment within the time period provided by Rule 68 of the Rules of Civil Procedure for acceptance of an offer of judgment.
Awards of pre-judgment interest and post-judgment interest must be calculated using market-driven interest rates rather than a flat interest rate. Minnesota law currently provides two different methods for calculating the interest that accrues and is owed on verdicts, awards, or judgments. One method is used to calculate interest on judgments or awards totaling $50,000 or less, or judgments or awards for or against the state or a political subdivision of the state for any dollar amount. A different method is used to calculate interest on judgments or awards that exceed $50,000. S.F. No. 530 proposed using just one method to calculate the interest that accrues and is owed on verdicts, awards, or judgments.
Supporters of this bill and similar proposals favor the consistency of using one method to calculate interest and argue that any party paying interest on a verdict, award, or judgment should pay interest at the market rate rather than at an unusually high interest rate (currently ten percent when the verdict, award or judgment exceeds $50,000). Opponents contend that charging a higher interest rate for verdicts, awards or judgments that exceed $50,000 provides a necessary incentive for those parties to pay those large verdicts, awards or judgments quickly.
Currently, Minnesota Statutes Section 549.09, subdivision 1 (2011), instructs that pre-judgment interest and post-judgment interest must be calculated as follows:
1) For a judgment or award of $50,000 or less, or when the judgment or award is for or against the state or a political subdivision of the state for any dollar amount:
a. Interest must be calculated as simple interest per annum (rather than as compounded interest).
b. The interest rate must be based on the secondary market yield of one-year U.S. Treasury bills, calculated on a bank discount basis. Each year, on or before December 20, the court must determine the one-year constant maturity treasury yield for the most recent calendar month, reported on a monthly basis in the latest statistical release of the board of governors of the Federal Reserve System. The interest rate for the coming year will be the greater of: (1) this yield rounded to the nearest one percent; or (2) four percent.
2) For a judgment or award in excess of $50,000, other than a judgment or award for or against the state or a political subdivision of the state:
a. The interest rate is ten percent per year until paid.
S.F. No. 530 proposed using a “market-driven” interest rate (though never less than four percent) to calculate interest on all verdicts, judgments, or awards. This differs from the current system of using a “flat” interest rate of ten percent to calculate interest on judgments or awards in excess of $50,000 and a “market-driven” interest rate to calculate interest on judgments or awards of $50,000 or less or where the judgment or award is for or against the state or a political subdivision of the state, the interest rate used to calculate interest would be tied to the market