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Does Federal Tort Reform Unduly Infringe on State Sovereignty?


Wednesday, Apr. 30, 2003

President George W. Bush is determined to avoid repeating what he regards as his father's fateful failure to spend the political capital earned by a victory in war against Saddam Hussein. Thus, we can expect an ambitious domestic agenda from the President and his Congressional allies. In the coming months, tort reform may feature prominently.

If only American enterprise were liberated from the fear of crushing liability, tort-reform advocates contend, the economy would soon boom again. In this view, huge verdicts line the pockets of greedy lawyers and a few lucky plaintiffs, while harming most consumers.

The facts do not always cooperate with this picture. Earlier this year, for example, doctors at the Duke University Medical Center performed a heart-lung transplant using organs from a donor of the wrong blood type, resulting in the death of the seventeen-year-old patient, Jesica Santillan. The widely publicized mishap undoubtedly robbed some of the momentum from pending tort reform legislation, which would limit recoveries in such cases.

However, the public attention span is short, and for every Jesica Santillan, tort reform proponents can conjure up a case like the three million dollar verdict against McDonald's for its hot coffee. Surely "conjure" is the right word, because the plaintiff, who suffered third-degree burns requiring a series of painful skin grafts, recovered far less after the appeals court re-evaluated her case.

My interest here, however, is not in whether tort reform is a good or bad idea. Instead, I want to consider whether Congress is the proper body to enact rules of tort law, which have traditionally been a matter for the states. Does the Constitution grant Congress the power to pass sweeping tort reform?

Pending Procedural Reform: The Class Action Fairness Act

A variety of tort reform measures have been proposed in or to Congress. Some would amend procedural requirements for cases in federal courts. For example, the "Class Action Fairness Act," introduced in Congress last month, would, among other things, give defendants the power to transfer any multi-state class action involving more than two million dollars from state court to federal court.

Congress clearly has the authority to enact the Class Action Fairness Act. Article III of the Constitution empowers Congress to confer on the federal courts the authority to hear cases between citizens of different states ("diversity" cases), even when state law governs the underlying dispute.

And indeed, at various points in history, Congress has tinkered with the requirements for federal court jurisdiction over diversity cases. Whatever its wisdom, the Class Action Fairness Act would fall within Congressional authority to make rules governing procedure in the federal courts.

Pending Substantive Reform: A Cap on Damages

However, some of the proposals on the table go far beyond establishing the procedures that govern tort suits brought in federal court. They would intrude into state court suits as well, and they would affect the suits' substance, not just procedure.

Consider the "Common Sense Medical Malpractice Reform Act of 2003," currently pending in the House of Representatives. The bill would cap damages in medical malpractice cases for non-economic injury at $250,000.

How would that work? A simple example is illustrative. Suppose that as a result of a botched appendectomy, an otherwise healthy patient loses the use of his arms and legs. If he establishes that the surgeon acted negligently, the patient could recover the cost of his medical bills; the earnings, if any, he loses as a result of his condition; and the cost of hiring someone to assist him in the tasks he could formerly perform for himself.

However, he could only recover a total of $250,000 to compensate for his pain and suffering and, if he can prove "conscious, flagrant indifference" by clear and convincing evidence, as punishment for the doctor, hospital or other tortfeasor. Thus, suppose in this case, the jury gave the patient $1 million in pain and suffering damages, and $1 million in punitive damages. The judge, after the verdict, would be legally required to reduce the total of these two sums to $250,000.

The Common Sense Medical Malpractice Reform Act, if enacted into law, would apply to all malpractice cases (against doctors and other health care providers) in federal and state court. It would change the substantive medical malpractice law on the books in most states. (Some states already have damages caps, but in those states, the amount of the cap and the type of damages capped would typically be altered from those the state itself had chosen.)

Where does Congress get the power to do that?

The Commerce Clause: The Best Source of Constitutional Authority

Let's answer that question by looking to first principles. The federal government is a government of enumerated powers. If Congress wishes to enact legislation, it must find authority for that legislation in some provision of the Constitution. Article I, Section 8, contains a list of such powers, but by far the most important of these is the power "To regulate commerce . . . among the several states."

If substantive provisions like those proposed in the Common Sense Medical Malpractice Reform Act can be sustained against the inevitable constitutional challenges they will face, it will have to be under the Commerce Clause.

What is the scope of Congressional power to regulate interstate commerce? Beginning with early nineteenth century rulings of the Supreme Court under Chief Justice John Marshall, the Commerce Clause has generally been construed broadly. Interstate commerce, the Marshall Court said, means more than the shipment of goods across state lines; it encompasses regulation of the national economy.

The Supreme Court took a somewhat narrower view of the Commerce Clause from the end of the nineteenth century through the first third of the twentieth century. However, since then, judicial precedents have validated legislation on a great many subjects under the principle that the regulated activities were connected to commerce.

For example, in the 1942 case of Wickard v. Filburn, the Supreme Court upheld the application of a production quota to a farmer who grew a small crop of winter wheat for home consumption, to feed to his animals, and possibly to sell. Did his little crop really affect "interstate commerce"?

The Court said yes, reasoning that the statute was valid as to Filburn even if he and his family intended to consume all the excess what themselves: the more wheat Filburn grew for home consumption, the less he would purchase on the market, and as a result there would be less total market demand for wheat. Thus, Filburn's production affected interstate commerce--by subtracting from it.

After the Filburn case, it looked like nearly anything Congress conceivably might enact would be validated under the Commerce Clause, for nearly every activity has at least some indirect impact on the market for some goods or services.

However, in 1995, the Rehnquist Court drew a line in the sand. In United States v. Lopez, the Court invalidated a federal statute prohibiting the possession of a gun in the vicinity of a schoolyard. Then, in the 2000 case of United States v. Morrison, the Court invalidated a provision of the Violence Against Women Act that permitted the victims of gender-motivated violence to sue their attackers in federal court.

In both Lopez and Morrison, the Supreme Court reaffirmed the principle drawn from Filburn that Congress may regulate activities on the ground that they have an effect on interstate commerce; however, the Court added an analytical requirement. If the statute does not limit itself to activities specifically affecting interstate commerce, then the regulated activities must be economic in nature.

Growing wheat--if not pursued simply as a hobby--the Court implied, is economic activity, whereas possessing a gun or engaging in gender-motivated violence is not economic activity.

Applying Recent Commerce Clause Precedents to Tort Reform

How do provisions like the proposed Common Sense Medical Malpractice Reform Act's $250,000 cap on noneconomic damages fare under the Lopez and Morrison precedents? That depends on how one describes the regulated activity.

To begin, one might be tempted to define the regulated activity as malpractice lawsuits. If so, the proposed legislation would be clearly constitutional, for a lawsuit seeking money damages is certainly an economic event.

However, the Morrison case forecloses this approach. After all, it was possible in that case to define the regulated activity as lawsuits alleging gender-motivated violence. But the Court thought the right level of analysis was the real-world conduct giving rise to the lawsuit, rather than the lawsuit itself.

And that makes considerable sense, for otherwise, any lawsuit on any subject would fall within the scope of the Commerce Clause. The key question as far as the Constitution is concerned is not whether the plaintiff is suing, but what he is suing for.

So, is medical malpractice an economic activity? Not necessarily. A doctor who negligently misdiagnoses (and thus does not prescribe treatment for) SARS can be held liable for malpractice regardless of whether she received money for her medical services.

Granted, most malpractice occurs in a context in which doctors receive compensation. But so what? Many people who possess guns near schoolyards probably do so in connection with some economic activity, such as planned drug dealing, robbery or extortion; yet that was not enough to sustain the Gun Free School Zones Act in the Lopez case.

Moreover, in Lopez the Supreme Court was especially troubled by the fact that the federal government asserted power over "criminal law enforcement [and] education where States historically have been sovereign." Similarly, the substantive law of torts, including medical malpractice, is an area of traditional state sovereignty.

Hence, there is a non-frivolous argument based on current precedent for judicial invalidation of whatever substantive tort reform measures Congress enacts.

In the End, Federalism Arguments May Be More Prudential than Constitutional

Nonetheless, the precedents are best read to permit Congress to regulate medical malpractice. As I read Lopez, Morrison, and Filburn (as re-imagined by the two more recent cases), an act will count as economic--and thus will be subject to regulation by Congress--if people usually or typically engage in the act for economic gain. That seems at least as true of the provision of medical services as of wheat cultivation.

To conclude that Congress has the power to regulate some subject matter, however, is not to say that it should regulate. Federalism is often raised as a legal argument to block enforcement of a law passed by Congress; it may also be raised as a prudential, political argument before a bill becomes a law.

Accordingly, if the Bush Administration and the members of Congress who profess to care about state sovereignty mean what they say, they will hesitate before displacing the substantive tort law of all fifty states.

Michael C. Dorf is Professor of Law at Columbia University.

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