In an unreported opinion filed on August 2, 2018, the U.S. Court of Appeals for the Fourth Circuit (“Federal Appellate Court”) reversed the district court’s grant of judgment for the nursing home defendants as to the jury’s award of punitive damages for the plaintiffs, and remanded to the district court with instructions to enter judgment for the plaintiffs consistent with North Carolina’s statutory limits on punitive damages.
The defendants operated a long-term skilled nursing facility (nursing home) in Raleigh, North Carolina that had a “vent unit” that provided services for ventilator-dependent patients. North Carolina requires vent units to provide 5.5 hours of nursing care per patient day and that the direct care nursing staff shall not fall below a registered nurse and a nurse aide I at any time during a 24-hour period. 10A N.C. Admin. Code 13D.3003 & 13D.3005. The evidence showed that the defendants consistently provided fewer than five hours of nursing care per day and failed to staff a registered nurse for the third shift.
The estates of three decedents who were ventilator-dependent patients at the nursing home in late 2011 and early 2012 claimed in their North Carolina nursing home wrongful death lawsuit that the inadequate staffing and supplies about which the defendants had been repeatedly warned proximately caused the decedents’ deaths. After a four-day trial, the jury returned verdicts for the plaintiffs, awarding compensatory damages of $50,000 for one plaintiff, $300,000 for another plaintiff, and $300,000 for the third plaintiff. The jury also awarded punitive damages of $1,523,939.16 for each plaintiff, which was the exact amount that trial testimony established was the defendants’ cost savings during 2011 resulting from their deviation from the required minimum staffing in the vent unit.
The district court granted the defendants’ motion for judgment as to punitive damages, ruling that the plaintiffs had failed to present evidence sufficient for a reasonable jury to find the defendants liable under North Carolina’s punitive damages statute. The plaintiffs appealed.
Federal Appellate Court Opinion
North Carolina law allows punitive damages only if a claimant proves that the defendant is liable for compensatory damages and that one of three possible aggravating factors was present and related to the injury for which compensatory damages were awarded. N.C. Gen. Stat. § 1D-15 (2017). The three possible aggravating factors are “Fraud,” “Malice,” and “Willful or wanton conduct.”
“Willful or wanton conduct” is defined as “the conscious and intentional disregard of and indifference to the rights and safety of others, which the defendant knows or should know is reasonably likely to result in injury, damage, or other harm.” N.C. Gen. Stat. § 1D-5(7) (2017). Proof must be by clear and convincing evidence, and a court reviewing an award of punitive damages under this statute must itself review the evidence under that standard. Moreover, North Carolina does not permit punitive damages based on vicarious liability: punitive damages may be awarded against a business enterprise only if “the officers, directors, or managers of the corporation participated in or condoned the conduct constituting the aggravating factor giving rise to punitive damages.” N.C. Gen. Stat. § 1D-15.
The amount of punitive damages is limited to three times compensatory damages or $250,000, whichever is greater. N.C. Gen. Stat. § 1D-25 (2017). To determine the amount of punitive damages, the jury considers the purpose of punitive damages, “to punish a defendant for egregiously wrongful acts and to deter the defendant and others from committing similar wrongful acts,” and evidence related to several statutory factors. N.C. Gen. Stat. § 1D-35 (2017).
The Federal Appellate Court stated that the record clearly shows that the defendants’ manager (administrator) participated in the decisions regarding staffing and supplies asserted to constitute willful or wanton conduct, and the uncontroverted record is that he was jointly employed by all three defendants. Furthermore, the extensive trial testimony that the defendants’ policy was to cut staffing to save money, viewed in a light most favorable to the plaintiffs and with all legitimate inferences drawn in the plaintiffs’ favor, clearly and convincingly shows that staffing was cut because of company policy.
The Federal Appellate Court further stated that the punitive damages statute is satisfied if a company manager condones conduct constituting an aggravating factor. A manager condones employees’ actions when the manager is aware of those actions and fails to intervene. In the present case, the Federal Appellate Court stated that there was clear and convincing evidence that the defendants were fully aware of the dangerously inadequate staffing levels yet did nothing or worse.
The Federal Appellate Court held: “The evidence produced at trial clearly and convincingly shows that Defendants engaged in willful or wanton conduct by intentionally failing to follow federal and state laws on staffing, by intentionally violating Blue Ridge’s policy regarding sitters for agitated patients, by intentionally failing to monitor oxygen levels or to provide continuous monitoring of alarms, and by intentionally failing to have necessary bedside supplies in the vent unit. Cuts to staffing and supplies were a deliberate corporate policy enacted to increase profits by millions of dollars. Defendants were repeatedly informed that those cuts placed patients at risk of death or serious injury—patients whose lives were entirely dependent upon Blue Ridge’s diligence in providing care—yet after such warnings Defendants continued to profit by endangering their patients.”
The Federal Appellate Court further held: “Here, Defendants deliberately failed to discharge their duty to provide adequate staff and supplies for their nursing facility. That duty is imposed by state and federal law because it is necessary for patient safety. See 42 C.F.R. §§ 483.25 & 483.30; 10A N.C. Admin. Code 13D.3003. Defendants knew—because they were repeatedly told—that the failure to provide minimum staffing and supplies was reasonably likely to result in patient injury or death. They nonetheless deliberately continued to disregard duties imposed by law because doing so would increase profits. This is precisely the type of egregious conduct punitive damages are meant to deter. See N.C. Gen. Stat. § 1D-1.”
Lastly, the Federal Appellate Court held: “North Carolina limits punitive damages to three times the amount of compensatory damages or $250,000, whichever is greater. N.C. Gen. Stat. § 1D-25. On remand, the district court is instructed to enter judgment reducing the award of punitive damages to $250,000 for the estate of Del Ray Baird, $900,000 for the estate of Elizabeth Jones, and $900,000 for the estate of Bettie Mae Kee.”
Vandevender v. Blue Ridge of Raleigh, LLC, d/b/a Blue Ridge Health Care Center; Care Virginia Management, LLC d/b/a Care Virginia; Care One, LLC d/b/a CareOne, No. 17-1900.
If you or a loved one suffered harm while a resident of a nursing home in North Carolina or in another U.S. state due to nursing home abuse, nursing home neglect, nursing home negligence, nursing home understaffing, or the failure to provide appropriate care for a vulnerable adult, you should promptly find a nursing home claim lawyer in North Carolina or in your state who may investigate your nursing home claim for you and file a nursing home claim on your behalf or behalf of your loved one, if appropriate.
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