Subject Matter: Myers v. NHC - TN COA Opinion (Wilkes)
Good morning all and I am writing to follow up on my e-mail from last Thursday with a recap of the recent Smartt (Myers) v. NHC McMinnville case released by the TN COA. Regrettably, because most of the trial courtâ€™s rulings were subject to a very deferential standard of review, the COA addressed (and disposed of in Plaintiffâ€™s favor) many of the issues often seen in LTC litigation cases. This new opinion from the Middle section of the COA conflicts, in some important ways, with the Eastern sectionâ€™s recent opinion in Estate of French v. Stratford House (reported previously). Nonetheless, this one is something of a dark cloud that has moved over those of us on this side of the â€œv.â€
In this case, Plaintiff filed suit against a nursing facility (NHC Healthcare/McMinnville, LLC) and related entities, seeking compensatory and punitive damages and asserting claims for ordinary negligence, medical malpractice, TAPA violations, and wrongful death. Defendants argued at the trial level that the Tennessee Medical Malpractice Act (TMMA) provided Plaintiffâ€™s exclusive avenue of recovery. The trial court dismissed Plaintiffâ€™s TAPA claim but allowed the jury to consider and assess liability on ordinary negligence as well as med mal as to all Defendants. The jury awarded compensatory damages of roughly $820,000 on the ordinary negligence claim and nearly $3.3 Million on the med mal claim against all Defendants. On the issue of punitive damages (for alleged reckless understaffing) the trial court allowed (and the jury awarded) punitives against the nursing home ($163,402), but granted a directed verdict to the facilityâ€™s parent corporation (National Healthcare Corp. (â€œNHCâ€)) as well as the corporation that contracted with the facility to provide staffing (National Health Corp. (â€œNationalâ€)) on the issue of punitive damages. As a precautionary measure in the event the case was retried, The Judge allowed the jury to consider punitive damages against each defendant. The jury awarded $1M against NHC and $28,635,000 against National. The COA upheld the punitive damages award against the facility. As to the other two corporations, the COA reversed and remanded on the issue of punitive damages, finding that the trial court used an improper standard when granting Defendantsâ€™ directed verdict motion on that issue.
In this 40-page opinion, the COA addressed a myriad of topics often encountered in LTC litigation. For ease of understanding and brevity, below is an outline of the high points of the issues, holdings, and reasoning of the COA.
1) Liability of Parent Corp. – Did the trial court err in denying NHC and Nationalâ€™s motion for directed verdict on the theory that they owed no duty of care to Plaintiff and thus could not be held directly or vicariously liable for Plaintiffâ€™s injuries? No. The COA held that a parent may be held liable for the acts of a subsidiary under respondeat superior (agency principles) or as a result of the parentâ€™s control over the sub. This latter theory is a variation of the â€œpiercing the corporate veilâ€ doctrine, known as the instrumentality rule, which allows a court to disregard the separate entity status of a subsidiary even without a showing of fraud or deceit, and fix liability on the parent corporation if the parentâ€™s domination of the sub is â€œso complete as to make them practically indistinguishable or to make the subsidiary a mere tool, agency or instrumentality of the parent; and that [the Plaintiff] will suffer loss unless the parent be held [liable.]â€ The COA held that, on the proof before it, the trial court did not err in allowing the question to go to the jury.
2) Ordinary Negligence vs. Med Mal â€“ Did the trial court err in allowing the jury to consider both ordinary negligence and medical malpractice? No. The COA held that the trial court properly denied Defendantâ€™s directed verdict motion on the ordinary negligence claim. The COA reviewed TN case law on the distinction between the two and whether the claims should be merged before hinging its reasoning on the testimony from NHCâ€™s president, Andy Adams, that certain acts of the Defendants could be classified as med mal and certain acts could be classified as ordinary negligence. The Middle section COA did not, however, reference the Eastern sectionâ€™s recent Estate of French v. Stratford House 2009 WL 211898 (Tenn. Ct. App. Jan. 29, 2009) decision released a month ago. As we reported then, the French opinion affirmed the dismissal of ordinary negligence and non-TMMA claims when certain facts are present. In French, care such as bathing, feeding and hydrating was deemed subject to the TMMA, whereas here, the COA essentially held that such care was â€œcustodialâ€ in nature and constituted â€œordinary negligence.â€ This conflict between the Middle and Eastern sections will need to be resolved by the Supreme Court.
3) Evidentiary Issues â€“ On appeal, Defendants argued that the juryâ€™s compensatory damage award was excessive because of improper evidence and argument allowed during trial. The COA addressed, and dismissed, each issue in Plaintiffâ€™s favor:
a. Evidence re: Mr. Adamsâ€™ stock holdings and number of affiliated entities â€“ Defendants argued that this was irrelevant and unfairly prejudicial, as it was introduced only to show that Defendants could pay a large award. COA disagreed, holding that the trial court did not abuse its discretion, as other valid reasons (such a bias and ownership/control issues) existed to support admission of the evidence.
b. Evidence re: Certification and training of facility employees â€“ Defendants argued that this was irrelevant and unfairly prejudicial as it had no effect on the care provided to the resident and was only introduced to inflame the jury. The COA held there was no abuse of discretion because the evidence was relevant to show understaffing issues and relevant to support compensatory as well as punitive damages claims on that issue.
c. Evidence re: Federal/State Regs on staffing requirements â€“ Defendants argued that plaintiffâ€™s reliance on the regs was too vague and in abrogation of the TMMAâ€™s locality rule. The COA disagreed, finding no abuse of discretion because Plaintiff was not asserting a claim for negligence per se and that plaintiffâ€™s expertâ€™s testimony is not inadmissible simply because some of his opinions include the federal regulations standards.
d. Spoliation â€“ Defendants argued that evidence regarding destruction of the Activities of Daily Living (â€œADLâ€) records should have been excluded because it was done in accord with the facilityâ€™s document retention policy and Plaintiff sought to introduce it only to show that Defendantsâ€™ actions were improper. The trial court instructed the jury that it may make an adverse inference against Defendants only if they jury concluded that the records were destroyed intentionally and with a desire to suppress the truth. The COA held that there was no error, as the Defendants were able to rebut Plaintiffâ€™s allegation that the records were destroyed with an improper purpose.
e. Testimony of the Facilityâ€™s DON and PT – Defendant argued that the DON and PT at the facility were â€œfact witnessesâ€ but were improperly compelled to give â€œexpertâ€ testimony that should have been excluded at trial. The COA found no error, holding that each witness testified in accord with Rule of Evidence 701, based on her experience at the Facility, within the areas of her responsibility, and as to ways that patient care was provided.
f. Plaintiffâ€™s â€œProfits over Peopleâ€ Argument â€“ Defendants claimed that this argument was inflammatory and should have been excluded. The COA agreed with the trial court that allowing the argument was not error. The COA stated that the trial court properly instructed the jury that arguments made by the attorneys are not evidence, but that the â€œprofits over peopleâ€ argument was supported by proof of an increase in revenue and a decrease in staffing levels.
g. Plaintiffâ€™s Argument to â€œsend a messageâ€ to the Defendants â€“ The COA found that the trial court did not abuse its discretion in allowing this argument from Plaintiffâ€™s counsel during the liability phase of the bifurcated trial. This did not encourage the jury to punish the Defendants through the award of compensatory damages, as Defendants argued.
4) Remittitur of Juryâ€™s non-economic compensatory damages awards â€“ Defendants argued that the amount of non-economic compensatory damages awarded by the jury was unreasonably excessive so as to â€œshock the judicial conscienceâ€ and require a remittitur. The COA noted the deferential nature of appellate review of compensatory damages awards, stating that it involved a determination into whether there is any material evidence to support the verdict. Beginning with the presumption that the jury which heard the case was â€œhonest and conscientious and . . .followed the instructions given to them,â€ the COA reviewed several cases on point and affirmed all damage awards (on both ordinary and medical negligence claims) to be supported by evidence in the record except that of disfigurement under the ordinary negligence claim. The COA vacated that portion of the award ($75K) and affirmed all others.
5) Punitive Damages â€“
a. Against the facility – At trial, Plaintiffs relied on their allegations of understaffing to prove recklessness, which is defined as when a â€œperson is aware of, but consciously disregards, a substantial and unjustifiable risk of such a nature that its disregard constitutes a gross deviation of the standard of care. . .â€ The Plaintiff proved that: 1) the facility was aware of inadequate staffing; 2) the facility knew it would lead to decreased care for the residents; and 3) the facility knew that less employees would lead to higher profits. The COA found that it was possible for a jury to find such conduct to be reckless. Finding that the punitive award against the facility was a mere 4% of the total compensatory award of $4.1 Million, the COA held that it was based on appropriate application of the law, not a result of the juryâ€™s caprice, and affirmed the award.
b. Against NHC and National â€“ As noted above, the trial court granted these Defendantsâ€™ Motion for directed verdict as to punitive damages, finding that, although there was sufficient evidence against the facility, there was insufficient evidence of reckless and/or gross deviations by the above corporations. Reversing, the COA noted that appellate courts will review a directed verdict motion de novo, with no presumption of correctness on appeal. A trial courtâ€™s granting of a directed verdict motion is appropriate if the court determines that â€œreasonable minds could not differ as to the conclusions to be drawn from the evidence.â€ The COA held that a reasonable jury could have returned a finding of recklessness if it believed that NHC and National controlled staffing levels at the facility with the knowledge that understaffing would adversely affect the residents. Liability could have been imposed indirectly upon the above entities in their role as either principal or employer. This part of the case was remanded to the Trial Court.
Unfortunately, this opinion from the Middle Section COA has a â€œchilling effectâ€ on much of the recent progress of our legal arguments and flies squarely in the face of the French and Barkes opinions in TN and other favorable rulings in contiguous jurisdictions. The apparent (yet completely silent) conflict with the recent Estate of French v. Stratford House opinion from the Eastern Section COA as to the issue of ordinary negligence v. TMMA applicability will need to be resolved at the Supreme Court. For now, this opinion is a substantial boon to Plaintiffs and a substantial detriment to LTC providers. Wilkes has already filed supplements to several of its brief in response to our Motions to Dismiss/SJ attaching this case as legal authority. We will stay informed about the status of an appeal and will of course keep you advised of developments. Let me know if you have any questions.
Subject: Myers v. NHC – TN COA Opinion
Good evening all and I regret to report that the TN COA has issued an unfavorable ruling in the Myers v. NHC case which was tried by Wilkes against an NHC TN facility and the related corporations. I am still reading and analyzing the opinion and its impact on TN LTC litigation but wanted to circulate it for your review as well. Please review the opinion.
Briefly, in this wrongful death NH case, the jury in this case was allowed to consider liability under theories of medical malpractice and negligence against all defendants (facility and related corporations). The jury found in favor of P and awarded $820K in compensatory damages on the negligence claim and $3.2 M on the med mal claim against all defendants. Notwithstanding the directed verdict on punitive damages granted as to the related corporations, the trial court permitted the jury to consider liability for punitive damages against all defendants (to avoid potential retrial) and the jury found that punitive damages were warranted against all defendants. Punitive damages were awarded totally approx. $30 M. The punitive damages award of $29.6 M was omitted against the parent/subs based upon the directed verdict and a judgment entered of punitive damages of $163K against the facility only.
The COA vacated a portion of the compensatory damages re: disfigurement. The COA REVERSED the trial court’s order granting the parent/subs a directed verdict on the issues of punitive damages and remanded the case. There are, of course, an abundance of other issues to address including many evidentiary rulings that will have an impact on all case moving forward. Appeals will be filed.
I will report later on this case which will serve as a focus for the tort reform efforts. Rebecca
Rebecca Adelman, Esq.
The Law and Mediation Offices of
Rebecca Adelman, PLC
545 South Main Street
Memphis, Tennessee 38103
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Document Date: January 1, 1970
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