CGB Occupational Therapy, Inc. v. RHA Health Services, Inc.

499 F.3d 184, 2007 U.S. App. LEXIS 20073, 2007 WL 2390386
CourtCourt of Appeals for the Third Circuit
DecidedAugust 23, 2007
Docket05-3409, 05-3586
StatusPublished
Cited by46 cases

This text of 499 F.3d 184 (CGB Occupational Therapy, Inc. v. RHA Health Services, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CGB Occupational Therapy, Inc. v. RHA Health Services, Inc., 499 F.3d 184, 2007 U.S. App. LEXIS 20073, 2007 WL 2390386 (3d Cir. 2007).

Opinions

OPINION OF THE COURT

JORDAN, Circuit Judge.

Before us are cross-appeals arising from the reduction of a $30 million punitive damages verdict to $2 million. The District Court ordered the reduction on the ground that the verdict was constitutionally excessive. Defendants Sunrise Assisted Living Management, Inc. and Sunrise Assisted Living, Inc. (collectively, “Sunrise”) contend that the reduced verdict is still unconstitutional and seek a further reduction. In a cross-appeal, Plaintiff CGB Occupational Therapy, Inc. (“CGB”) challenges the District Court’s reduction of the verdict and seeks either reinstatement of the original verdict or some enhancement [187]*187of the reduced verdict. For the reasons that follow, we will vacate the District Court’s remittitur order and remand the case with instructions to enter a new judgment for punitive damages in the amount of $750,000. CGB’s cross-appeal will be dismissed.

I.

This case is before us for the second time, following a second jury trial. It is, as we said on the first go-around, a case that “has been characterized by its contentious history.” CGB Occupational Therapy, Inc. v. RHA Health Serv., Inc., 357 F.3d 375, 379 (3d Cir.2004) (“CGB I”). Since we have previously set forth the facts in detail, the following factual recitation is limited to the background necessary for our ruling.

CGB is a provider of rehabilitation therapy services in long-term care and assisted-living facilities. Beginning in 1995, CGB contracted with a company known as RHA Pennsylvania Nursing Homes (“RHA”) to provide physical, occupational, and speech therapy to residents at two nursing home facilities owned by RHA, the Pembrooke facility and the Prospect Park facility. CGB’s agreements with RHA contained an “anti-raiding” clause providing that, in the event CGB was terminated as the provider of therapy services, the Pembrooke and Prospect Park facilities would not, for a period of twelve months, seek to hire or contract with therapists employed by CGB.

At all times relevant to this case, Sunrise managed RHA’s Pembrooke and Prospect Park facilities. In 1998, the federal Medicare program altered its process for reimbursing care facilities for therapy services provided to residents. Under the revised process, RHA claimed that it was more difficult to pay CGB, and, on June 30, 1998, at RHA’s direction, Sunrise notified CGB in writing that RHA intended to terminate its contracts with CGB, effective September 30, 1998. Almost immediately after giving that notice, Sunrise, again acting on behalf of RHA, executed agreements with another provider of therapy services, Symphony Health Services, Inc. (“Symphony”), to retain Symphony as the new therapy provider at both the Pem-brooke and Prospect Park facilities, effective October 1,1998.

What followed is central to this bitter legal contest. Sunrise’s Prospect Park Administrator, Marjorie Tomes, met with certain CGB therapists at the end of July 1998. She did so despite the anti-raiding clause in RHA’s contracts with CGB and despite direct admonitions by both RHA and CGB that no such meeting should occur. During that meeting, Tomes informed the therapists that CGB’s contracts with RHA had been terminated because CGB could not comply with Medicare changes. She made that representation even though CGB’s owner, Cindy Brillman, had repeatedly told her that CGB could comply with the Medicare requirements and could continue to be competitive in providing therapy services. Tomes also told the therapists that Symphony would replace CGB as the therapy contractor, and that they might have employment opportunities with Symphony. She polled the therapists for their interest in pursuing employment with Symphony, wrote down the names of those who replied in the affirmative, and proceeded to facilitate Symphony’s hiring of CGB therapists.

In September 2000, CGB brought this action against Sunrise and other defendants, alleging claims under Pennsylvania law for, among other things, tortious interference with CGB’s contractual relationships both with its therapists and with RHA. The jury in the first trial found that Sunrise had indeed tortiously interfered [188]*188with CGB’s contractual relationship with its therapists, and returned a compensatory damages verdict in the amount of $109,000 on that claim. The jury also found that Sunrise had tortiously interfered with CGB’s contractual relationship with RHA, and returned compensatory damages in the amount of $576,000 on that claim. The jury awarded punitive damages to CGB in the amount of $1.3 million, but the verdict did not specify how the punitive damages award was allocated between the two claims of interference.

On the first appeal, we affirmed the jury’s verdict against Sunrise for tortious interference with CGB’s contractual relationship with its therapists, but we reversed the verdict of tortious interference with CGB’s contractual relationship with RHA. See CGB I, 357 F.3d at 385-90.1 Because the jury had awarded $1.3 million in punitive damages without differentiating between the two acts of interference by Sunrise, we noted that “it is impossible to determine how punitive damages should be allocated in light of our determination that Sunrise could not have interfered with the contract between CGB and [RHA].” Id. at 390. Consequently, we reversed the punitive damages determination and remanded the case to the District Court for “a new trial on the question of punitive damages.” Id. at 392.

Sunrise evidently had a “watch what you wish for” experience when, at the second trial, the jury awarded CGB $30 million in punitive damages on the claim that Sunrise had tortiously interfered with CGB’s contractual relationship with its therapists. Sunrise thereafter moved to reduce the punitive damages award, arguing that the $30 million penalty was constitutionally excessive. After considering the guideposts for judicial review of punitive damages as articulated in BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), and as amplified by State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003), the District Court reduced the award to $2 million. These cross-appeals followed. The District Court exercised diversity jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction over the final judgment pursuant to 28 U.S.C. § 1291.

II.

“The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor.” Campbell, 538 U.S. at 416, 123 S.Ct. 1513. In determining whether a punitive damages award comports with due process,2 courts must [189]

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499 F.3d 184, 2007 U.S. App. LEXIS 20073, 2007 WL 2390386, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cgb-occupational-therapy-inc-v-rha-health-services-inc-ca3-2007.