PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 17-1900
GERALDINE L. VANDEVENDER, Administrator of the Estate of Del Ray Baird, deceased, and Jacqueline Ann Baird, deceased; NORWOOD R. JONES, Co-Executor of the Estate of Elizabeth J. Jones, deceased; LISA J. PATE, Co- Executor of the Estate of Elizabeth J. Jones, deceased; JOYCE K. HARRISON, Administrator of the Estate of Bettie Mae Kee, deceased and Samuel Kee, Sr., deceased; RALPH D. JONES, JR., Co-Executor of the Estate of Elizabeth J. Jones, deceased,
Plaintiffs - Appellants,
and
SAMUEL KEE, SR., Individually,
Plaintiff,
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,
Defendants - Appellees,
RALEIGH REGIONAL REHAB CENTER, LLC, d/b/a Crabtree Valley Rehab Center; NC MANAGEMENT HOLDINGS, LLC,
Defendants.
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NORTH CAROLINA ADVOCATES FOR JUSTICE, Amicus Supporting Appellant.
No. 17-1951
RALPH D. JONES, JR., Co-Executor of the Estate of Elizabeth J. Jones, deceased; GERALDINE L. VANDEVENDER, Administrator of the Estate of Del Ray Baird, deceased, and Jacqueline Ann Baird, deceased; NORWOOD R. JONES, Co-Executor of the Estate of Elizabeth J. Jones, deceased; LISA J. PATE, Co-Executor of the Estate of Elizabeth J. Jones, deceased; JOYCE K. HARRISON, Administrator of the Estate of Bettie Mae Kee, deceased and Samuel Kee, Sr., deceased,
Plaintiffs - Appellees,
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,
Defendants - Appellants,
RALEIGH REGIONAL REHAB CENTER, LLC, d/b/a Crabtree Valley Rehab Center; NC MANAGEMENT HOLDINGS, LLC,
NORTH CAROLINA ADVOCATES FOR JUSTICE,
Amicus Supporting Appellant.
2 Appeals from the United States District Court for the Eastern District of North Carolina, at Raleigh. Terrence W. Boyle, District Judge. (5:14-cv-00150-BO)
Argued: May 10, 2018 Decided: August 2, 2018 Amended: August 27, 2018
Before TRAXLER and DIAZ, Circuit Judges, and Richard M. GERGEL, United States District Judge for the District of South Carolina, sitting by designation.
Affirmed in part, reversed in part, and remanded with instructions by published opinion. Judge Gergel wrote the opinion, in which Judge Traxler and Judge Diaz joined.
ARGUED: Rachel Alexis Fuerst, HENSON & FUERST, PA, Raleigh, North Carolina, for Appellants/Cross-Appellees. Gregory Wenzl Brown, BROWN LAW LLP, Raleigh, North Carolina, for Appellees/Cross-Appellants. ON BRIEF: Thomas W. Henson, Jr., HENSON & FUERST, P.A., Raleigh, North Carolina, for Appellants/Cross-Appellees. Kristi L. Gavalier, BROWN LAW LLP, Raleigh, North Carolina, for Appellees/Cross- Appellants. Burton Craige, Narendra K. Ghosh, Paul E. Smith, PATTERSON HARKAVY LLP, Chapel Hill, North Carolina, for Amicus Curiae.
3 GERGEL, District Judge:
After a jury returned verdicts awarding compensatory and punitive damages for
each Plaintiff in three wrongful death nursing home malpractice claims, Defendants
moved for judgment as a matter of law, arguing Plaintiffs failed to produce evidence of
an aggravating factor necessary to support an award of punitive damages under North
Carolina law and failed to produce evidence necessary to support a verdict regarding
Plaintiff Jones. The district court order granted the motion as to Plaintiffs’ punitive
damages awards and denied it as to Plaintiff Jones’ award of compensatory damages.
Plaintiffs appeal the grant of judgment for Defendants as to Plaintiffs’ award of punitive
damages. Defendants cross-appeal the denial as to Plaintiff Jones’ award of
compensatory damages. For the reasons stated below, we affirm the denial of the motion
for judgment as a matter of law as to Plaintiff Jones’ award of compensatory damages,
reverse as to Plaintiffs’ award of punitive damages, and remand with instructions to enter
judgment for Plaintiffs consistent with North Carolina’s statutory limits on punitive
damages.
I.
Defendants operated a long-term skilled nursing facility known as the Blue Ridge
Health Care Center (“Blue Ridge”) in Raleigh, North Carolina. Blue Ridge operated a
“vent unit,” a special facility 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. Defendants, however,
4 consistently provided fewer than five hours of nursing care per day, and failed to staff a
registered nurse for the third shift.
At trial, multiple former employees of Blue Ridge testified that Blue Ridge
management was repeatedly warned that the staffing levels were a safety risk. In May
2011, the administrator of Blue Ridge, Darryl Taylor, resigned because his superiors
“continued to push him to cut supplies and staff to levels that would not allow the staff to
properly care for the patients.” He was replaced by Ben McGovern on May 3, 2011.
McGovern told employees that “he came in to cut staffing and that there was a new
sheriff in town . . . and he was going to do whatever he needed to do to cut costs.”
Plaintiffs’ accounting expert testified that Defendants’ deviation from the required
minimum staffing in the vent unit resulted in cost savings during 2011 of $1,523,939.16.
When a staffing coordinator complained about the unsafe staffing levels, the coordinator
was fired. McGovern himself was fired and replaced by interim administrator Pamela
Street on February 6, 2012. Street testified that she knew more staff was needed to
provide care for the vent unit patients, but her superiors would not allow her to hire more
staff.
In addition to cutting staff, Blue Ridge management also reduced expenditures on
supplies. E.g., “And then [soon after Mr. McGovern took over] we started getting
supplies of lesser value and supplies that really didn’t work well . . . ;” “[T]he bill hadn’t
been paid, so supplies weren’t coming;” “I [Respiratory Therapist Myra Dotson] spoke
with the administrator of the facility about several issues, one in particular was the fact
that we did not have adequate equipment and supplies.”
5 The estates of three decedents who were ventilator-dependent patients at Blue
Ridge in late 2011 and early 2012 claim the inadequate staffing and supplies about which
Blue Ridge had been repeatedly warned proximately caused decedents’ deaths. Del Ray
Baird was admitted to the vent unit on December 29, 2011. He received an anoxic brain
injury in the early morning of December 30, 2011. He was found in his room with his
ventilator and alarms turned off for an unknown period. Because of understaffing, the
respiratory therapist for Mr. Baird could not check the alarms in his room to make sure
they were on. Bettie Mae Kee was found dead in the vent unit on March 20, 2012, with
her breathing apparatus pulled from her neck and with no alarm or oxygen monitor in
use. The standard of care required a sitter for Ms. Kee, but no sitter was provided
because of understaffing. Elizabeth Jones died in the vent unit on March 2, 2012, when
staff members were unable to replace her tracheostomy tube in a timely manner. The
delay was caused by a lack of proper bedside supplies due to budget cuts.
The Plaintiff estates filed suit against three Defendant LLCs: Blue Ridge of
Raleigh, the nursing facility; CareOne, which owned Blue Ridge; and CareVirginia
Management, which helped manage the facility. The complaint was removed to federal
court on March 13, 2014, and trial commenced on February 13, 2017. All former Blue
Ridge employees who testified at trial did so for Plaintiffs. Defendants’ only witnesses
were two medical experts. After a four-day trial, the jury returned verdicts for Plaintiffs.
The jury awarded compensatory damages of $50,000 for Plaintiff Baird, $300,000 for
Plaintiff Jones, and $300,000 for Plaintiff Kee. The jury also awarded punitive damages
of $1,523,939.16 for each Plaintiff.
6 Soon thereafter, Defendants filed a motion for judgment as a matter of law on the
award of compensatory damages for Plaintiff Jones and on the awards of punitive
damages. The district court denied the motion as to Plaintiff Jones’ compensatory
damages but granted the motion as to punitive damages, ruling Plaintiffs had failed to
present evidence sufficient for a reasonable jury to find Defendants liable under North
Carolina’s punitive damages statute.
Plaintiffs timely appealed the district court’s order on punitive damages, and
Defendants cross-appealed the order on Plaintiff Jones’ compensatory damages. We
review a district court’s order on a motion for judgment as a matter of law de novo,
viewing the evidence in a light most favorable to the non-moving party and drawing
every legitimate inference in that party’s favor. Huskey v. Ethicon, Inc., 848 F.3d 151,
156 (4th Cir. 2017).
II.
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.” Id. “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
7 under this statute must itself review the evidence under that standard. Scarborough v.
Dillard’s, Inc., 693 S.E.2d 640, 643 (N.C. 2009). 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).
Applying the punitive damages statute to the evidence presented at trial, the
district court found Plaintiffs failed to present sufficient evidence to support an award of
punitive damages for two reasons. First, the district court found that Plaintiffs failed to
present evidence showing Defendants’ officers, directors, or managers participated in or
condoned the asserted willful or wanton conduct. Second, the district court found that
even if such participation or condonation were assumed, Plaintiffs failed to present
sufficient evidence to show they had the requisite state of mind to establish any
aggravating factor. For the reasons set forth below, both reasons are in error.
8 A.
North Carolina does not permit respondeat superior for punitive damages.
Companies are liable for punitive damages for the acts or omissions of their employees
only if the “officers, directors, or managers” of the company “participated in or condoned
the conduct constituting the aggravating factor giving rise to punitive damages.” N.C.
Gen. Stat. § 1D-15. Although the statute specifically refers to “corporations” and not
other business entities with employees, North Carolina courts nonetheless apply the
statute to limited liability companies and partnerships. See, e.g., Phillips v. Rest. Mgmt.
of Carolina, L.P., 552 S.E.2d 686, 694–95 (N.C. Ct. App. 2001). North Carolina courts
define “manager” as “one who ‘conducts, directs, or supervises something.’” Miller v.
B.H.B. Enterprises, Inc., 568 S.E.2d 219, 225 (N.C. 2002). In determining whether an
employee was a manager, courts consider whether “(1) the employee was designated a
manager; (2) the employee had supervisory powers; (3) the employee gave input on
hiring and firing decisions and participated in personnel meetings; (4) the employee set
work schedules for other employees; and (5) the employee handled money.” Everhart v.
O’Charley’s Inc., 683 S.E.2d 728, 738 (N.C. Ct. App. 2009).
The district court found that Plaintiffs failed to present evidence showing
Defendants’ managers participated in or condoned the decision-making on staffing and
supplies that is asserted to constitute an aggravating factor. That finding was erroneous
for three reasons.
First, the record clearly shows that Defendants’ manager—Administrator Ben
McGovern—participated in the decisions regarding staffing and supplies asserted to
9 constitute willful or wanton conduct. E.g., Ben McGovern “had said that, you know, he
came in to cut staffing and that there was a new sheriff in town—his words—there was a
new sheriff in town, and he was going to do whatever he needed to do to cut costs”;
“Soon after Ben McGovern arrived as administrator he made a lot of policy changes and
began to drastically cut back on staff at Blue Ridge Health Care Center”; testimony that
the administrator “runs the nursing home.” The uncontroverted record is that he was
jointly employed by all three Defendants. cf. Salinas v. Commercial Interiors, Inc., 848
F.3d 125, 129–30 (4th Cir. 2017) (providing, in the context of the Fair Labor Standards
Act, that “joint employment exists when (1) two or more persons or entities share, agree
to allocate responsibility for, or otherwise codetermine—formally or informally, directly
or indirectly—the essential terms and conditions of a worker’s employment”).
Indeed, the district court never explicitly held that Mr. McGovern did not
participate in staffing decisions or that Mr. McGovern was not a manager for punitive
damages purposes. The district court’s repeated reference to “unidentified officers,
directors, or managers,” however, implies that Mr. McGovern (and other Blue Ridge
employees) was not identified as Defendants’ officer, director, or manager. Any such
implication, however, is belied by the record. Administrator Ben McGovern was
identified both as a person participating in conduct constituting an aggravating factor and
as the chief administrator of Blue Ridge. His duties satisfy every Everhart factor except
possibly the handling of money. If an “assistant dining room manager” is a manager, the
chief administrator of a medical facility unquestionably is one too. Cf. Everhart, 683
S.E.2d at 738.
10 Second, the district court found “there is nothing in the record that shows or would
allow the reasonable inference that staffing was cut because of a corporate policy”
regardless of whom is identified as a manager. But the extensive trial testimony that
Defendants’ policy was to cut staffing to save money, viewed in a light most favorable to
Plaintiffs and with all legitimate inferences drawn in Plaintiffs’ favor, clearly and
convincingly shows that staffing was cut because of company policy. E.g., Former Blue
Ridge Administrator “Darryl Taylor left because he said he was getting pressure from
New Jersey to cut staff”; Business Office Manager Peggy Singletary “said that she
couldn’t take it anymore, that she was—because she was doing payroll, and she would
see how—how the staffing was so short, but [Administrator] Ben [McGovern] kept
telling her that this is how it has to be”; “The administration of Blue Ridge [H]ealth Care
Center and CareOne knew that the facility was understaffed and we could not properly
care for the needs of the patients”; “Darryl Taylor quit after Blue Ridge Health Care
Center and CareOne continued to push him to cut supplies and staff to levels that would
not allow the staff to properly care for the patients”; Ben McGovern “had been told that
[cutting staffing] was his job there. . . .” and “a corporate representative by the name of
[Regional Director of Operations for CareOne Virginia] Don [Mc]Hale[] . . . came down
and held a meeting [about staffing] with the staff at Blue Ridge.” Defendants offered no
fact witnesses to dispute this testimony.
Third, the punitive damages statute is satisfied if a company manager condones
conduct constituting an aggravating factor. “The plain meaning of ‘condone’ is to
‘forgive or overlook,’ or ‘permit the continuance of.’” Miller v. B.H.B. Enters., Inc., 568
11 S.E.2d 219, 225 (N.C. Ct. App. 2002) (citations omitted). A manager condones
employees’ actions when the manager is aware of those actions and fails to intervene.
See, e.g., Wallace v. M, M & R, Inc., 600 S.E.2d 514, 518 (N.C. Ct. App. 2004). Here,
there was clear and convincing evidence that Defendants were fully aware of the
dangerously inadequate staffing levels yet did nothing or worse. E.g., Registered Nurse
Kate Cogan testifying that in response to complaints to CareOne from Blue Ridge patient
family members about inadequate staffing, Regional Director of Operations Don
[McHale] went to Blue Ridge and fired more staff; “I [Respiratory Therapist Myra
Dotson] spoke to the administrator and my boss and . . . the supervisor of respiratory
[therapy] and told him that this is just—there’s just—there’s too many [vent unit] patients
to take care of. . . . So I told him that it was just a dangerous situation.” Again,
Defendants offered no fact witnesses to dispute this testimony.
B.
Since there was clear and convincing evidence that Defendants’ managers did
participate in and condone the conduct asserted to constitute an aggravating factor, we
turn to the district court’s ruling that even if Defendants’ managers did participate in or
condone that conduct, Plaintiffs failed to present sufficient evidence to show they did so
with the state of mind necessary for that conduct to constitute an aggravating factor. The
three possible aggravating factors are “Fraud,” “Malice,” and “Willful or wanton
conduct.” Since there is no assertion of fraud or actual malice toward any decedent, the
issue is whether the conduct of Defendants’ managers constituted “willful or wanton
conduct” as defined by North Carolina law: “the conscious and intentional disregard of
12 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). “In the medical context, a medical provider acts willfully and wantonly when
she knowingly, consciously, and deliberately places a patient at risk of harm by acting
contrary to known protocols and procedures.” Clarke v. Mikhail, 779 S.E.2d 150, 160
(N.C. Ct. App. 2015).
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 district court, however, held that evidence insufficient because Plaintiffs
failed to show Defendants acted with “malicious intent” or with a “wicked purpose” in
causing the decedents’ injuries. But under North Carolina’s punitive damages statute,
willful or wanton conduct does not require proof of malicious intent. Cockerham-
Ellerbee v. Town of Jonesville, 660 S.E.2d 178, 181 (N.C. Ct. App. 2008); see also
Everhart, 683 S.E.2d at 737 (“[Defendant’s] claims that ‘there is nothing “wicked” or
13 “needless” about [its conduct] . . . fails to apply N.C. Gen. Stat. § 1D–5(7)’s definition of
“willful or wanton conduct.”’”). Willful or wanton conduct only requires proof of “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).
The district court improperly read “willful or wanton conduct” to require proof of
“wanton” conduct. At common law, “willful negligence involves a deliberate purpose
not to discharge some duty necessary to the safety of the person or property of another,
which duty the person owing it has assumed by contract, or which is imposed on the
person by operation of law.” Bailey v. N.C. R. Co., 62 S.E. 912, 914 (N.C. 1908). That is
virtually synonymous with the statutory definition of “willful or wanton conduct.” But
“wanton” conduct arguably does require a wicked purpose: “An act is wantonly done
when it is needless for any rightful purpose, and manifests a reckless indifference to the
rights and interests of another.” Everett v. Receivers of Richmond & D.R. Co., 27 S.E.
991, 991–92 (N.C. 1897). North Carolina courts continue to apply these definitions
today:
In order to warrant punitive damages, an act of negligence must be willful or wanton.
A wanton act is an act done with a “wicked purpose or . . . done needlessly, manifesting a reckless indifference to the rights of others.” An act is willful when there is a deliberate purpose not to discharge a duty, assumed by contract or imposed by law, necessary for the safety of the person or property of another.
14 Lashlee v. White Consol. Indus., Inc., 548 S.E.2d 821, 827 (N.C. App. 2001) (quoting
Benton v. Hillcrest Foods, Inc., 524 S.E.2d 53, 60 (N.C. App. 1999)).
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.
III.
Defendants argue in their cross-appeal that the evidence was insufficient to show
medical malpractice claim regarding Elizabeth Jones’s death, because her representatives
failed to show that Defendants breached any applicable standard of care or that their acts
or omissions proximately caused her death. Defendants argue the evidence was
insufficient to show malpractice because it is undisputed that all caregivers present when
Ms. Jones died acted within the standard of care when attempting to replace her
tracheostomy tube. The district court correctly disregarded this argument when denying
Defendants’ motion for judgment as a matter of law as to Ms. Jones, finding that there
was sufficient evidence that others at Blue Ridge breached the standard of care by failing
to supply the proper bedside supplies and by being understaffed. Likewise, the district
court correctly disregarded Defendants’ argument that their acts did not proximately
15 cause Ms. Jones’s death, noting that the jury was not obliged to find testimony from
Defendants’ expert Dr. Phillip Ashburn that lung cancer complications proximately
caused Ms. Jones’s death outweighed testimony from Plaintiffs’ expert Dr. Mark Bernat
that the failure to have adequate staffing and proper bedside supplies proximately caused
Ms. Jones’s death.
IV.
Having determined that the district court correctly found Plaintiffs presented
sufficient evidence that Defendants’ negligence proximately caused the death of
Elizabeth Jones but erred in finding Plaintiffs failed to present evidence sufficient for a
reasonable jury to award punitive damages, we turn to the proper amount of punitive
damages for each Plaintiff. The district court held that “should the award of punitive
damages stand, such awards must be reduced to comply with North Carolina law.”
Plaintiffs concede that is correct. 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.
For the reasons set forth above, the judgment of the district court is
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH INSTRUCTIONS.