Business Law

Jarman v. HCR Manorcare, Inc. (Aug 17, 2020, S241431) __ Cal.5th __ [2020 WL 4744241]

“Patients Bill of Rights” statutory penalty applies per action, not per violation.

John Jarman stayed three months at an HCR ManorCare skilled nursing facility while recovering from hip surgery. About two years later, Jarman sued HCR, alleging violations of the “Patients Bill of Rights” (Health & Saf. Code, § 1430, subd. (b) (section 1430(b)), elder abuse, neglect, and negligence. The jury found that HCR was liable for 382 regulatory violations, and awarded Jarman $250 per violation, plus $100,000 in damages. The trial court struck Jarman’s punitive damages claim even though the jury found that HCR engaged in oppression, malice, or fraud, due to concerns regarding the sufficiency of the evidence. The court entered judgment for $195,500 plus attorney fees. Both sides appealed. The Court of Appeal held that the trial court had erred by striking the punitive damages claim, and rejected HCR’s claim that Jarman was limited to $500 in statutory damages under section 1430, subdivision (b). The court instead held that a statutory penalty of up to $500 could be recovered on each of cause of action.

The Supreme Court granted review to address two questions: (1) Does the Patients Bill of Rights authorize a maximum penalty of $500 per “cause of action” against a skilled nursing facility or only $500 per lawsuit? (2) Does the Patients Bill of Rights authorize an award of punitive damages?  (The Court ultimately declined to reach the second issue.)

The Supreme Court held that the section 1430(b) penalty applied per action (meaning per lawsuit), rejecting a dissenting opinion that it should be applied per violation. The Court observed that section 1430(b) “is far from clear” regarding how the statutory penalty is applied. However, the Court observed that, in related contexts, the Legislature had clearly specified when other penalties were to be assessed per violation. Moreover, because many of the rights protected by section 1430(b) overlap, and there was difficulty distinguishing a series of violations from a single continuing violation, the Court thought it improbable that the Legislature intended the penalty to be applied in a sliding-scale fashion based on the severity of the infraction.  Furthermore, the statutory penalty in private enforcement actions applies to all infractions regardless of severity, while citations issued by the Department of Public Health are classified based on severity. Allowing private penalties to be assessed per violation would anomalously allow penalties for minor infractions to be worth twice the monetary redress that the Department could impose for more severe violations. In addition, the Legislative history of section 1430(b) indicated that the Legislature originally and consistently thereafter intended the penalty to apply per lawsuit. Finally, the Court rejected the claim that limiting the section 1430(b) penalty to $500 per lawsuit rendered the statute “toothless” since injunctive relief, damages, and attorney fees were available in addition to the penalty, and doctrines of claim and issue preclusion would prevent plaintiffs from evading the cap by filing multiple lawsuits.

Justice Cuellar filed a dissenting opinion, joined by Justice Liu, arguing that a per violation approach did not present significant practical difficulties and would further the Patients Bill of Rights’ fundamental purpose of deterring violations. He urged the Legislature to modify the statutory scheme to achieve a more robust deterrent effect.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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