July 2, 2017

California Supreme Court will decide availability of punitive damages under nursing home statute (Jarman v. HCR Manor Care)

The California Supreme Court has granted review in Jarman v. HCR ManorCare, a case involving the availability of punitive damages under Health & Safety Code section 1430, subdivision (b).  That statute gives nursing home residents the right to bring a lawsuit for violations of their rights, but authorizes only limited remedies: injunctive relief, attorneys' fees and costs, and a penalty of up to $500.

Here are the questions presented, as framed by the defendant's petition for review:

  1. Does Section 1430(b) authorize a maximum award of $500 per "cause of action" in a lawsuit, as held below, or $500 per lawsuit, as held in [two previous Court of Appeal decisions] Nevarrez and Lemaire
  2. Does Section 1430(b) authorize an award of punitive damages?
Although the statute applies only to skilled nursing facilities, it could potentially have a broader impact because the statute is similar to statutes governing other types of facilities, including hospitals.

And there's another issue lurking in the case, having to do with California's "managing agent" requirement.  As we have discussed before, Civil Code section 3294 provides that corporations cannot be liable for punitive damages based on the acts of low-level corporate employees.  A corporation can be punished only if the wrongdoing was committed (or authorized or ratified) by an officer, director, or managing agent.  The Court of Appeal in Jarman concluded that the defendant's director of nursing qualified as a managing agent because she had direct responsibility for ensuring patient care at the facility.  But the Supreme Court has held that a corporate employee does not qualify as a managing agent unless he or she has the authority to create company policy, not just implement company policy.  Because Jarman seems to be a significant departure from that precedent, it is possible that the Supreme Court may address the managing agent issue in the course of its punitive damages analysis.

Click here to view the online docket in Jarman and track ongoing developments.

Disclosure: Horvitz & Levy LLP filed an amicus letter in support of the defendant's petition for review.