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FEATURED CASE

$23 MILLION PUNITIVE DAMAGES AWARD AGAINST GIANT ASSISTED-LIVING COMPANY


Robert W. Johnson & Associates was retained to provide economic testimony quantifying punitive damages.

Location: Sacramento, CA

Case: Joan Boice v. Emeritus Corporation, et al.

Court: Sacramento Superior Court, Case No. 34-2009-00063714.

Plaintiff’s Attorney: Attorney Lesley Ann Clement of Clement & Associates, Sacramento, California.

Judge: The Honorable Judy Holzer Hersher.

Case Synopsis: Plaintiff Joan Boice was 82 years old and suffering from Alzheimer's disease.  As a result of her condition, her children moved her into Emeritus Assisted Living Facility at Emerald Hills in Auburn, CA on September 12, 2008.

Ms. Boice came into the facility using a walker, but was very much ambulatory.  Within a few weeks, she had fallen down and injured her head.  From this point forward, she was confined to a wheelchair and her bed.

Emeritus marketed to the elderly and their families that they were the nation's largest leader in assisted living and dementia care with highly trained staff members.  It turns out that none of the staff at the Auburn facility had the state-mandated training or the qualifications claimed by Emeritus. 

The staff did not have the time or the training to care for Ms. Boice.  Due to severe understaffing at the facility, she did not receive the care she required and she declined rapidly.

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Within three months after entering the facility, Ms. Boice had lost 20 pounds, developed contractures and developed multiple full-thickness pressure ulcers. The pressure ulcers she developed were treated by unlicensed staff for nearly two months before any notice was given to the physician or the family.

The family removed her to another facility on December 4, 2008, but she died on February 14, 2009 as a result of her injuries.  Plaintiff's counsel stated that Emeritus's neglect was a substantial contributing factor in Joan Boice's death.

Compensatory Result: On March 6, 2013 after 2 days of deliberation, the jury returned a verdict of $3,875,000 for pain and suffering and $250,000 for the wrongful death suit.  The jury also found that Emeritus was guilty of fraud, malice and oppression.

Punitive Damages Testimony: This verdict led to the second phase of the bifurcated trial. Mr. Johnson’s primary task was to frame, in economic terms, the “financial condition” of Emeritus Corporation. The term “financial condition” encompasses the areas of financial health, wealth and economic status.

Mr. Johnson presented evidence from Emeritus's 10-K financial statements filed with the Securities and Exchange Commission (SEC).  He explained that Emeritus nearly doubled their revenue to $1.57 billion from 2008 to 2012. Their average daily revenue in that year was $4.3 million.  Although Emeritus reported negative net income for several years, they had positive cash flow profits increasing to $116 million in 2012. In addition, Emeritus paid their Co-CEOs over $22.6 million in 2011 according to their 2012 Proxy Statement.

After Mr. Johnson had testified as to the defendant's financial condition, the jury deliberated for just a few hours before returning a $22,963,943.81 verdict for the plaintiffs. 

Attorney’s Comments:  Plaintiff attorney Lesley Clement commented: "Mr. Johnson was instrumental in the punitive damages phase. 

“Mr. Johnson’s review of Emeritus's financials enabled him to explain to the jury how a corporation making $1.5 billion in sales can appear to be losing money.  At first blush, it is perceived that Emeritus is losing money.  However, he was able to explain to the jury that due to their rapid expansion, Emeritus was taking advantage of running large amounts of depreciation (a non-cash expense) through their books.  Without the depreciation deduction, the loss turned into positive cash flow for Emeritus. This analysis provided the real metric for Emeritus' true profitability.

“I asked the jury to give Emeritus a '12-day timeout' based on their average daily revenue of $4.3 million.  Although the jury gave me less than half, it was enough to get their attention and send a message."