Robert W. Johnson & Associates

FEATURED CASE

AN ARIZONA JURY AWARDS $19.2 MILLION IN DAMAGES AGAINST NATIONAL CHAIN OF SKILLED NURSING FACILITIES

Mesa, AZ: Robert W. Johnson & Associates was retained to provide economic testimony quantifying punitive damages.

Citation: The Estate of Doris L. Cote, et al. v. Five Star Quality Care, Inc., et al., Arizona Superior Court, Maricopa County, Case No. CV2012-094285. Plaintiff’s attorneys Arthur E. Lloyd of Lloyd & Robinson PLLC and H. Michael Wright of Udall Shumay, PLC, Mesa, California. The judge was the Honorable Mark Aceto.

Case Synopsis: Plaintiff Doris Cote was 86 years old, had a pacemaker and suffered from kidney disease. She was first admitted to The Forum at Desert Harbor on November 5, 2011 to recuperate from septic arthritis in her shoulder. Five Star Quality Care, Inc. is the operator for The Forum at Desert Harbor.

While living at this facility, Ms. Cote became dehydrated, was overmedicated with painkillers, allowed to fall multiple times, malnourished and lost 11 pounds (or nine percent of body weight) in the first three weeks of her stay. She eventually developed a pressure ulcer on her sacrum, which later became infected with Methicillin-resistant Staphylococcus aureus, known as MRSA.

Ms. Cote was discharged to another nursing home in January 2012. She died six months later from pneumonia.

According to Plaintiff's counsel Arthur Lloyd, the staff at the Forum were aware of their misconduct because federal investigators told the nursing home’s administrators in 2011 that sufficient steps were not being taken to keep patients from developing pressure ulcers (bedsores).

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The Forum agreed to make immediate changes which should have been completed before Ms. Cote’s admission in November 2011. They claimed that they made these commitments in an attempt to stave off further scrutiny from the government.

Compensatory Result: Before trial, Five Star had offered Ms. Cote’s estate a settlement of $500,000. On May 22, 2012, the 10-member jury deliberated for one day after hearing two weeks of testimony before deciding unanimously that the Forum at Desert Harbor was responsible for Ms. Cote's pain and suffering and returned a verdict of $2.5 million.

Punitive Damages Testimony: This verdict led to the second phase of the trial. Since Mr. Johnson was not available to testify in person regarding punitive damages, he was asked to provide trial preservation testimony a few weeks earlier. Mr. Johnson’s primary task was to frame, in economic terms, the “financial condition” of Five Star Quality Care, Inc. The term “financial condition” encompasses the areas of financial health, wealth and economic status.

Mr. Johnson presented evidence from Five Star's 10-K financial statements filed with the Securities and Exchange Commission (SEC). He explained that Five Star had revenues of $1 billion or more from 2010 to 2014. Their average daily revenue in 2014 was $3.6 million. Although Five Star reported negative net income for the last two years, they had positive cash flow profits of $22 million, $21 million in cash and a net worth of $226 million for 2014. In addition, Five Star had a stock market valuation of $212 million on March 24, 2015.

On May 28, 2015, the jury returned a punitive damages verdict of $16.7 million for the plaintiffs. The compensatory verdict of $2.5 million plus the punitive damages verdict of $16.7 million yielded a total of $19.2 million.

Attorney’s Comments: Immediately after the verdict, Plaintiff’s attorney Arthur Lloyd commented:

"Mr. Johnson’s research of Five Star’s financials was very crucial in the punitive damages phase.

His analysis enabled me to put into perspective what I wanted the jury to award Ms. Cote’s estate. I explained to the jury that Five Star had a valuation on the New York Stock Exchange of over $200 million and annual revenues of over $1 billion.

I asked the jury to force Five Star to reform their practices by returning a verdict that would ‘get past middle management and get into the boardroom.’ I asked the jury to award between $18 and $20 million. The equivalent of a 5 day ‘time-out’ based on their daily revenue of $3.6 million."