Judge: Daniel S. Murphy, Case: 21STCV40440, Date: 2022-10-21 Tentative Ruling

Case Number: 21STCV40440    Hearing Date: October 21, 2022    Dept: 32

BACKGROUND

            On November 3, 2021, Plaintiff Arcelia Martinez, through her guardian ad litem, Martha Laguna, filed this action for elder abuse and negligent hiring against Defendants Shlomo Rechnitz (“Rechnitz”), San Gabriel Healthcare & Wellness Centre LP (“San Gabriel”), G4 Wellness GP, LLC (“G4”), Rockport Administrative Services, LLC (“Rockport”), and Steven Stroll (“Stroll”). The lawsuit stems from alleged injuries Plaintiff sustained while she was a resident at a skilled nursing facility. Defendants Rechnitz and Stroll have since been dismissed.

            The matter came on for trial on August 1, 2022, and the jury found that Defendants San Gabriel and Rockport were liable to Plaintiff. The jury additionally awarded $4 million in punitive damages against Rockport. Judgment was entered on August 23, 2022.

LEGAL STANDARD

Welfare & Institutions Code §15657 expressly mandates an award of attorneys’ fees and costs to Plaintiff in this case. Welfare & Institutions Code §15657 provides in pertinent part:

Where it is proven by clear and convincing evidence that a defendant is liable for physical abuse as defined in Section 15610.63, or neglect as defined in Section 15610.57 … the following shall apply, in addition to all other remedies otherwise provided by law: (a) The court shall award to the plaintiff reasonable attorney's fees and costs. The term “costs” includes, but is not limited to, reasonable fees for the services of a conservator, if any, devoted to the litigation of a claim brought under this article.

(Welfare & Institutions Code §15657.)

Fee and costs statutes phrased in mandatory terms (i.e., the court “shall” award fees and costs), such as Welfare & Institutions Code §15657 here, afford no discretion to deny fees and costs to a prevailing party. (See, Schroeder v. Irvine City Council (2002) 97 Cal.App.4th 174, 194.)  Further, a prevailing party is entitled to recover costs as a matter of right in any action. (Code of Civil Procedure §1032.) Attorneys’ fees are included in the definition of costs when a fee award is authorized by statute. (Code of Civil Procedure §1033.5(a)(10).)

DISCUSSION

            Plaintiff moves pursuant to Welfare & Institutions Code §15657 for attorney fees in the amount of $1,295,142.00 and costs of $70,002.47.

A. Entitlement to Fees and Costs

            Under Welfare & Institutions Code §15657, a prevailing plaintiff is entitled to reasonable attorney fees.  Because Plaintiff was successful in her elder abuse action, she is entitled to attorney fees under Welfare & Institutions Code §15657.

B. Reasonableness of Fees

1. Reasonableness of Hourly Rates

Plaintiff retained the law offices of Garcia & Artigliere to represented her in connection with this action. 

The hourly rate claimed by Garcia & Artigliere attorneys and support person who worked on this case are as follows:  Klarissa G. Aguilar, Paralegal, $125.00/hr; William M. Artigliere, Attorney, $700.00/hr; Rosalie E. Baladejo, Attorney, $425.00/hr; Stephanie L. Barenos, Paralegal, $150.00/hr; Ashley M. Beers, Paralegal, $150.00/hr; Madison B. Carroll, Attorney, $325.00/hr; Christopher Chavez, Paralegal, $125.00/hr; Cara M. Crownover, Attorney, $400.00/hr; Anna V. Fejes, Paralegal, $125.00/hr; Calvin B. Forsythe, Paralegal, $150.00/hr; Stephen M. Garcia, Attorney, $900.00/hr; Cathleen L. Hiltbrand, Paralegal, $150.00/hr; Amie M. Lonza, Paralegal, $125.00/hr; David M. Medby, Attorney, $650.00/hr; Scott M. Milewski, Paralegal, $175.00/hr; Aurelia P. Olivas, Paralegal, $150.00/hr; Tonya L. Picken, Paralegal, $150.00/hr; Karen L. Rush, Paralegal, $150.00/hr; Christina Salazar, Paralegal, $125.00/hr; Thomas S. Tai, Attorney, $325.00/hr; C. Ryan Wood, Attorney, $575.00/hr. 

“In determining hourly rates, the court must look to the ‘prevailing market rates in the relevant community.’”  (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 100.)  In making this determination, “[t]he court may rely on its own knowledge and familiarity with the legal market.”  (Ibid.) 

The Court finds that $500.00 per hour is the reasonable hourly rate in this case for plaintiff’s attorneys.

2. Reasonableness of Number of Hours Billed

The total number of billable hours claimed by Plaintiff’s attorneys is 1258.10 hours.

The hours claimed by Garcia & Artigliere attorneys and support person who worked on this case are as follows:  Klarissa G. Aguilar, Paralegal, 40.70; William M. Artigliere, Attorney, 177.40; Rosalie E. Baladejo, Attorney, 40.70; Stephanie L. Barenos, Paralegal, 0.5; Ashley M. Beers, Paralegal, 5.50; Madison B. Carroll, Attorney, 13.60; Christopher Chavez, Paralegal, 29.25; Cara M. Crownover, Attorney, 35.80; Anna V. Fejes, Paralegal, 37.80; Calvin B. Forsythe, Paralegal, 60.00; Stephen M. Garcia, Attorney, 389; Cathleen L. Hiltbrand, Paralegal, 18.25; Amie M. Lonza, Paralegal, 46.50; David M. Medby, Attorney, 64.40/hr; Scott M. Milewski, Paralegal, 197.70/hr; Aurelia P. Olivas, Paralegal, 31.00/hr; Tonya L. Picken, Paralegal, 6.45/hr; Karen L. Rush, Paralegal, 5.50; Christina Salazar, Paralegal, 8.00; Thomas S. Tai, Attorney, 3.78; C. Ryan Wood, Attorney, 30.50. 

            Plaintiff claims that the number of hours billed is unreasonable. 

The Court finds that the reasonable hours spent by plaintiff’s attorneys in this matter are 1200 hours.  

In making this determination, the court found that some of the billing was excessive, especially for attorneys as experienced as plaintiff’s counsel. Plaintiff had twenty-one attorneys and support persons working on this case.  While plaintiff has the right to have multiple attorneys, the court finds that some of the attorneys’ work were duplicative and redundant.

C. Multiplier

Plaintiff requests a lodestar multiplier enhancement. 

 The Court finds that an upward adjustment to the lodestar is not warranted in this action. This was a straightforward elder abuse case.  There is no evidence that Plaintiff’s counsel was precluded from taking other cases. A downward adjustment to the lodestar is not warranted either as Plaintiff’s counsel took this case on a contingency.

D. Entitlement and Reasonableness of Costs

Plaintiff requests a total of $70,002.47 in costs and expenses.  Defendants do not disputes these costs.

CONCLUSION

Based on the foregoing reasons, Plaintiff’s motion for attorney fees is GRANTED.  The Court awards $600,000.00 in attorney fees.  Plaintiff is also awarded $70,002.47 in costs and expenses.

BACKGROUND

            On November 3, 2021, Plaintiff Arcelia
Martinez, through her guardian ad litem, Martha Laguna, filed this action for
elder abuse and negligent hiring against Defendants Shlomo Rechnitz (“Rechnitz”),
San Gabriel Healthcare & Wellness Centre LP (“San Gabriel”), G4 Wellness
GP, LLC (“G4”), Rockport Administrative Services, LLC (“Rockport”), and Steven
Stroll (“Stroll”). The lawsuit stems from alleged injuries Plaintiff sustained
while she was a resident at a skilled nursing facility. Defendants Rechnitz and
Stroll have since been dismissed.

            The matter came on for trial on
August 1, 2022, and the jury found that Defendants San Gabriel and Rockport
were liable to Plaintiff. The jury additionally awarded $4 million in punitive
damages against Rockport. Judgment was entered on August 23, 2022.

            Defendant Rockport presently moves for
a new trial and judgment notwithstanding verdict on the grounds that the jury’s
findings and punitive damages award are unsupported by evidence. Rockport also
moves to set aside the judgment and enter a new judgment clarifying the precise
amount owed, which Plaintiff does not oppose.  

LEGAL STANDARD

  “The court, before the expiration of its power
to rule on a motion for a new trial, either of its own motion, after five days’
notice, or on motion of a party against whom a verdict has been rendered, shall
render judgment in favor of the aggrieved party notwithstanding the verdict
whenever a motion for a directed verdict for the aggrieved party should have
been granted had a previous motion been made.” (Code Civ. Proc., § 629, subd.
(a).) “A motion for judgment notwithstanding the verdict may be granted only if
it appears from the evidence, viewed in the light most favorable to the party
securing the verdict, that there is no substantial evidence in support.” (Sweatman
v. Department of Veterans Affairs (2001) 25 Cal.4th 62, 68.)    

A motion for new trial may be made on the
grounds of, inter alia, excessive or inadequate damages and
insufficiency of the evidence to justify the verdict. (Code Civ. Proc., § 657.)
“A new trial shall not be granted upon the ground of insufficiency of the
evidence to justify the verdict or other decision, nor upon the ground of excessive
or inadequate damages, unless after weighing the evidence the court is
convinced from the entire record, including reasonable inferences therefrom,
that the court or jury clearly should have reached a different verdict or
decision.” (Ibid.)

DISCUSSION

I.
Managing Agent

Under Civil Code section 3294(b), for a
corporate employer to be liable for punitive damages, the malicious acts giving
rise to punitive damages must have been ratified by an officer, director, or managing
agent of the corporation. “The managing agent must be someone who exercises
substantial discretionary authority over decisions that ultimately determine
corporate policy.” (White v. Ultramar (1999) 21 Cal.4th 563, 573.) “‘[C]orporate
policy’ is the general principles which guide a corporation, or rules intended
to be followed consistently over time in corporate operations.” (Cruz v.
Homebase (2000) 83 Cal.App.4th 160, 167.) The Elder Abuse Act requires the
same finding before damages may be imposed against an employer. (Welf. &
Inst. Code, § 15657(c).)

Defendant argues that neither the finding
of elder abuse nor the award of punitive damages is supported by the evidence
because no managing agent personally committed or ratified malicious conduct.
The jury found that no officer, director, or managing agent personally engaged
in malicious conduct. Instead, the jury imposed liability based on ratification
by an officer, director, or managing agent. The individual at issue here is Amy
Johnson, Rockport’s Vice President of Operations. Ms. Johnson is indisputably
not an officer or director. However, the parties dispute whether Ms. Johnson is
a managing agent.

In her position, Ms. Johnson was
responsible for overseeing services provided at eight skilled nursing
facilities, including the Ivy Creek facility where Plaintiff stayed. Ms.
Johnson was tasked with ensuring the facilities’ compliance with state and federal
regulations, as well as ensuring quality of care to residents, responsibilities
she agreed were critical because of the health and safety of residents. (Plntf.’s
Ex. 6 at 57:10-58:5.) Ms. Johnson also oversaw accounting and human resources
at the eight facilities. (Plntf.’s Ex. 5 at 8:16-27.) Defendant points out that
Rockport manages 70 facilities, arguing that as a result, Ms. Johnson does not
exercise discretionary authority over a significant portion of Rockport’s
business by overseeing only eight such facilities. However, the requirement is for
an individual to exercise authority over a significant “aspect” of a
corporation’s business, not necessarily a majority of it. (See White, supra,
21 Cal.4th at p. 577.) Ms. Johnson’s responsibilities affect a significant
aspect of Rockport’s business: the safety of elderly residents, compliance with
regulations, accounting, and human resources. Therefore, Amy Johnson constitutes
a managing agent of Rockport.

II.
Malicious Conduct

            Defendant argues that even if Amy
Johnson could be considered a managing agent, there is no evidence that she ratified
malicious conduct. In opposition, Plaintiff argues that Ms. Johnson: (1) failed
to ensure compliance with Ivy Creek policies and failed to ensure Ivy Creek had
fall prevention intervention for Plaintiff; (2) was not aware of how many times
Plaintiff fell; (3) failed to ensure that Ivy Creek staff were attentive of
Plaintiff; (4) failed to ensure continuity of care for Plaintiff; (5) failed to
ensure adequate attendance at meetings regarding Plaintiff’s care; and (6)
failed to ensure post-fall checks and meetings after most of Plaintiff’s 13
falls. (Opp. 9:1-21; Plntf.’s Ex. 5, 7.) Defendant does not dispute this
evidence. A reasonably jury could have found that Ms. Johnson’s actions constitute
authorizing or adopting malicious conduct.  

III.
Amount

            Defendant argues that even if an
award of punitive damages is justified, the $4 million award in this case is
excessive. Defendant argues that it has no ability to pay that amount and that
the amount is constitutionally impermissible.

            a. Ability to Pay

            A punitive damages award may be reversed
for the sole reason that it exceeds the defendant’s ability to pay, regardless
of the egregiousness of the conduct. (Adams v. Murakami (1991) 54 Cal.3d
105, 111-12.)

            In its opening brief, Defendant
cited evidence that: (1) in 2020, it had no profits and a negative net worth;
(2) in 2021, it had a negative net worth and would have had a $310,000 loss but
for a COVID relief loan; and (3) in the first quarter of 2022, it had $231,000
in profits but a negative $11.3 million net worth. (Mtn. 12:1-8.) Defendant had
$2.49 million on its 2022 balance sheet, of which $1.45 million was allegedly
held on behalf of other facilities and $500,000 was earmarked for the IRS.
(Cowdrey Decl. ¶ 18, Ex. 4, 7.)

            Plaintiff cites to evidence that Defendant
was paid 5.5% of gross revenues from 71 skilled nursing facilities in 2021 (Opp.
13.), and Defendant had gross revenues of $56,000,000.00 (Reply 12.)   

With Defendant having gross revenues of
$56,000,000 and $2.49 million on its 2022 balance sheet, the court finds that
Defendant has the ability to pay punitive damages.    

b. Constitutional Limits

“The Due Process Clause of the Fourteenth
Amendment prohibits the imposition of grossly excessive or arbitrary
punishments on a tortfeasor.” (State Farm Mut. Auto. Ins. Co. v. Campbell (2003)
538 U.S. 408, 416.) Although there is no “bright-line ratio which a punitive
damages award cannot exceed,” the law has developed such that “in practice, few
awards exceeding a single-digit ratio between punitive and compensatory
damages, to a significant degree, will satisfy due process.” (Id. at p.
425.) At the same time, single-digit ratios are not presumptively valid, “[e]specially
when the compensatory damages are substantial or already contain a punitive
element.” (Nickerson
v. Stonebridge Life Ins. Co. (2016) 5 Cal.App.5th 1, 25.) The most important
factor is the egregiousness of the defendant’s conduct. (BMW of N. Am. v.
Gore (1996) 517 U.S. 559, 575.)

Here, the compensatory damages award was
$287,763.40, resulting in an approximately 13:1 ratio when compared against the
$4 million punitive damages award. Ratios “significantly greater than 9 or 10
to 1 are suspect and, absent special justification (by, for example, extreme
reprehensibility or unusually small, hard-to-detect or hard-to-measure
compensatory damages), cannot survive appellate scrutiny under the due process
clause.” (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th
1159, 1182.)

Plaintiff argues that a higher ratio is justified
in this case because Plaintiff was awarded a meager $7,763.40 in economic
damages. (Opp. 15:4-6.) However, this overlooks the award of $280,000 in
noneconomic damages. The compensatory damages in this case were not unusually
small, hard to detect, or hard to measure. (See Gober v. Ralphs Grocery Co.
(2006) 137 Cal.App.4th 204, 222 [compensatory damages ranging from $50,000 to
$75,000 were not unusually small].) Moreover, a substantial compensatory award
justifies a lower punitive award, as the compensatory damages likely include a
punitive element already. (See Roby v. McKesson Corp. (2009) 47 Cal.4th 686,
718 [“a substantial compensatory award for emotional distress . . . may be
based in part on indignation at the defendant's act and may be so large as to
serve, itself, as a deterrent”]; Contreras-Velazquez v. Family Health
Centers of San Diego, Inc. (2021) 62 Cal.App.5th 88, 109 [“the sheer amount
of the damages that were awarded for noneconomic losses . . . shows the
compensatory damages award is to some extent duplicative of the punitive
damages award”].) Therefore, a 13:1 ratio is unjustified under the facts of
this case.

At the same time, a ratio as low as 1:1 is
also unwarranted. The facts of this case are more egregious than those in State
Farm in that “repeated misconduct is more reprehensible than an
individual instance of malfeasance.” (State Farm, supra, 538 U.S. at p.
423.) In State Farm, the plaintiffs “identified scant evidence of
repeated misconduct of the sort that injured them,” and there was no physical
harm. (Id. at pp. 423, 426.) By contrast, the repeated failures in this
case resulted in Plaintiff falling no less than 13 times, resulting in significant
pain and suffering. Therefore, a ratio of 6:1 better reflects the reprehensibility
of Defendant’s misconduct.

IV.
Proper Procedure to Address Excessive Damages

“Where the evidence supports a plaintiff's
entitlement to punitive damages but the amount of the award is challenged as
unreasonably high, the court cannot reduce the amount of damages on a motion
for JNOV.” (Ena North Beach, Inc. v. 524 Union Street (2019) 43
Cal.App.5th 195, 210.) “The Legislature has provided an exclusive remedy for a
trial court to employ where some damages are properly awarded, but the amount is
excessive. That is through a remittitur pursuant to Code of Civil Procedure
section 662.5.” (Ibid.) Under Section 662.5, “[i]f the ground for
granting a new trial is excessive damages, [the court may] issue a conditional
order granting the new trial unless the party in whose favor the verdict has
been rendered consents to the reduction of so much thereof as the court in its
independent judgment determines from the evidence to be fair and reasonable.”
(Code Civ. Proc., § 662.5(a)(2).)

The Court determines that a ratio of approximately
7:1 is appropriate given the facts of this case, resulting in punitive damages
of $2,000,000.00.

As discussed above, there is sufficient
evidence to justify punitive damages, and Defendant can pay this lower number for
punitive damages. 

CONCLUSION

            Defendant Rockport’s motion for
judgment notwithstanding verdict is DENIED. Defendant’s motion for new trial is
conditionally GRANTED, unless Plaintiff consents to the remitted punitive damages
reduction of $2,000,000.00. (See Code Civ. Proc., § 662.5(a)(2).)

            Defendant’s unopposed motion to set
aside judgment and enter a new judgment with clarifying language is GRANTED.