Superior Court of Pennsylvania Holds Management Companies of Long-Term Care Facilities May Be Vicariously Liable for Corporate Negligence

On August 8, 2017, nearly twelve years after Plaintiff Robert Scampone initiated suit against skilled nursing facility Highland Park Care Center (Highland Park) and its management company Grane Healthcare Company (Grane) following the death of his mother, Madeline Scampone, the Superior Court of Pennsylvania held that Grane, as Highland Park’s management company, could be held vicariously liable for corporate negligence.

By way of background, in January 2004, Highland Park Care Center resident Madeline Scampone sustained a urinary tract infection, dehydration, malnutrition and bedsores. The following month, Ms. Scampone suffered a heart attack and died. In September 2005, her son and executor Richard Scampone commenced suit against Highland Park, Grane and several other entities, claiming Grane was vicariously liable because some of its employees oversaw patient care at Highland Park.

In 2007, Grane was granted a compulsory nonsuit at trial after the close of Mr. Scampone’s evidence, leaving Highland Park as the sole defendant. The jury determined that Highland Park was vicariously and directly liable, and awarded Mr. Scampone compensatory damages. Mr. Scampone appealed, claiming the trial court erred in granting a nonsuit in favor of Grane and refusing to submit punitive damages to the jury. The Superior Court ruled that Grane was subject to (1) vicarious liability for the actions of its employees; and (2) direct corporate liability due to the control it exercised over management of the facility. The Court further held that there was sufficient evidence to permit the question of punitive damages to be submitted to the jury.

Grane and Highland Park appealed to the Supreme Court, which held that both defendants could not be held liable for a breach of the same non-delegable duty. The High Court affirmed the Superior Court’s reversal of nonsuit in favor of Grane and left it for the trial court to determine whether the defendants had a duty to Ms. Sampone. On remand, the trial court re-entered a compulsory nonsuit in favor of Grane, noting that its duty was to provide management services to Highland Park rather than to care and treat for Madeline Scampone. Further, the trial court conducted a new jury trial as to punitive damages solely against Highland Park. In April 2015, the jury returned a verdict in favor of Highland Park. After his post-trial motion was denied, Mr. Scampone appealed, contending the trial court erred, inter alia, by granting a compulsory nonsuit in favor of Grane and by denying him a new punitive damages trial against Highland Park.

In its August 8, 2017 opinion, the Superior Court overturned the nonsuit. In doing so, the Court cited to the Restatement (Second) of Torts § 324A, which states that one who undertakes to render services to another which are necessary for the protection of a third person is subject to liability to the third person for failure to exercise reasonable care in performing the undertaking. As such, the Court found that Grane had a duty to Madeline Scampone for the foregoing reasons:

1. The Court interpreted the evidence of record, including the management services contract between Grane and Highland Park, to mean it was Grane’s duty to create and enforce policies and procedures to ensure quality patient care.
2. Even though Highland Park set the staffing levels, Grane ultimately approved the budget. Employees of Highland Park testified that, despite their complaints to management, the facility was understaffed, making it difficult to provide patients with the state-mandated number of care hours.
3. Grane hired and trained Highland Park’s registered nurses and appointed its Director of Nursing. Additionally, Grane employed nurse consultants, supervisory personnel who visited Highland Park weekly to oversee patient care. During their visits, the nurse consultants reviewed medical charts and provided hands-on patient care to residents, including Ms. Scampone.
4. Grane’s employee supervised Highland Park’s administrator.
5. Grane established and administered a quality assurance program.

Based on the above, the Court held that Grane should have recognized that its contractual undertaking to manage and oversee Madeline Scampone’s care was necessary for her protection. Because Highland Park employees testified they were too short-handed to administer food and water or monitor and test Ms. Scampone for infection, the Court noted that a jury could find that lack of sufficient staffing contributed to the patient’s death. However, the Superior Court, echoing the Supreme Court in this same case, held that only Highland Park, the licensed operator, may be directly liable for corporate negligence. Grane, as the management company, may be subject to vicarious liability for the actions of its nurse consultants, who oversaw Highland Park staff and failed to ensure that patients received appropriate care. Simply put, because “vicarious liability and direct corporate liability [are] distinct theories of recovery,” both Grane and Highland Park cannot be liable for direct negligence.

Notably, Plaintiff presented evidence at trial that the defendants engaged in various falsifications. Highland Park, which had notice of upcoming state surveys, temporarily increased staffing levels during those periods. The facility’s administrator directed an aide to “fill in the holes” in patient ADL sheets and falsify medication administration records. Grane’s nurse consultants were observed falsifying treatment records.

The Supreme Court ordered a new damages trial against Grane. Given the evidence that Highland Park employees colluded with Grane employees to falsify records, the Court also ordered a new trial against Highland Park to determine whether it could be held liable for punitive damages.

The Superior Court’s opinion is accessible on the Unified Judicial System of Pennsylvania’s website, Case Nos. 716 WDA 2015, 717 WDA 2015, and 1354 WDA 2015.