Piercing the Corporate Veil and Naming an Individual Nursing Home Owner in a Liability Lawsuit for Wrongful Death or Injury
Many states, including Florida, shelter passive owners of nursing homes from civil liability. This means you cannot sue the nursing home owner unless they were actively negligent in resident care or facility management. You can, however, pierce the corporate veil and sue the owner if you can show tortious conduct individually perpetrated by that owner. Typically, this means a lack of budgeting for the facility, or a failure to provide appropriate policies and procedures to the facility.
Our Florida nursing home abuse attorneys routinely prevail on the Defendant’s attempts to keep individual nursing home owners out of negligence lawsuits.
Below is a brief filed dealing with individual nursing home owner liability in a nursing home neglect lawsuit. Our attorneys prevailed on this argument.
PLAINTIFF’S BRIEF REGARDING NURSING HOME OWNER’S LIABILITY, DEFEATING CORPORATE SHIELD AND PIERCING THE CORPORATE VEIL
On August 3, 2018, Plaintiff James PLAINTIFF, as personal representative of the estate of Michael PLAINTIFF, filed a Complaint against Defendant MR. OWNER (“OWNER”) and SHELL COMPANY Nursing Centers, Inc. (“SHELL COMPANY”), among others, for alleged negligence leading to bedsores, injuries and infections acquired at SKILLED NURSING FACILITY that caused his wrongful death. On September 18, 2018 and September 14, 2018, OWNER and SHELL COMPANY filed a Motion to Quash Service and/or Dismiss Plaintiff’s Complaint For Lack of Personal Jurisdiction as well as an Affidavit. On February 21, 2019, at a hearing on the motion, JUDGE instructed Plaintiff and Defendant to write a brief regarding the applicability of the corporate shield doctrine for OWNER and piercing the corporate veil for SHELL COMPANY . See Exhibit A “February 21 Transcript” at 31-37. Plaintiff will explain below why the corporate shield does not apply to OWNER as Chapter 400 specifically allows for suits against “managing employees” and “management companies” of the Licensee and the Complaint alleges tortious acts by OWNER that occurred in Florida. Plaintiff will then explain why SHELL COMPANY’s activities meet the Florida Long-Arm Statute and therefore does not need to pierce the corporate veil for jurisdiction.
I. LEGAL ANALYSIS OF PIERCING THE CORPORATE SHIELD IN FLORIDA NURSING HOME LITIGATION
a. Chapter 400.023 of the Florida Statutes Allows for Relief Against Managing Employees and Management Companies of the Licensee
Effective June 13, 2014, the Florida Legislature passed a law stating “[a]n exclusive cause of action for negligence or a violation of residents’ rights, which alleges direct or vicarious liability for the personal injury or death of a nursing home resident arising from such negligence or violation of rights and which seeks damages for the injury or death may be brought only against the licensee, the licensee’s management or consulting company, the licensee’s managing employees, and any direct caregivers, whether employees or contractors. A passive investor is not liable under this provision.” Fla. Stat. Ann. § 400.023(1) (West 2014) (emphasis added).
According to Chapter 400.023, “Licensee” is defined as “an individual, corporation, partnership, firm, association, governmental entity, or other entity that is issued a permit, registration, certificate, or license by the agency and that is legally responsible for all aspects of the operation of the nursing home facility.” Fla. Stat. Ann. § 400.023(2)(a).
“Management or consulting company” is defined as “an individual or entity who contracts with, or receives a fee from, a licensee to provide any of the following services for a nursing home facility:
1. Hiring or firing of the administrator or director of nursing;
2. Controlling or having control over the staffing levels at the facility;
3. Having control over the budget of the facility; or
4. Implementing and enforcing the policies and procedures of the facility.”Fla. Stat. Ann. § 400.023(2)(b).
While “managing employee” is not defined, “passive investor” is defined as “an individual or entity that has an interest in a facility but does not participate in the decision making or operations of the facility.” Fla. Stat. Ann. § 400.023(2)(c). There are no residency requirements, or Florida connection requirements specified in Chapter 400 to bring suit against the parties in § 400.023(1). See generally Fla. Stat. Ann. § 400.023(1) (West 2014).
b. The corporate shield does not apply to non-resident employees or officers who have committed alleged torts in Florida.
In their Motion, Defendant incorrectly states that “[i]n order for a non-resident corporate officer to be subject to personal jurisdiction in Florida, it must be established that the officer acted not only in his capacity as agent for the corporation, but that he acted individually, for his own benefit, and thereby caused harm to the forum state.” See Defendant’s Motion page 5-6, citing Doe v. Thompson, 620 So.2d 1004, 1006 (Fla. 1993). Defendant’s statement ignores the Kitroser case, wherein the Supreme Court distinguishes Doe. In Kitroser v. Hurt, 85 So.3d 1084, 1087 (Fla. 2012), the Florida Supreme Court distinguishes Doe by clarifying that the corporate shield doctrine only applies to a “nonresident employee-defendant who works only outside Florida, commits no acts in Florida, and has no personal connection with Florida.” Id. (emphasis added).
The Kitroser case arises from a trucking accident where the Plaintiff died after being hit by an employee/driver of an Airgas truck. Plaintiffs added 5 non-resident employees to the amended complaint, alleging that they were liable because of their personal supervision or training of the driver, as they should have known the driver was careless and/or dangerous. Similar to the underlying OWNER case, “[t]he crux of the Airgas employees’ argument is that [Plaintiff] cannot allege sufficient jurisdictional facts because the employees were not acting for personal benefit or ‘personally’ in Florida.” Id. at 1087. The non-resident Defendants alleged “they acted only in pursuit of corporate interests while in Florida rather than their own personal interests” thus precluding personal jurisdiction. Id. at 1088.
The Supreme Court disagreed with the Defendant’s argument. The Court noted that the Plaintiff “has alleged without controversion that while the Airgas employees were personally in Florida, each engaged in some form of negligent conduct, either by training or supervision of [truck driver] or both, which contributed to [the Decedent’s] death. The Airgas employees do not contest that they were in Florida, nor do they contest that they engaged in some form of conduct, training, or supervision of [truck driver] in Florida. The corporate shield doctrine, therefore, is inapplicable and does not exclude the Airgas employees from the exercise of personal jurisdiction by Florida courts.” Id. at 1089 (emphasis added).
The Court held that “[w]here an individual, nonresident defendant commits negligent acts in Florida, whether on behalf of a corporate employer or not, the corporate shield doctrine does not operate as a bar to personal jurisdiction in Florida over the individual defendant. Jurisdiction properly applies to “any person” who commits torts ‘within this state.’ § 48.193, Fla. Stat. (2011). To hold otherwise would be tantamount to providing corporate employees with a form of diplomatic immunity and would abolish the legislative goal inherent in adopting a long-arm jurisdictional statute: to provide an in-state forum to hold those responsible who commit negligent acts in Florida.” Id. at 1090 (emphasis added).
c. Kitroser is distinguishable from Doe, Rambo, LaFreniere, Clement and other cases where the corporate shield applied
Defendant cited certain cases to support their argument that the corporate shield should apply to OWNER, which are easily distinguishable from Kitroser and the instant case. In each of the cases below, there was no alleged negligent act that occurred within the State of Florida. In Kitroser, in contrast to the below cases, the alleged negligent acts completed by the non-resident employees were physically done within the state of Florida. It is worth noting that all cases except for LaFreniere were decided before Kitroser.
i. Doe v. Thompson, 620 So.2d 1004 (Fla. 1993) (pre-Kitroser)
The Supreme Court in Kitroser directly distinguishes Doe. The plaintiff in Doe was allegedly sexually assaulted in a convenience store owned and operated by Southland Corporation. The plaintiff sued the CEO of Southland alleging inadequate security. The plaintiff failed to show that the CEO “act[ed] physically in Florida”. The only connection the plaintiff made between the CEO and the Florida convenience store was his statement saying “the buck stops here”. Doe v. Thompson, 620 So.2d 1004, 1006 (Fla. 1993). The Court in Doe held that a CEO could not be haled into a Florida court solely “by virtue of his position”. Id.
ii. Carter v. Rambo, 925 So.2d 353 (Fla. 5th DCA 2006) (pre-Kitroser)
In Rambo, plaintiff filed suit against a nursing home, including an officer of a related health group. The officer submitted an affidavit that refuted all allegations in the complaint. The only connection that the officer had with the Florida facility was that “he signed business reports…in a representative capacity”. The Court held that the trial court did not have personal jurisdiction over the defendant, an Officer of a health group, because plaintiff never alleged that the defendant committed any negligent acts in Florida. The Rambo case is distinguished in Kitroser along with a series of other Florida cases where the corporate shield applied because the plaintiff introduced no evidence that defendants had committed tortious acts in Florida. Kitroser, 85 So.3d at 1089.
iii. LaFreniere v. Craig-Myers, 2018 WL 6816547 (Fla. 1st DCA 2018)
In LaFreniere, an employee of Otis Elevator was killed while performing an inspection. The plaintiffs sued, among other parties, the general counsel of Otis Elevator. The Court, citing Kitroser, states that “Here, all pertinent paragraphs in Appellee’s amended complaint alleged that Appellant acted “in the course and scope of her employment and as corporate officer.” Thus, the corporate shield doctrine bars the exercise of personal jurisdiction, unless facts alleged in the amended complaint show that Appellant committed a tort in Florida.” LaFreniere v. Craig-Myers, 2018 WL 6816547, at *4 (Fla. 1st DCA 2018) citing Kitroser, 85 So.3d at 1087. The LaFreniere Court applies the corporate shield because “[a]lthough these allegations plainly assert that Appellant visited Florida throughout a span of nine years, none of the allegations suggest that she committed a tort while in the forum state.” Id.
iv. Clement v. Lipson, 999 So.2d 1072 (Fla. 5th DCA 2008) (pre-Kitroser)
In Clement, non-resident time share managers were sued individually for allegedly tortious conduct in selling time shares. The trial court ruled that jurisdiction existed based on the managers’ communication by email with the Florida office and telephonic board meetings from outside Florida. Again, like Rambo, Doe and LaFreniere, this case is distinguishable from Kitroser because no allegations were made that the nonresident managers committed tortious acts within the state of Florida.
d. An intentional tort is not required if the alleged non-intentional tort occurred in Florida.
During the February 21, 2019 hearing on the underlying motion, one of the unanswered questions presented was whether a tort needed to be “intentional” for the corporate shield to not apply . The aforementioned Florida case law is clear that any alleged tort made by an employee of a company, whether intentional or not, that occurred within the State of Florida makes the corporate shield doctrine inapplicable. See e.g. Kitroser, 85 So.3d (where the alleged torts were not intentional torts (negligent training/supervision) and the Supreme Court held the corporate shield applied because these alleged non-intentional torts occurred in Florida). This distinction is still enforced in the State of Florida:
“Although the corporate shield doctrine generally insulates any nonresident corporate officer acting on behalf of his employer, an exception exists “[w]here an individual, nonresident defendant commits negligent acts in Florida, whether on behalf of a corporate employer or not[.]” Kitroser, 85 So.3d at 1090 (emphasis added). In Kitroser, the complaint alleged that “while the [corporate] employees were personally in Florida, each engaged in some form of negligent conduct, either by training or supervision of [the employee] or both, which contributed to [the decedent]’s death.” Id. at 1089. Because the torts were allegedly committed within the state, the supreme court held that “[t]he corporate shield doctrine, therefore, is inapplicable and does not exclude the [corporate] employees from the exercise of personal jurisdiction by Florida courts.” Id. The supreme court distinguished Doe, reasoning that in that case, the defendant’s “out-of-state activities alone did not form a predicate for in-state jurisdiction.” Id. at 1089. The court reasoned that “[t]o hold otherwise would be tantamount to providing corporate employees with a form of diplomatic immunity.” Id. at 1090.”
LaFreniere v. Craig-Myers, 2018 WL 6816547, at *3 (Fla. 1st DCA 2018)
The only time an intentional tort is required to avoid the corporate shield is when a defendant is alleged to have made a tortious act from outside of the state of Florida but directed into the state of Florida. See LaFreniere, 2018 WL at *5 (stating a non-resident defendant is deemed to have committed a tort inside of the state for corporate shield purposes if the “conduct alleged…consist[ed] of intentional and tortious acts expressly aimed at Florida” [from outside of the state of Florida]).
II. APPLICATION OF FACTS TO OWNER
a. OWNER is a Managing Employee and/or a Management Company of the Licensee, NURSING HOME LICENSEE, LLC, per Chapter 400.
Plaintiff’s Complaint specifically alleges that OWNER is a manager of the licensee of NURSING HOME LICENSEE. See Complaint ¶ 9 (Attached as Exhibit B). OWNER admits in his affidavit that he is “the President of NURSING HOME LICENSEE. NURSING HOME LICENSEE is doing business in Florida as SKILLED NURSING FACILITY.” OWNER Affidavit ¶ 2. He describes himself as the “administrative manager” of NURSING HOME LICENSEE in the year 2017. See OWNER Depo, page 117, lines 02-25 (Attached as Exhibit D). As administrative manager, he conducts quarterly board meetings for NURSING HOME LICENSEE with the administrator and director of nursing. See OWNER Depo, page 102, lines 10-25. As administrative manager, OWNER discusses “census, how many meds are filled…its expenditures, its revenue, its collection…survey…and where their star rating sits”. See OWNER Depo, page 104, lines 01-16. OWNER, as a member of the Board, would approve the budget. See OWNER Depo, page 106, lines 10-20.
This conclusively shows that OWNER is a “managing employee” and not a “passive investor” under Chapter 400, as OWNER participates in the “decision making or operations of the facility”. Additionally, OWNER can be considered a “management or consulting company” of NURSING HOME LICENSEE as he is “an individual…who receives a fee from [the] licensee [for] having control over the budget of the facility”.
b. The Complaint alleges uncontested tortious action within the State of Florida
Plaintiff’s Complaint sufficiently states numerous specific jurisdictional allegations that implicate the Florida Long Arm Statute that were not contested in the OWNER affidavit. OWNER “is the managing member as President, Officer and/or Board member of at least 40 Florida LLC’s operated in Florida with a principal place of business in Florida”. See Complaint ¶ 28. This is uncontested in the OWNER affidavit. According to the official Medicaid cost report filed by NURSING HOME, OWNER “spends 10% of his time devoted to this nursing home in Boca Raton, Florida”. See Complaint ¶ 29 and Exhibit C. This is uncontested in the OWNER affidavit. OWNER “engaged in substantial, not isolated, activity within the State of Florida, where he organizes, participates and/or leads quarterly meetings for all of the Florida LLC’s as a managing member where he is President, Officer and/or Board Member either by telephone or physical presence within the State of Florida”. See Complaint ¶ 30 (emphasis added). These allegations are uncontested in the OWNER affidavit.
These allegations are uncontested because they are easily provable by information provided by OWNER himself. In his own sworn deposition, OWNER explains that he “conduct[s] the quarterly board meetings”. See OWNER Depo, page 20, lines 20-25, page 21, lines 1-25. For the five 501(c)(3)’s (including SHELL COMPANY) that own the licensees of the Florida Facilities (including NURSING HOME LICENSEE LLC), OWNER conducts 3 quarterly meetings telephonically and one in person in the State of Florida. See OWNER Depo, page 21, lines 1-25, page 96, lines 4-18. For the LLC’s that are licensees of the Florida facilities (including NURSING HOME LICENSEE LLC), quarterly board meetings are done telephonically. See OWNER Depo, page 99, lines 4-23. Importantly, when OWNER is in the State of Florida for a 501(c)(3) board meeting (one meeting per year), he telephonically conducts the LLC board meetings from the State of Florida. See OWNER Depo, page 38, lines 6-25, page 39, lines 1-10. This means OWNER leads at least 1 of the 4 quarterly meetings for NURSING HOME LICENSEE and SHELL COMPANY by telephone physically within the State of Florida.
These board meetings are conducted with the administrator of the facility and the director of nursing of the facility, both of whom are Florida residents. See OWNER Depo, page 102, lines 10-21. These meetings discuss budgeting issues such as census, expenditures, revenue, collections, survey results and facility star ratings for Florida facilities. See OWNER Depo, page 103, lines 10-18, page 104 lines 1-16. OWNER organizes quarterly board meetings for 51 Business Entities operating in Florida. See OWNER Depo, page 37, lines 21-25, page 38 lines 1-22. As President of each of the Florida LLC’s (including NURSING HOME LICENSEE LLC) and the Florida 501(c)(3)’s (including SHELL COMPANY), OWNER would receive information regarding the budget for each facility. See OWNER Depo, page 35, lines 15-25. OWNER, as a member of the Board, would approve the budget. See OWNER Depo, page 106, lines 10-20. The Board of each LLC approves key contracts recommended by their consulting company at board meetings. See OWNER Depo, page 90, lines 10-19. OWNER visits Florida “once or twice [a year] to see a facility”. See OWNER Depo, page 37, lines 10-20. OWNER commits 10% of his time to NURSING HOME LICENSEE, the subject facility in the instant case. See Medicaid Cost Report as Exhibit C. This is one of his many Florida facilities.
It is directly alleged in Counts III and VI of the Complaint that OWNER was negligent in failing to provide appropriate budgeting for NURSING HOME and that this led to Mr. PLAINTIFF’s death or injury in the alternative. See Complaint Count III and Count VI. These alleged tort(s) arose from the communications and decisions made by OWNER at these board meetings, including those conducted from the State of Florida. Therefore, the Complaint sufficiently alleges that OWNER committed tort(s) within the state of Florida, meaning Kitroser applies and the corporate shield doctrine is inapplicable. Therefore, this Court has jurisdiction over OWNER.
III. APPLICATION OF FACTS TO SHELL COMPANY
a. SHELL COMPANY is alleged to be, and clearly is a Management Company, per Chapter 400.023, of NURSING HOME LICENSEE
Plaintiff’s Complaint clearly alleges that SHELL COMPANY is the management company of NURSING HOME. See Complaint ¶ 18 (Attached as Exhibit B). SHELL COMPANY, as the 501(c)(3) that wholly owns NURSING HOME LICENSEE, is clearly a management company under Chapter 400.023. SHELL COMPANY, like the other 501(c)(3)’s, on recommendation of a consulting firm, hires the underlying administrators for their wholly-owned LLC’s, including NURSING HOME LICENSEE. See OWNER Depo page 25, lines 17-25, page 26, lines 4-13, page 46, lines 5-13. The SHELL COMPANY Board and President have control of the budget, based on optional recommendations from a consulting firm, for the underlying LLC’s, including NURSING HOME LICENSEE. See OWNER Depo page 24, lines 1-17, page 123, lines 7-23, page 106, lines-11-20, page 59, lines 05-12, page 46, lines 5-13. There are consulting companies with every facility, including NURSING HOME LICENSEE. See page 39, lines 4-19.
Since SHELL COMPANY, like the other 501(c)(3)’s, had the ability to hire an administrator and had control over budgetary decisions for their LLC’s, it is clearly a management company that is subject to this suit for alleged negligence and violation of resident rights.
b. Piercing the Corporate Veil or Alter Ego Theories are not Required to Maintain Jurisdiction Over SHELL COMPANY because Florida Long-Arm Statutes Grant Jurisdiction.
A plaintiff may establish personal jurisdiction over a non-resident parent in three ways. First, by showing that the non-resident parent company independently satisfies the test for jurisdiction under Florida’s long-arm statutes. Second, by piercing the corporate veil. Third, by showing the parent exercises such control that the subsidiary is an agent or alter ego of the parent. If any of these are satisfied, Florida courts have jurisdiction over the non-resident parent. See Schwartzberg v. Knobloch, 98 So.3d 173, 182 (Fla.App. 2 Dist. 2012). In order to show that the parent company meets the long arm statute, “connexity” between the parent and the alleged abuse from where the claim arises. Id.
Applying this to the instant case, Plaintiff has alleged, and supported by SHELL COMPANY’s President’s affidavit, evidence of connexity between SHELL COMPANY and Mr. PLAINTIFF’s injuries and death. See Complaint ¶ 8, 18-22, 24-25 (stating that SHELL COMPANY operated and managed the underlying facility and OWNER, as President of SHELL COMPANY, “actively controlled the day to day care at the facility by creating and/or approving budgets, staffing, post-incident investigations, policies and procedures” for the facility.) It is directly alleged in Counts II and V of the Complaint that Mr. PLAINTIFF’s injuries resulted in part from failures in budgeting and staffing by SHELL COMPANY.
The connexity is supported by numerous statement in OWNER’s sworn testimony. As President and Chairman of the Board for the 501(c)(3)’s (including SHELL COMPANY) that wholly own the LLC Licensees (including NURSING HOME LICENSEE) approves suggestions on operating the underlying LLC’s. See OWNER Depo page 24, lines 5-17, page 46, lines 5-13. As President of the 501(c)(3)’s (including SHELL COMPANY), OWNER is “more of the day-to-day [than other Board Members]. It’s a full-time position, whereas the Board members are not. So I need to be apprised of almost on an everyday basis.” See OWNER Depo page 25, lines 6-13. SHELL COMPANY has a number of wholly owned Florida LLC’s under them, including NURSING HOME LICENSEE, LLC, which is doing business as NURSING HOME. See OWNER Depo page 116, lines 18-25, page 117, lines 1-25, page 119, lines 13-25. OWNER was a manager of every Florida LLC under SHELL COMPANY, including NURSING HOME LICENSEE, LLC, which was doing business as NURSING HOME.
As President of each of the Florida LLC’s (including NURSING HOME LICENSEE LLC) and the Florida 501(c)(3)’s (including SHELL COMPANY), OWNER would receive information regarding the budget for each facility. See OWNER Depo, page 34, lines 15-25. OWNER, as a member of the Board, would vote to approve the budget. See OWNER Depo, page 106, lines 10-20. All of OWNER’s work as “administrative manager” of NURSING HOME LICENSEE, LLC is paid bi-weekly through SHELL COMPANY, its parent company. See OWNER Depo page 75, lines 07-25, page 80, lines 08-20, page 85, lines 20-25, page 86, lines 1-25, page 87, lines 1-18, page 119, lines 13-25, page 120 lines 01-07. The decisions made by OWNER in his capacity as an employee for the 501(c)(3)’s (including SHELL COMPANY) “[i]mpact the facility”. See OWNER Depo page 50, lines 14-25, page 25, lines 1-25.
According to OWNER, SHELL COMPANY, along with the other 501(c)(3)’s “do business in Florida”. See OWNER Depo page 70, lines 16-24. The type of business conducted by the 501(c)(3)’s is “[s]killed nursing home” and the 501(c)(3)’s hold licenses to operated skilled nursing homes in Florida. See OWNER Depo page 71, lines 01-05. Those services provided by the 501(c)(3)’s are “elderly care”, including SHELL COMPANY. See OWNER Depo page 87, lines 03-18. In summary, the allegations in the Complaint and the sworn testimony of SHELL COMPANY President OWNER show a connexity between SHELL COMPANY and the alleged injury which satisfies the requirements of the long arm statute. Therefore, this Court has jurisdiction over SHELL COMPANY.
WHEREFORE, the Plaintiff, Estate of MICHAEL PLAINTIFF, respectfully requests this Honorable Court enter an order denying the Co-Defendants’ Motion to Quash Service and/or to Dismiss Plaintiff’s Complaint for Lack of Personal Jurisdiction.
DATED this 18th day of March, 2019.
/s/ David J. Brevda
David J. Brevda, Esq.
Florida Bar No.: 1008373
SENIOR JUSTICE LAW FIRM
Attorneys for Plaintiff