Wake Forest Law Review

By Ryan C Dibilio and Robert M. Padget III

Facts

On August 2, 2018, the Fourth Circuit Court of Appeals decided Vandevender v. Blue Ridge of Raleigh, LLC.,[1] which addressed the required standards for a business to pay punitive damages in North Carolina.  Blue Ridge Health Care Center (“Blue Ridge”) operated a nursing home with a “vent unit,” which is a “[s]pecial facility for ventilator-dependent patients.”[2]   According to North Carolina law, vent units must provide at least 5.5 hours of nursing care per patient per day, and “[t]he direct care nursing staff shall not fall below a registered nurse and a nurse aide I at any time during a 24-hour period.”[3]  However, in a conscious effort to cut costs and increase profit, Blue Ridge consistently failed to meet these requirements by understaffing the vent units with nurses and caretakers, and by not providing the proper bedside supplies for adequate care.[4]  As a result of understaffing in the vent unit or a lack of bedside supplies, Del Ray Baird, Bettie Mae Kee, and Elizabeth Jones all died in Blue Ridge’s vent unit.[5]

The Parties’ Arguments and the District Court’s Ruling

The Plaintiff estates filed suit against three Defendants: Blue Ridge; CareOne, the owner of Blue Ridge; and CareVirginia Management, which helped manage Blue Ridge.[6]  All of the former Blue Ridge employees who testified at trial actually testified for the Plaintiffs.[7]  Defendants, on the other hand, only had two witnesses, each of whom were expert witnesses.[8]

In the district court, a jury returned verdicts awarding both compensatory and punitive damages for each of the three Plaintiffs.[9]  The jury awarded compensatory damages in the amount of $50,000 for Plaintiff Baird, $300,000 for Plaintiff Jones, and $300,000 for Plaintiff Kee.[10]  In addition, the jury awarded each Plaintiff punitive damages of $1,523,939.16.[11] The Defendants then moved for judgment as a matter of law.[12]  In supporting their motion, the Defendants argued that Plaintiffs failed to produce evidence of an aggravating factor, which is necessary for an award of punitive damages under North Carolina law.[13]  The Defendants also argued that the Plaintiffs failed to produce the necessary evidence to support a verdict in favor of Plaintiff Jones.[14]  The district court granted the motion as to Plaintiffs’ punitive damage awards; however, the district denied the motion as to the award of compensatory damages to Plaintiff Jones.[15]  The Plaintiffs appealed the grant of judgment for Defendants in regards to the punitive damages awards bringing the case to the Fourth Circuit.[16]  The Defendants then cross-appealed the denial of their motion regarding Plaintiff Jones’ award of compensatory damages.[17]

Under North Carolina law, a plaintiff can only recover punitive damages if the plaintiff proves that “the defendant is liable for compensatory damages and that one of [three possible] aggravating factors was present and was related to the injury for which compensatory damages were awarded.”[18]  Those three possible aggravating factors are “Fraud,” “Malice,” and “Willful or wanton conduct.”[19]  The Plaintiffs argued that the conduct of the Defendants’ managers did indeed constitute “willful or wanton conduct” as defined by North Carolina law.[20]  North Carolina law defines “willful or wanton conduct” as “the conscious and intentional disregard of and indifference to the rights and safety of others, which the defendant knows or should know is reasonably likely to result in injury, damage, or other harm.”[21]  The Plaintiffs did not assert that fraud or malice were present.[22]

The district court found two reasons why the Plaintiffs failed to present sufficient evidence to support an award of punitive damages.[23]  The district court’s first reason was that the “Plaintiffs failed to present evidence showing Defendant’s officers, directors, or managers participated in or condoned the asserted willful or wanton conduct.”[24]  The second reason the district court offered was that “even if such participation or condonation were assumed, Plaintiffs failed to present sufficient evidence to show they had the requisite state of mind to establish any aggravating factor.”[25]  As discussed below, the Fourth Circuit held that both reasons offered by the district court were in error.

As to the Defendants’ cross-appeal regarding compensatory damages awarded to Plaintiff Jones, the Defendants argued that the evidence was insufficient for the medical malpractice claim regarding Elizabeth Jones’s death.[26]  Plaintiff Jones died when the caregivers were unable to replace her tracheostomy tube in a timely manner.[27]  The Defendants argued that the evidence was insufficient because it failed to show that there was a breach of the applicable standard of care by the caregivers who tried to replace Plaintiff Jones’ tracheostomy tube or that the acts or lack thereof of the caregivers proximately caused Plaintiff Jones’ death.[28]

The Fourth Circuit’s Holding

First, the Court concluded the district court erred in finding Defendants’ managers did not participate in or condone decision-making that constituted an aggravating factor that would result in punitive damages. [29]  Under North Carolina law, companies are only liable for punitive damages if their “officers, directors, or managers . . . ‘participated in or condoned the conduct constituting the aggravating factors giving rise to punitive damages.’”[30]  Former Blue Ridge Administrator Ben McGovern clearly participated in the decisions to cut staffing and supplies, which was behavior that constitutes the aggravating factor “willful or wanton conduct.” [31]  The Court considered five factors (“the Everhart Factors”) to determine whether McGovern was a “manager” and would subject Blue Ridge to punitive damages: “(1) the employee was designated a manager; (2) the employee had supervisory powers; (3) the employee gave input on hiring and firing decisions and participated in personnel meetings; (4) the employee set work schedules for other employees; and (5) the employee handled money.”[32]  Here, the Court found Ben McGovern satisfied every Everhart factor except handling money, and thus, he was a “manager” for the purposes of subjecting Blue Ridge to punitive damages.

The Court next found Blue Ridge’s policy was to “[c]ut staffing to save money . . . .”[33]  While the district court found there was nothing in the record to show a corporate policy of cutting staff, the Fourth Circuit identified clear evidence in the trial testimony to make such a finding.[34]  For example, a former Administrator and a former Business Office Manager both left because of pressure to make cuts and because staffing was dangerously and obviously short.[35]

Furthermore, the Court found “[c]lear and convincing evidence that Defendants were fully aware of the dangerously inadequate staffing level . . . .”[36]  The Court noted that, “[i]n the medical context, a medical provider acts willfully and wantonly when she knowingly, consciously, and deliberately places a patient at risk of harm by acting contrary to known protocols and procedures.”[37]  The Court concluded that even though there was no “wicked purpose,” the staffing and supply cuts were “[a] deliberate corporate policy enacted to increase profits by millions of dollars.”[38]  Blue Ridge was repeatedly warned about the dangers of the staffing and supply cuts, but Blue Ridge failed to remedy the issues and even continued to make cuts and intensify the dangers.[39]  The Court declared, “[t]his is precisely the type of egregious conduct punitive damages are meant to deter.” [40]  The Court also briefly rejected Blue Ridge’s argument and upheld the district court’s determination that there was sufficient evidence to show Blue Ridge breached the requisite standard of care by failing to provide adequate bedside supplies, which proximately caused Elizabeth Jones’ death.[41]

Conclusion

The main issue in the case was whether the district court properly granted Blue Ridge’s motion for judgment as a matter of law that Plaintiffs failed to present sufficient evidence to find Blue Ridge liable for punitive damages.[42]  However, this conclusion would turn on several prerequisite determinations.  First, since North Carolina does not permit respondeat superior for punitive damages, the Court had to determine whether Blue Ridge’s managers participated in activities sufficient to constitute willful and wanton conduct.[43]  After considering the Everhart Factors, the Court concluded that former Administrator Ben McGovern was a “manager”, and thus Blue Ridge could be liable for punitive damages if his conduct constituted the aggravating factor “willful and wanton.” [44]

The next issue the Court addressed is whether Blue Ridge condoned willful and wanton conduct.  This issue was easily resolved because the Court found “[c]lear and convincing evidence that the Defendants were fully aware of the dangerously inadequate staffing levels yet did nothing or worse.”[45]  Another issue was whether Blue Ridge had the necessary state of mind for their conduct to constitute an aggravating factor.  The Court again found clear and convincing evidence that Blue Ridge “[e]ngaged in willful or wanton conduct by intentionally failing to follow federal and state laws on staffing . . . .”[46]  This conduct showed a “reckless indifference” to the patients, and thus the willful and wanton state of mind was satisfied.[47]

Further, the Court briefly addressed whether there was sufficient evidence to show Blue Ridge’s negligence proximately caused Elizabeth Jones’ death.  It was clear that the inadequate staffing and failure to provide proper bedside supplies proximately caused Elizabeth Jones’ death, so that issue was quickly dispensed with.[48]

Lastly, the Court had to adjust the amount of punitive damages awarded in order to comply with North Carolina law.  The jury awarded compensatory damages in the amount of $50,000 for the estate of Del Ray Baird, $300,000 for the estate of Elizabeth Jones, and $300,000 for the estate of Bettie Mae Kee.[49]  The jury also awarded $1,523,939.16 in punitive damages for each plaintiff. However, North Carolina law limits punitive damages to three times compensatory damages, or $250,000, whichever is higher.[50]  In accordance with North Carolina law, the Fourth Circuit reduced the award of punitive damages to $250,000 for the estate of Del Ray Baird, $900,000 for the estate of Elizabeth Jones, and $900,000 for the estate of Bettie Mae Kee.[51]

[1] 901 F.3d 231(4th Cir. 2018).

[2] Id. at 235.

[3] 10A N.C. Admin. Code 13D.3005 (1996).

[4] Vandevender, 901 F.3d at 235.

[5] Id. at 236.

[6] Id.

[7] Id.

[8] Id.

[9] Id. at 235.

[10] Id. at 236.

[11] Id.

[12] Id. at 235.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] N.C. Gen. Stat.§ 1D-15 (2017).

[19] Id.

[20] Vandevender, 901 F.3d at 239.

[21] N.C. Gen. Stat. § 1D-5(7) (2017).

[22] Vandevender, 901 F.3d at 239.

[23] Id. at 237.

[24] Id.

[25] Id.

[26] Id. at 240–41.

[27] Id. at 236.

[28] Id. at 241.

[29] Id. at 238.

[30] Id. at 238 (quoting N.C. Gen. Stat. §1D-15 (2017)).

[31] Id.

[32] Id. at 238 (quoting Everhart v. O’Charley’s Inc., 683 S.E.2d 728, 738 (N.C. Ct. App. 2009)).

[33] Id. at 238.

[34] Id.

[35] Id. at 239.

[36] Id.

[37] Id. (quoting Clarke v. Mikhail, 779 S.E.2d 150, 160 (N.C. Ct. App. 2015)).

[38] Id. at 240.

[39] Id.

[40] Id. (citing N.C. Gen. Stat.§ 1D-1(1995)).

[41] Id. at 240.

[42] Id. at 237.

[43] Id. at 238.

[44] Id. at 239.

[45] Id.

[46] Id.

[47] Id. at 240.

[48] Id.

[49] Id. at 236.

[50] Id. at 237 (citing N.C. Gen. Stat. §1D-25 (2017)).

[51] Id. at 241.

Businessman with files

By Taylor Anderson

On January 14, 2016, the Fourth Circuit issued its published opinion regarding the civil case Cisson v. C.R. Bard, Inc. The appellant, transvaginal mesh proprietor C.R. Bard, Incorporated (“Bard”), raised four issues on appeal. In addition, the appellee, Donna Cisson (“Cisson”) cross-appealed the district court’s finding regarding punitive damages. The Fourth Circuit affirmed the district court’s judgment as to all issues raised on appeal.

Cisson Alleged Design Defect

On May 6, 2009, Cisson was implanted with the Avaulta Plus, a transvaginal mesh medical device developed and marketed by Bard. This device addressed pelvic organ prolapse and stress urinary incontinence. Three months after implantation, Cisson’s doctor diagnosed her with “an adhesion band” of scar tissue that was causing Cisson pain. Dr. Raybon resected the mesh, which involved cutting out a thick band of scar tissue and mesh encased in the tissue. A few months later, Cisson went to a different doctor who explanted the Avaulta Plus from Cisson’s body, although complete removal of the mesh was not possible.

Complaining that the surgical mesh marketed by Bard caused ongoing “loss of sexual feeling” and “severe pain with intercourse and otherwise,” Cisson filed a lawsuit against Bard in March 2011. Cisson’s claims for design defect, failure to warn, and loss of consortium proceeded to trial.

Cisson presented evidence that the Avaulta Plus caused her injuries. Furthermore, Cisson also presented evidence that painted a picture of Bard as ignoring the warning signs that its product could cause injuries. One piece of such evidence was a material data safety sheet (“MSDS”) received from the corporation that manufactured the polypropylene pallets used to extrude the Avaulta Plus mesh. The MSDS contained an explicit warning that polypropylene should not be used in short- or long-term human implantations.

Ultimately, the jury credited Cisson’s evidence, awarding damages for the design defect and failure to warn claims. The jury awarded Cisson $250,000 in compensatory damages and awarded an additional $1.75 million in punitive damages. The punitive damages award was split pursuant to a Georgia statute, with seventy-five percent going to the State of Georgia and twenty-five percent going to Cisson. The jury returned a verdict for Bard on the consortium claim. Bard timely appealed.

Bard Believed Compliance Evidence Should Have Been Admissible

Bard’s first issue on appeal was that the district court abused its discretion by granting Cisson’s motion in limine asking the court to exclude all evidence that Bard had complied with the Food & Drug Administration’s (“FDA”) 510(k) process. The district court excluded the evidence under Federal Rule of Evidence 402 for lack of relevance and under Rule 403 for being substantially more prejudicial than probative.

After noting that district courts have “broad discretion” in deciding whether “the probative value of evidence is substantially outweighed by the danger of unfair prejudice, misleading the jury, or confusion of the issues” under Rule 403, the Fourth Circuit affirmed the district court’s ruling. The Fourth Circuit focused mainly on the fact that Bard’s compliance with the FDA’s 501(k) process did not prove that the product was safe. This alone presented substantial dangers of misleading the jury and confusing the issues. The district court excluded this compliance evidence so that the jury would not confuse Bard’s compliance with the safety of Bard’s product, and the Fourth Circuit affirmed this decision.

The Fourth Circuit did not reach the district court’s ruling that that 501(k) evidence could be excluded as irrelevant under Rule 402 because the evidence was properly excluded under Rule 403.

Bard’s Hearsay Objections Were Meritless

Bard’s second issue on appeal was that the district court erred when it overruled Bard’s hearsay objections to the admission of the MSDS pertaining to polypropylene, a material used in the construction of the Avaulta Plus implanted in Cisson’s body. The MSDS at issue contained a warning and disclaimer stating that the polypropylene should not be used “in medical applications involving permanent implantation in the human body.” The district court admitted the MSDS for the limited purpose of showing that the statement was made and that Bard was aware of it. The district court also ruled that the MSDS was admissible for substantive purposes under the hearsay exceptions contained in Federal Rules of Evidence 803(17), 803(18), and 807.

The Fourth Circuit reversed the district court’s rulings as to the hearsay exceptions; however, the Fourth Circuit affirmed the decision to admit the MSDS as non-hearsay. First, the Fourth Circuit held that the MSDS did not fall within Rule 803(17)’s “Market Reports and Similar Commercial Publications” hearsay exception because the MSDS did not contain factual information as required by this exception. Instead, the MSDS operated as a warning and disclaimer of liability for the self-interested issuing party. For this reason, Rule 803(17) did not apply. Second, the Fourth Circuit held that the MSDS did not fall within Rule 803(18)’s “Statements in Learned Treatises, Periodicals, or Pamphlets” hearsay exception because the MSDS was not “relied on by [an] expert on direct examination,” nor was it “called to the attention of an expert witness on cross-examination” as required by Rule 803(18). For this reason, the MSDS did not fall under Rule 803(18)’s exception. Lastly, the Fourth Circuit held that the MSDS did not fall within Rule 807’s “Residual Exception” because there was other evidence available to address polypropylene’s viability as a material for surgical implants, such as studies, reports, empirical evidence, and tissue sample slides. Because the MSDS evidence did not fall within the hearsay exceptions enumerated in Rule 803(17), 803(18), or 807, the MSDS evidence was not admissible as substantive evidence. For this reason, the Fourth Circuit reversed the district court’s rulings as to these hearsay exceptions.

Although the Fourth Circuit reversed the district court’s rulings as to the hearsay exceptions, it affirmed the district court’s decision to admit the MSDS evidence as non-hearsay. The Fourth Circuit agreed with the district court that Cisson used the MSDS to show that Bard had received warning that its product might be unsafe. Bard did not dispute this non-hearsay purpose on appeal, but argued instead that Cisson used the MSDS for its truth during the trial, which is not allowed because the MSDS did not fall within one of the hearsay exceptions. The Fourth Circuit disagreed with Bard and held that “even if Cisson did at any time use the MSDS for its truth, she did so in a way that did not prejudice the defendant.” Because Cisson’s use of the MSDS did not prejudice Bard, the alleged error was harmless. The Fourth Circuit affirmed the district court’s admission of the MSDS evidence.

Bard Argued the Jury Instruction as to Causation

Bard’s third issue on appeal was that the district court erred in its instruction to the jury on causation, as well as in its subsequent ruling upholding the jury’s causation finding pursuant to its denial of Bard’s renewed motion for judgment as a matter of law. Bard charged that it was prejudiced because the court’s causation instruction did not reflect Georgia law.

Bard’s position was that Georgia law required injury causation be proved by “expert testimony stated to a reasonable degree of medical probability or certainty.” The Fourth Circuit disagreed and noted that “Bard’s characterization of Georgia law incorrectly states the standard of proof applicable here, inserting the standard for medical malpractice cases into this products liability case.” Additionally, Bard did not point to a single Georgia case stating that the standard in the pattern instruction was incorrect. For these reasons, the Fourth Circuit held that the district court did not err in giving the Georgia pattern jury instruction.

Additionally, the Fourth Circuit held that Cisson presented ample expert and non-expert testimony for a jury to find that the design defect caused her injuries; therefore, the district court correctly upheld the jury’s causation finding and correctly denied Bard’s renewed motion for judgment as a matter of law.

The Punitive Damages Award Was Not Unconstitutional

Bard’s final issue on appeal was the jury’s award of $1.75 million in punitive damages. Bard pointed to the Due Process Clause of the Fourteenth Amendment which prohibits the imposition of grossly excessive or arbitrary punishments on a tortfeasor. Bard cited the Supreme Court of the United State’s decision in State Farm Mutual Automobile Insurance v. Campbell, where the Court stated “an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.” The punitive damage award in this case was seven times the $250,000 compensatory damages award.

The Fourth Circuit held that Bard, relying on the above statement from Campbell, apparently failed to realize that the Court went on to say “these ratios are not binding” and concluded that “[s]ingle-digit multipliers are more likely to comport with due process . . . than awards with ratios in the range of 500 to 1.” Also, the Fourth Circuit pointed to the district court’s finding that the punitive damages against Bard arose from its misconduct that resulted in Cisson’s injuries and grounded its refusal to overturn the award in reprehensibility of Bard’s conduct. Therefore, the Fourth Circuit held that the seven-to-one ration was not constitutionally excessive and affirmed the district court’s decision.

Cisson’s Cross-Appeal Was Unsuccessful

The final issue before the Fourth Circuit was Cisson’s cross-appeal that challenged the district court’s ruling that a Georgia split-recovery statute garnishing seventy-five percent of the punitive damages award arising from a product liability judgment does not violate the Takings Clause of the Fifth Amendment of the United States Constitution.

The Fourth Circuit noted that to succeed on this issue, Cisson must first show that she has “a constitutionally protected property interest” in the punitive damages award at issue; however, Cisson made no such claim. Additionally, Cisson does not explain how Georgia exceeded its authority by defining the contours of the right it allegedly created. For these reasons, the Fourth Circuit affirmed the judgment of the district court as to this issue.

Judgment Affirmed

For the aforementioned reasons, the Fourth Circuit affirmed all of the issues raised on appeal.

railroad-615404_640

By Kayleigh Butterfield

On April 30, 2015, the Fourth Circuit issued a published opinion in the civil case Harris v. Norfolk Southern Railway Co. Norfolk Southern Railway Company (“Norfolk Southern”) appealed the district court’s grant of summary judgment against it on the issue of liability in a negligence action brought by Charles Harris, who sought compensation for injuries suffered from a train derailment. Harris cross-appealed the district court’s summary judgment grant against him on a claim for punitive damages. The Fourth Circuit reversed the grant of summary judgment on the issue of liability, affirmed the grant against punitive damages, and remanded the case for further proceedings.

Factual Background

On July 21, 2009, Harris was working at a coal-loading facility (“loadout”) in Mingo County, West Virginia. Norfolk Southern employees backed an empty train of freight rail cars over an area of the railroad track running underneath the loadout where Harris was working. Both the train and track were owned and operated by Norfolk Southern. A section of the rail about 35 feet from the loadout was heavily corroded between the ball and vertical part of the rail. When the rail cars passed over the damaged portion of the track, a part of the rail separated and the cars derailed. When one of the cars crashed into the loadout’s support beams, the loadout collapsed and Harris subsequently suffered severe physical and mental injuries. The evidence showed that most of the track damage occurred months or years prior to the derailment.

Standard of Review

Summary judgment is reviewed de novo, viewing all facts and reasonable inferences in the light most favorable to the nonmoving party. Summary judgment is appropriate so long as the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.

Federal Rail Safety Act and Track Safety Standards

Under the Federal Rail Safety Act (“FRSA”), 49 U.S.C. § 20101, et seq. Norfolk Southern has a duty to inspect the rail in accordance with the comprehensive track safety standards (“TSS”) as set forth by the Secretary of Transportation. 49 C.F.R. Part 213. The TSS sets forth minimum requirements for how inspections must be conducted and how issues should be remedied.

Norfolk Southern Breached Its Duty to Inspect

Section 213.5 of the TSS states that a track owner “who knows or has notice that the track does not comply with the requirements of this part” is responsible for remedying the problem in accordance with the TSS. The Fourth Circuit examined the plain language of the Federal Railroad Administration’s (“FRA”) commentary to the 1998 TSS amendments, and found that their reading of the phrase “knows or has notice” was reasonably interpreted to include constructive notice.

The Fourth Circuit then determined the scope of Norfolk Southern’s duty to inspect the track. While the court rejected Harris’ contention that a visual inspection requires someone to look at every part of the track structure, the court concluded that a reasonable visual inspection must be made in light of the surrounding circumstances. In this case, evidence was brought showing that Norfolk Southern knew that the obstruction of coal and debris on the tracks could cause corrosion. Despite this knowledge, Norfolk Southern failed to examine any of the embedded portion of the track over a period of months and years. Thus, the Fourth Circuit determined that any reasonable jury would find that Norfolk Southern breached its duty to inspect.

Genuine Dispute as to Proximate Cause

The Fourth Circuit concluded that a genuine dispute of material fact existed as to proximate cause. Expert testimony revealed that corrosion could have been detected through ultrasonic testing or digging out coal debris from the damaged parts of the track. However, the court noted that the testimony did not provide that the damage was consistent along the track or that it would necessarily be discovered by digging out sample areas of coal debris. Because a jury could reasonably find that Norfolk Southern’s breach was not the proximate cause of Harris’s injuries, the Fourth Circuit reversed summary judgment on the issue of liability.

Harris Did Not Meet Standard for Punitive Damages

The Fourth Circuit did not find that Norfolk Southern’s conduct met the standard of severe negligence required for an award of punitive damages. The court noted that Norfolk Southern conducted ultrasonic rail testing and visual inspections on a regular basis. While the defect remained undiscovered, the court held that Norfolk Southern’s actions simply did not rise to the near-reckless level of negligence needed to award punitive damages.

Conclusion

For the above reasons, the Fourth Circuit reversed the grant of summary judgment on the issue of Norfolk Southern’s liability, affirmed the grant of summary judgment on Harris’s claim for punitive damages, and remanded to the district court for further proceedings.