Court upholds $5.75 million verdict against former nursing home officers, board members

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A $5.75 million verdict will stand and there will be no new trial in the case against officers and board members of a former Pennsylvania nursing home, a federal judge recently ruled.

The case involves the Lemington Home for the Aged, a nonprofit nursing home in Pittsburgh that was formed in 1883 to serve African-Americans. After the nursing home went bankrupt and was forced to close, a group of unsecured creditors sued the former administrator, chief financial officer and board members. Plaintiffs claimed the nursing home leaders had breached their fiduciary duty by mismanaging the home even after warnings from auditors and the deaths of two residents.

After nearly seven years of litigation, the case went to trial last February. A jury awarded the creditors $2.25 million in compensatory damages and $3.5 million in punitive damages. James Shealey, the home's former CFO, bore the brunt of the punitive damages, facing a $1 million assessment.

The damages are reasonable given the evidence of an “outrageous” lack of diligence on the part of the defendants, wrote Judge Arthur J. Schwab of the U.S. District Court, Western District of Pennsylvania, in a May 17 decision. He upheld the damages and denied the defendants' request for a new trial, rejecting their procedure- and evidence-related arguments over the conduct of the first trial.  

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