Sure you want to go there? Litigation more perilous in some areas than others
When the big boys look to divest, they usually think in terms of portfolio holdings.
Most notably, Ventas recently spun off Care Capital Properties. And HCP plans to do the same with its skilled-care business.
But we might soon start to see the emergence of a different kind of divestiture: one based less on undesirable holdings and more on undesirable locales.
The obvious choices will be cities and states with a plaintiff-friendly reputation, where lawsuit risks can rise dramatically. As Exhibit A, I offer St. Louis. The Gateway City has become a destination of choice for hundreds of plaintiffs. And it's not just fly-by-night operators being targeted. Claims have been filed against the likes of General Motors, Bayer, Pfizer and other big-name firms with deep pockets. Why? Largely because the city has a well-deserved reputation for fast trials, pro-plaintiff decisions and record awards.
In fact, three of the six leading defective product verdicts this year (totaling more than $173 million) came from the circuit court in St. Louis, according to Bloomberg.
And while federal courts require a unanimous jury conviction, Missouri law requires that only nine of 12 jurors must be in agreement. Moreover, jury pools in St. Louis have a well-earned reputation for being plaintiff friendly.
But while St. Louis may stand out, it is hardly alone. In its most recent annual report, the American Tort Reform Foundation also cited courts in California, Florida, Illinois, Louisiana, New York City, Texas and Virginia as being especially unfair to firms being sued.
Since 2002, the organization has been documenting “troubling developments in jurisdictions where civil court judges systematically apply laws and court procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants,” says Tiger Joyce, the president of the American Tort Reform Association. The negative effects in places like these could be heightened for accused nursing homes if the Center for Medicare & Medicaid Services' move to ban pre-dispute arbitration clauses overcomes challenges to its validity.
Does this mean providers should avoid acquisitions or new construction in these places? Not necessarily. But with few indications of federal tort reform happening any time soon, operators should be wary.
In these places more than others, real or imagined mistakes could prove to be quite costly.