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A case involving ugly contract negotiations, allegations of vandalism and self-sabotage, and the possible defamation of a major nursing home chain by union representatives, has been partially dismissed by a federal judge.

CareOne Management brought a federal lawsuit in 2012 against United Heath Care Workers East and its SEIU 1199 arm. The multistate nursing home operator argued that the union had “ceased with traditional organizing and negotiation tactics in favor of extortion and fraud in violation of federal and state law” that cost the provider $400 million in business.

A judge later allowed CareOne to add claims of defamation and trade libel, but those had to withstand a decades-old interpretation that such statements must be made with “actual malice” to trigger legal recourse. In a 21-page ruling Thursday, US District Court Judge for the District of New Jersey Susan D. Wigenton found that CareOne failed to meet that standard and could not collect any damages related to defamation or lost business opportunities.

The ruling follows a 2022 remand from the Third Circuit Court of Appeals, which argued the lower court might need to send the case to a jury to determine key facts.

The case, which Wigenton described as both “contentious and complex,” involved allegations dating to 2010. That’s when the unions filed complaints against CareOne with the National Labor Relations Board, alleging that the company had improperly terminated or threatened employees, improperly ended benefits, wrongfully suppressed union communications at its Connecticut facilities, and engaged in unfair labor practices at its Somerset, NJ, facility.

The NLRB responded by charging CareOne with interfering with rights guaranteed by the National Labor Relations Act, including the refusal to bargain collectively and in good faith.

CareOne, however, argued that a union campaign attempted to smear the company’s reputation through advertising and other communications that falsely alleged or insinuated that CareOne overprescribed antipsychotic drugs, overbilled residents, understaffed its facilities and provided poor quality of care. Among its other complaints, CareOne said the union:

  • Falsely accused the company of staging the vandalism and sabotage of its Connecticut facilities the night before a planned strike in July 2012.
  • Issued a memo to members of the Connecticut Congressional delegation alleging questionable Medicare billing practices, leading to a requested federal audit, although the union’s statistical analysis was later discredited.
  • Filed petitions for public hearings on CareOne’s applications for “determinations of need” to obtain approval from the Massachusetts Department of Public Health for capital improvement projects to delay the approval of those projects.

In rejecting CareOne’s claims, the judge turned to New York Times vs. Sullivan, a free speech case dating to the Civil Rights era in which the Supreme Court ruled that derogatory statements must be both false and made with “actual malice,” or the “reckless disregard of whether it was false or not” to be deemed defamatory. Wigenton also cited several later cases that extended that principle to statements made as part of a labor dispute.

“Neither side of a labor dispute is legally required to ‘present a balanced view’ about the other side,” Wigenton wrote.

Both Wigenton and the Third Circuit Court of Appeals have now found that “the record did not support a finding of specific intent to deceive because the Unions had fact-checking and vetting procedures in place, and the people who researched, drafted, and approved the publications believed [statements] to be truthful.”

A spokesperson for CareOne told McKnight’s Long-Term Care News’ Monday afternoon that “as a matter of policy, CareOne does not comment on litigation.”

Wigenton’s ruling determined that CareOne failed to show how the union’s campaign caused “reputational injuries” or specific business losses. CareOne had outlined three potential deals in which sellers cited problems between the union and CareOne or its subsidiaries as at least contributing to collapsed talks. Care One said the defamatory remarks lost the company $400 million in business opportunities.

The company sought to recover damages for those so-called “lost-acquisition” opportunities.  The court, however, found that Care One could not show the union caused the alleged damages and also could not collect for any supposed injury experienced by its subsidiaries because of technical and legal issues with the court filing.