California Nursing Home’s Stockholders Escape Liability For Neglect At Facility
Two nursing companies were mere investors in a California nursing home with no responsibility for the facility’s day-to-day operations and cannot be held liable in a wrongful-death lawsuit filed by a resident’s estate, a state appeals court has ruled.
National nursing chain Sun Healthcare Group owns stock in Regency Health Services Inc., which in turn owns stock in the Covina Rehabilitation Center in Covina, Calif., according to the opinion.
The appeals courts found no evidence that Covina is an alter ego of either Regency or Sun and ruled that the estate could not pierce Covina’s corporate veil to hold the two firms liable.
The panel further held that there was no evidence that either Sun or Regency “managed, directed, administered or controlled” the operations at Covina or was involved in the treatment given to the resident, Arlene Renteria.
Renteria’s family sued the three companies in the Los Angeles County Superior Court.
According to the appeals court’s opinion, Renteria suffered from Huntington’s chorea, a genetic degenerative brain disorder characterized by uncontrolled movements, progressive dementia and psychoses. This condition put her at a risk for skin deterioration and bedsores.
Renteria lived at Covina from June 16, 2000, until March 2, 2003, when she was hospitalized with a severe case of diarrhea.
Hospital staff noted numerous bedsores on her lower back and buttocks, the appeals court said. The sores became infected, causing her death two months later at age 38.
Renteria’s family alleged that neglect at Covina caused her bedsores and infections.
They accused the three companies of staffing Covina with an insufficient number of trained and qualified personnel, thus increasing profits at the expense of residents.
The family said Covina acted as an alter ego of Regency and Sun. They filed claims against the three companies for willful misconduct, negligence, breach of contract, elder abuse, fraud, wrongful death and unfair business practices.
Sun and Regency moved for summary judgment, arguing that they are not involved in Covina’s day-to-day operations and there is no basis for finding either company directly liable to Renteria’s family.
The trial court found that Sun is merely a shareholder of Regency, a holding company with no employees that owns shares of Covina’s stock.
The court granted the companies summary judgment, saying neither had any responsibility for the operations at Covina.
Renteria’s family appealed, arguing, among other things, that Sun and Regency wrote policies and procedures manuals that governed Covina’s operations.
As further evidence, the family offered several forms and documents generated by Sun’s subsidiary, Sunbridge Healthcare Corp., and used by the facility.
The family said the documentation showed that Covina merely acted as an alter ego of Regency and ultimately Sun.
They also argued in the alternative that by formulating policies and procedures for the facility, the two companies had undertaken responsibility for the residents’ care.
The California 2nd District Court of Appeal, in an opinion written by, found the evidence insufficient to allow the claims against Sun and Regency to go forward.
The forms relied on by Renteria’s family “do not establish that Regency and Covina are so intertwined that they are not separate entities,” Justice Judith Ashman-Gerst wrote for the court.
Thus, Regency could not be held liable through an alter-ego theory and Sun could not be held liable through Regency, the panel said.
As for the policies and procedures manuals, the court said it found no proof that Regency or Sun wrote them and, even if they did, there was no suggestion that guidelines themselves were negligent.
“The authorship of a policies and procedures manual is not the same as undertaking … to actually provide [Renteria] with the care she was allegedly deprived of,” the panel said.