A Pennsylvania corporation must face claims related to operations of a facility it owns in Florida, following a state court decision that could be a blow to nursing homes’ often complex ownership structures.
The estate of a former Florida nursing home resident can proceed with its claims that Concordia Lutheran Ministries, a Pennsylvania holding company, didn’t fulfill its financial obligations to the facility where she lived.
The District Court of Appeal for Florida’s Second District on Wednesday upheld a trial court’s refusal to dismiss the suit, ruling that CLM didn’t adequately refute allegations that it committed a claimable offense in Florida. That makes it subject to the state’s “long-arm” statute, despite CLM’s efforts to distance itself from its out-of-state operators.
Bloomberg Law News, which was first to report on the ruling Thursday, said the jurisdictional question “has gained importance in cases involving the nursing home industry especially, as it’s known for having many layers of ownership that complicate liability questions.” The often tangled nature of nursing home ownership has been in the news in recent years, most notably when the White House has criticized it and vowed more transparency.
The Florida long-arm statute provides for court jurisdiction over a foreign defendant when the defendant has “engaged in substantial and not isolated activity within this state” or if it has committed “tortious” acts, or behaviors that can be sued over in civil court.
In this case, the estate of Linda Schumer alleged two negligence counts, one wrongful death count, one count of aiding and abetting Concordia of Florida’s breach of fiduciary duty, and one count of exploitation of a vulnerable adult per Florida statutes.
The estate alleged that CLM conducted and engaged in business activities within the State of Florida through its ownership and management of Concordia Village of Tampa. As for a tortious act, the estate pointed to breached fiduciary duties including the improper transfer of funds to CLM that “adversely impacted the level of care and services provided to residents of the Concordia of Florida facility.”
The estate alleged that CLM made financial transfers “for the purpose of improperly and unjustly enriching CLM and that Schumer suffered injuries as a result.” In addition, the estate alleged that CLM structured and approved contracts between itself and Concordia of Florida that CLM “knew or should have known would result in the diversion of facility revenues necessary to provide the care and services to its residents.”
CLM acknowledged that Concordia was its subsidiary but argued that “ownership of a resident subsidiary corporation by an out-of-state parent corporation, without more, has been repeatedly deemed insufficient” to force a defendant to face civil allegations in another jurisdiction. On that matter, the court agreed.
But judges Patricia J. Kelly and Andrea Teves Smith found that CLM might have committed a tortious act in Florida, ruling that CLM did not adequately dispute claims by the estate over misdirected revenues and other complaints.
In an affidavit related to the company’s motion to dismiss the case, CLM Chief Operating Officer Brian Hotert did not address contracts that may have been entered into regarding repayment of CLM’s capital investment in Concordia of Florida or the impact of repayment on the availability of funds to provide adequate care for residents at the Tampa facility.
The CLM affidavit also did not contain a factual refutation of the aiding and abetting allegations or a charge by the estate that it encouraged Concordia’s breach of fiduciary duties owed to residents including Schumer.
The judges also noted that at a hearing on the dismissal, CLM “made only a cursory argument that requiring CLM to litigate in Florida ‘would be a significant burden’ because it is a Pennsylvania corporation with no employees and no operational control over the facility.”
But leaving the local subsidiary as the only corporate defendant could potentially harm the estate, based on its claims that the facility was underfunded and that CLM “swept” money money from Concordia of Florida to its own coffers, the judges wrote.
