United States District Court, E.D. Arkansas, Jonesboro Division
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For Kevin Nutt, Lisa Nutt, Plaintiffs: Laura Ann E. Bailey, LEAD ATTORNEY, PRO HAC VICE, Alan G. Crone, David Brackstone, Crone & McEvoy, PLC, Memphis, TN.
Stafford Kees, Defendant, Pro se, Heber Springs, AR.
For Carroll County Nursing & Rehab Center Inc, an Arkansas Corporation, Osceola Therapy & Living Center Inc, an Arkansas Corporation, Defendants: Alfred F. Tom Thompson, III, Casey P. Castleberry, LEAD ATTORNEYS, Murphy, Thompson, Arnold, Skinner & Castleberry, Batesville, AR.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
KRISTINE G. BAKER, UNITED STATES DISTRICT JUDGE.
This matter came for a bench trial on May 28 and 29, 2014. Plaintiffs Kevin and Lisa Nutt appeared through their attorneys. Defendant Stafford Kees appeared pro se. Defendants Carroll County Nursing & Rehab Center, Inc. (" CCNRC" ), and Osceola Therapy & Living Center, Inc. (" OTLC" ), appeared through their attorneys. Having previously entered default judgment against defendants Osceola Nursing Home, LLP, and Osceola Healthcare, PLLC (together, " Osceola defendants" ), the Court also conducted a damages hearing regarding claims against those defendants at the same time as the bench trial, though no one made an appearance on behalf of the Osceola defendants.
There is nothing in the record showing that defendant Hope Healthcare, LLC, was served, and no one has made an appearance on Hope Healthcare's behalf. According to the record before the Court, plaintiffs have not moved for default judgment against Hope Healthcare and thus default judgment has not been entered against it ( See Dkt. Nos. 35, 38, 40). Plaintiffs' claims against Hope Healthcare are dismissed without prejudice. Plaintiffs may file a motion to reconsider if they believe the Court has otherwise overlooked matters in the record related to Hope Healthcare.
Pursuant to the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § 1001 et seq., plaintiffs alleged three claims at trial: (1) breach of fiduciary duty by Mr. Kees, CCNRC, and OTLC; (2) delinquent contributions by Mr. Kees, CCNRC, and OTLC; and (3) interference with protected rights by CCNRC and OTLC. In a bench trial, the trial judge is the sole judge of the credibility of the witnesses and the weight to be given their testimony. See BLB Aviation S.C., LLC v. Jet Linx Aviation, LLC, 748 F.3d 829, 836 (8th Cir. 2014). Conflicting witness
testimony was presented at this trial on several key issues. This Court has carefully considered the issue of witness credibility. Pursuant to Federal Rule of Civil Procedure 52(a), the Court makes the following specific findings and conclusions.
I. Findings Of Fact
A. Plaintiffs' Health Insurance Premiums
1. Plaintiffs worked at a nursing home facility known as Osceola Healthcare as of March 2010 (T.T. 10:15-16; 83:4-17).
2. Ms. Nutt held a variety of jobs at Osceola Healthcare during her tenure there. She started as a housekeeper and worked her way up from housekeeping supervisor to social service director (T.T. 11:4-19).
3. Mr. Nutt worked at the nursing home from September 2009 through August 9, 2010 (T.T. 83:10-17). Mr. Nutt worked as the maintenance supervisor for the facility (T.T. 83:21-22).
4. As a part of their employment with Osceola Healthcare, LLC, plaintiffs contributed money from their paychecks to their group health insurance premiums, through United Healthcare (T.T. 14:16-15:17; 86:11-13; 87:4-20; Plaintiffs' Exhibits 2, 9).
5. Plaintiffs believed that the funds that were withheld from their paychecks as " pre-tax insurance" were going towards paying their healthcare premiums (T.T. 19:1-4).
6. Not until Mr. Nutt was involved in a serious ATV accident did plaintiffs discover that their employer, Osceola Healthcare, had withheld wages from their checks but had not paid their health insurance premiums (T.T. 19:11-24).
7. On or about March 6, 2010, Mr. Nutt was injured in an ATV accident that occurred in Paragould, Arkansas (T.T. 84:17-22). He was air-lifted to the Regional Medical Center (" The Med" ) ( Id.). During his hospitalization, Mr. Nutt's condition was " touch and go" (T.T. 21:1-4). The Med discharged Mr. Nutt about 30 days later (T.T. 85:3-7).
8. On the way home from The Med, Ms. Nutt stopped at the pharmacy to purchase Mr. Nutt's prescriptions (T.T. 19:14-20). The pharmacist notified Ms. Nutt that her insurance was not valid, and Ms. Nutt had to pay out-of-pocket for Mr. Nutt's prescriptions (T.T. 23:9-14).
9. After learning that Mr. Nutt's health insurance was no longer valid, Ms. Nutt called David Threlkeld, the Administrator of Osceola Nursing Home, whom Mr. Kees had hired (T.T. 22:18-23:5; 141:24-142:14).
10. Ms. Nutt complained to Mr. Threlkeld on the phone and in person that day. When she met with him in person, she showed him the receipts and denial codes from the pharmacy (T.T. 23:6-8). Mr. Threlkeld told Ms. Nutt that he would check with Mr. Kees, the majority partner of Osceola Nursing Home, to determine the problem (T.T. 23:15-18).
11. A few days later, Ms. Nutt had a follow-up conversation with Mr. Threlkeld about the status of the health insurance, and again Mr. Threlkeld told Ms. Nutt that he would check with Mr. Kees about the premium payments (T.T. 23:19-24).
12. Ms. Nutt followed-up with Mr. Threlkeld for the fourth time about a week after her third conversation regarding the status of insurance (T.T. 23:25-24:5). That same day, she also spoke with Mr. Kees about the situation because he was in the facility (T.T. 24:3-5). During her conversation with Mr. Kees, Ms. Nutt let him know that plaintiffs had started receiving bills from The Med and the helicopter
service and that they did not have any insurance (T.T. 24:6-13).
13. At this point, since neither Mr. Kees nor Mr. Threlkeld were offering Ms. Nutt any help, she called the insurance agent to determine the problem (T.T. 24:12-13). The insurance agent informed Ms. Nutt that their policies had lapsed but that if Osceola Nursing Home made the payments, then the policies could be reinstated and The Med would get paid (T.T. 24:14-18; 65:22-66:3).
14. After Ms. Nutt found out that Osceola Nursing Home could reinstate the insurance by making the payment, she raised this issue with Mr. Threlkeld (T.T. 24:19-21). Mr. Threlkeld told Ms. Nutt that he would discuss it with Mr. Kees (T.T. 24:21-23).
15. In her attempt to reinstate their health insurance, Ms. Nutt persisted in her conversations with Mr. Kees and Mr. Threlkeld. Approximately two weeks later, when neither Mr. Threlkeld nor Mr. Kees had taken any action on reinstating the health insurance, Ms. Nutt realized that it was probably too late to pay the premiums (T.T. 25:1-3). Plaintiffs told Mr. Threlkeld that they would not be able to afford to pay the medical bills and that they had been paying for their own health insurance but did not have any (T.T. 25:3-5).
16. Plaintiffs had additional conversations with Mr. Kees about the lapsed health insurance. Ms. Nutt would discuss it with him when Mr. Kees came to the facility (T.T. 25:12-16). Plaintiffs told Mr. Kees that they did not know what they would do about the bills because they did not have enough money to pay them ( Id.). They explained that The Med saved Mr. Nutt's life and that they thought that The Med should be paid ( Id.).
17. When plaintiffs brought this up with Mr. Kees, he would refer them to Mr. Threlkeld (T.T. 25:17-24). When plaintiffs went to Mr. Threlkeld, he would refer them to Mr. Kees ( Id.).
18. Eventually, a week or two before August 5, 2010, Mr. Kees and Mr. Threlkeld proposed that plaintiffs file bankruptcy to write-off the debt from the medical bills (T.T. 122:11-18; 27:25-28:4). Mr. Kees and Mr. Threlkeld called plaintiffs into Mr. Threlkeld's office and presented them with a check for $1,500.00 to file bankruptcy (T.T. 28:5-10). Plaintiffs refused the offer to file bankruptcy because they believed that The Med should be paid for its work, especially since plaintiffs should have had health insurance as they had been paying for their premiums (T.T. 28:11-20).
19. As a result of Mr. Nutt's hospitalization, plaintiffs are responsible for medical bills in the amount of $225,591.97 for The Med and $7,880.00 the helicopter service (T.T. 26:2-27:17; Plaintiffs' Exhibits 3, 5).
B. History Of The Management Of Osceola Defendants
20. At the time that plaintiffs began working at Osceola Healthcare it was a limited liability partnership, and Mr. Kees was the majority partner (T.T. 141:10-12). His name was listed with the Arkansas Office of Long Term Care as the person responsible for the Osceola Nursing Home facility (T.T. 186:11-22).
21. In 2009, a company called Hope Healthcare managed the Osceola nursing home facility (T.T. 141:13-15). Mr. Threlkeld worked for Hope Healthcare, but, in October 2009, Mr. Kees fired Hope Healthcare because it purportedly got the nursing home in trouble with the Equal Employment Opportunity Commission (T.T. 141:16-23).
22. After Mr. Kees fired Hope Healthcare, he hired Mr. Threlkeld to be the administrator of the nursing home, (T.T. 141:24-142:9), and learned that there were problems with the Medicaid reimbursements, (T.T. 145:14-146:1).
23. Osceola Healthcare paid Mr. Threlkeld's checks after Mr. Kees fired Hope Healthcare, and Mr. Threlkeld worked directly for Osceola Healthcare as administrator without a management company in between Mr. Threlkeld and Osceola Healthcare (T.T. 142:10-18).
24. Mr. Threlkeld continued in his capacity working directly for Osceola Healthcare as the administrator of the nursing home from October 2009 to August 1, 2010 (T.T. 142:15-20).
25. After Mr. Threlkeld became the administrator of the nursing home and began working directly for Osceola Nursing Home, Mr. Kees became more involved in the management of the nursing home (T.T. 29:21-30:3). Mr. Kees, who used to come to the nursing home a couple of times a month, increased his involvement ( Id.). He began visiting the nursing home every couple of weeks ( Id.). Then towards the end of his ownership of the facility, he would come every week to the nursing home and stay for couple of days ( Id.).
26. As Mr. Kees became more involved with the operation of the nursing home, he would give the employees instructions on how to perform their jobs. Mr. Kees contacted the nursing home frequently (T.T. 31:21-32:7). Sometimes he called as many as four times a day, and Ms. Nutt would hear a page announcing his calls over the nursing home loudspeaker ( Id.). Mr. Kees instructed Ms. Nutt to follow-up on referrals to try to get patients for the facility (T.T. 30:7-14). He also told Ms. Nutt about how to perform marketing with different hospitals so that they could get more patients in the facility (T.T. 31:1-6).
27. Mr. Kees took Ms. Nutt to his accountant's office so that she could learn how to perform Medicare billing (T.T. 30:15-25).
28. Mr. Kees would call and check with Ms. Nutt about the amount of money that she had billed to Medicare, known as " back billing" (T.T. 30:7-15). He would call her on Fridays to check the estimated Medicaid deposits, though Ms. Nutt was not responsible for transferring the nursing home's funds and did not have access to the nursing home's general ledger (T.T. 31:7-11, 17-23).
29. Ms. Nutt, in her capacity as social services director and with her involvement on the billing, did not have control over the funds for the patient trust account (T.T. 82:10-11). She was not a signatory on the patient trust account and did not have the ability to transfer funds out of the patient trust account (T.T. 81:1-7). Mr. Threlkeld and Mr. Kees were the signatories on the account (T.T. 37:5-11). Ms. Nutt's role was to present to the bank the deposit slips and checks signed by Mr. Kees or Mr. Threlkeld (T.T. 37:19-20).
30. Mr. Threlkeld trained Ms. Nutt on the patient trust account (T.T. 81:8-9), but she had no direct access to the funds. Ms. Nutt could track the individual patient trust account in the Americana system, an accounting system similar to QuickBooks, but she could not actually balance the trust account against the money in the bank because she did not have access to the bank statements (T.T. 39:6-13).
31. Ms. Nutt never used patient trust funds for any expenses other than expenses that a patient authorized and for which a patient signed the ledger (T.T. 40:2-12). She never misappropriated patient funds (T.T. 40:13-14). She never used any money from the patient account for her purposes (T.T. 42:5-7).
32. When the bank informed Ms. Nutt that the trust account was negative, she informed Mr. Threlkeld, and he told her that he would take care of it (T.T. 41:17-42:1).
33. In fact, Ms. Nutt would occasionally use her own money to assist residents (T.T. 42:8-18). She bought patients cigarettes, eggs, bread, cookies, Cokes, and " things that the residents wanted and needed, and [she] felt like they ought to have them" (T.T. 42:13-16). She did not pay for these things with funds from the patient trust account, and she was ...