In re: Lemington Home for the Aged, No. 13-2707 (3d Cir. 2015)Annotate this Case
The Lemington Home, established in 1883, was a non-profit nursing home caring for African-American seniors. Causey became its Administrator and CEO in 1997. Shealey became CFO in 2002. The Home had financial trouble for decades, but remained afloat with help from Pittsburgh, Allegheny County, and private foundations. In the early 2000s, the Home was repeatedly cited for deficiencies; two patients died under suspicious circumstances. In 2005, the Directors voted to close the Home and filed a Chapter 11 petition. Residency dropped to 37 patients. The Bankruptcy Court approved the closure. The Home had delayed filing Monthly Operating Reports that would have shown $1.4 million in Nursing Home Assessment Tax payments, which could have increased its chances of finding a buyer. The Committee of Unsecured Creditors filed an adversary proceeding, claiming breach of fiduciary duty, breach of the duty of loyalty, and deepening insolvency. In 2013 a jury awarded: compensatory damages of $2,250,000; punitive damage of $350,000, individually, against five Directors; and punitive damages of $1 million against Shealey and $750,000 against Causey. The Third Circuit affirmed the liability findings and the punitive damages awards against Shealey and Causey, but vacated the award of punitive damages against the Directors, which was not supported by evidence sufficient to establish that they acted with “malice, vindictiveness and a wholly wanton disregard of the rights of others.”
The court issued a subsequent related opinion or order on February 23, 2015.