Settlement in Skilled Healthcare suit approved by court;
window to file a claim closes next month
By Matt Drange
December 1, 2010
After 365 days of arguing over documents and disputing testimony, it was all handshakes and smiles in the courtroom Tuesday.
The settlement in the class-action lawsuit against Skilled Healthcare was approved in Humboldt County Superior Court, exactly one year after the case was brought to court. The settlement, which was initially reached in September, is almost identical to the preliminary agreement and is worth $62.8 million -- up to $26 million of which could end up in the hands of the class in the case.
With the approval, the clock is winding down for people who are members of the class to file a claim. Class members of the case have until Jan. 5 to file a claim. The settlement also sets in motion a 65-day period before the injunction in the case goes into effect, something that plaintiff's attorneys said was the goal of the lawsuit all along.
"Everything was fought tooth and nail," said Timothy Needham, lead trial attorney for a team of lawyers who represented the class, which if you include the months leading up to the preliminary settlement amounts to some 42,000 people. "There was not one thing that was left uncontested."
The case, which spans over six years, is believed to be the longest civil trial in Humboldt County history and featured 129 motions, 14 writs and two appeals. Needham said that his office has received roughly 4,000 claims since news of the settlement was distributed to the class over a month ago and that only one person has filed an objection to the agreement.
"It's absolutely unheard of given the circumstances of the case," Needham said, adding that he hasn't seen anything like it in 30 years of experience. "I think the fact that so many people have already filed claims tells us we've done our job."
The issue at the heart of the case, and one that was argued at nearly every turn during the 100-plus court days the case was in session, is a California statue that requires nursing homes to maintain 3.2 nursing hours per patient per day.
The injunction, which will cost the nursing home chain an estimated $12.8 million to comply with, allows for a third party monitor to inspect each of the 22 facilities implicated in the suit and ensure adequate staffing levels are being met. Humboldt County is home to five nursing homes operated by Skilled Healthcare, including Eureka facilities Granada and Eureka Healthcare and Rehabilitation.
The injunction will be in effect for a period of two years, which can be knocked down if a facility is found to be in compliance for 18 months. The agreement also gives the monitor the ability to check on a facility at any time of the day without notice, a big reason for the support of state nursing care advocate Pat McGinnis.
"From an advocate's standpoint, it's great. I would hope this makes a real difference in these patients' lives, and becomes a standard in the future," said McGinnis, the executive director of California Advocates for Nursing Home Reform, adding that the agreement was the most substantial injunction the state has ever seen. "It's just so unusual. They've never had anything like this."
Of the settlement, up to $20 million -- or 40 percent -- could be directed to plaintiff's attorney fees, with another $2 million going to the Humboldt County District Attorney's office, which intervened in the case and pushed for the injunction. The remaining money will go toward claims administration costs, with any leftover cash directed to patient advocacy groups at the discretion of the court.
Healthcare industry analyst Sheryl Skolnick said the breakdown of attorney's fees was standard and that she was not surprised by the amount going to the class.
"I was initially concerned that it would be even less, so I was relieved to hear that they got something," said Skolnick, an analyst with CRT Capital Group in Connecticut who followed the case and the company over the summer. On Wall Street, meanwhile, Skilled Healthcare shares have rebounded since the initial jury verdict of $677 million was rendered against the company in July, setting off a tumultuous summer for the company.
On Tuesday, stocks closed at $6.36 a share, up from a summer low of $1.52 and back to prices before the verdict was announced, and a level that Skolnick expects to stay the same in the future.
"The company will survive," Skolnick said. "One only hopes that they would follow the law in the future."
Matt Drange can be reached at 441-0514 or firstname.lastname@example.org.