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After losing its business in receivership proceedings, a former nursing home operator has won a $20 million jury award on a breach of contract claim against the Florida Agency for Health Care Administration. When Southlake Nursing and Rehabilitation Center began experiencing financial difficulties in 1998, John E. Carter Jr. resigned as its president and board member. Later that year, he purchased the 180-bed nursing home through a new corporation, MIED Inc. Carter’s plan to rejuvenate the facility depended partly on the state’s policy of paying new, unrelated owners a temporary fee increase of $10 a day for each Medicaid patient. According to the complaint, this plan had been preapproved by Frank Hughes, the agency’s planning administrator, but because the state considered Carter to be related to the previous owner, it refused to pay the fee increase. Instead, the agency placed the facility into receivership, claiming MIED had failed to produce accurate fiscal records and could not justify $10 million in Medicaid reimbursement costs. The jury found in favor of Carter and MIED on their breach of contract and equitable estoppel claims, and last week awarded $20 million for breach of contract. MIED Inc. v. State of Florida, Agency for Health Care Admin., No. 00-05941-CA (Duval Co., Fla., Cir. Ct.). An equitable estoppel claim might have yielded only $1.5 million, because the Medicaid fee increase would have lasted for only about 1.5 years, said plaintiffs’ lawyer James C. Rinaman Jr., of Jacksonville, Fla.’s Marks Gray. But for breach of contract, Rinaman said, the jury could consider lost profits for 25 years. The complaint alleged that MIED could have operated the facility with a profit of more than $100,000 a month under Carter’s plan. Southlake is still in receivership. Carter, 75, is no longer interested in the business, Rinaman said. The $20 million will barely pay the personal debts that Carter undertook for the nursing home, Rinaman said, adding that “those debts are not included in the damages award. The jury’s award is for loss of profits only.” Chesterfield Smith, chief of state programs litigation at the Florida attorney general’s office, said his team did not want to comment because it may file post-verdict motions. One issue that could be appealed is the trial court’s ruling that the plaintiffs did not have to seek administrative remedies before filing suit. The court did not say why, but Rinaman said the ruling was based on the principle that a plaintiff does not have to exhaust administrative remedies when doing so would be futile. According to the complaint, Carter and MIED agreed to forgo administrative hearings to stave off agency threats to close the facility.

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