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An appellate victory backfired Wednesday when a federal jury awarded $30million in punitive damages in the retrial of a case where the firstjury had awarded just $1.3 million. The first trial of CGB Occupational Therapy Inc. v. RHA/PennsylvaniaNursing Homes Inc., in November 2002, ended with a verdict of nearly $2million — $685,000 in compensatory damages and $1.3 million inpunitives. But the 3rd U.S. Circuit Court of Appeals overturned part of the verdictin February 2004, reducing the compensatory award to $109,000 andordering a new trial limited to the issue of punitive damages. Now a second jury has again found that the plaintiff is entitled topunitive damages and awarded $30 million. In the suit, plaintiff CGB, a Delaware County occupational therapy firm,claimed that Sunrise Assisted Living Inc., a Virginia nursing homemanagement company, had tortiously interfered with its contracts byinducing two Philadelphia-area nursing homes to terminate CGB and thenhire away five of its therapists. At the first trial, plaintiff’s attorney David G. Concannon of Wayne,Pa., told the jury that CGB’s contracts with RHA/Pennsylvania NursingHomes Inc. included a “non-raiding” clause that prohibited the nursinghomes from hiring any of the independent-contractor therapists whoworked for CGB for a period of one year in the event that CGB’s contractwas terminated. CGB had settled with RHA prior to trial. The only remaining defendantwas Sunrise, which had been hired by RHA to manage the two nursinghomes. In the November 2002 verdict, the jury sided with CGB on both itsclaims. On the first claim, the jury found that Sunrise had tortiouslyinterfered with CGB’s contract with RHA by inducing it to terminateCGB’s contract. The jury awarded $576,000 on that claim. The jury also found that Sunrise tortiously interfered with thecontracts between CGB and CGB’s own therapists when Sunrise recruitedCGB’s therapists to continue working for RHA, and awarded $109,000 onthat claim. But on appeal, the 3rd Circuit ruled that although CGB’s second claimwas valid, the first claim was flawed since Sunrise, as a managementcompany, was legally acting as RHA’s “agent” and therefore had a”qualified privilege” to recommend termination of CGB’s contract. “The actions of a principal’s agent are afforded a qualified privilegefrom liability for tortious interference with the principal’s contract,”3rd Circuit Judge Michael Chertoff wrote. But Chertoff found that CGB’s second claim of tortious interference wasa valid one and did not implicate the privilege because CGB claimed thatSunrise interfered in the relationship between CGB and the therapists.The question, Chertoff found, was “whether intermeddling by a thirdparty (Sunrise) in the relationship between an employer and its at-willemployees is an actionable tort.” Under Pennsylvania law, Chertoff said, offering employment to anothercompany’s at-will employee is not actionable in and of itself. “However, systematically inducing employees to leave their presentemployment is actionable when the purpose of such enticement is tocripple and destroy an integral part of a competitive businessorganization rather than to obtain the services of particularly giftedor skilled employees,” Chertoff wrote. Having overturned a portion of the compensatory award, Chertoff alsofound that the punitive damages verdict could not stand because the jurydid not allocate the punitive damages between the two claims. “It is impossible to determine how punitive damages should be allocatedin light of our determination that Sunrise could not have interferedwith the contract between CGB and RHA/Pennsylvania. Consequently, wemust reverse the punitive damage determination and remand to thedistrict court for a redetermination of punitive damages,” Chertoffwrote. In the retrial, CGB’s owner, Cindy G. Brillman, said she testified thatit took her six months to recover from Sunrise’s raid of her employees.Brillman told the jury that she has been battling with Sunrise for sevenyears. According to a transcript of his closing argument, Concannon told thejury that Sunrise has $1.5 billion in annual revenue and earns $60million in profits. Concannon urged the jury to hit Sunrise hard. “Your award must be high enough to punish Sunrise for its intentional,wrongful conduct, and to deter others from engaging in similar conduct,”Concannon said. “You must deter other billion-dollar companies fromtrying to crush the little guy simply because they can.” Concannon told the jury that a punitive award of $15 million wouldrepresent just one-tenth of 1 percent of Sunrise’s annual revenues.”That’s a tiny fraction. You have to decide if this is enough to getSunrise’s attention, or if it’s too little or too much,” Concannon said. Sunrise’s lawyers — Richard G. Mann Jr. and C. William Groscup of WattTieder Hoffar & Fitzgerald in McLean, Va. — argued that Sunrise’sconduct was not outrageous and urged the jury to award no punitivedamages. After the verdict, Mann and Groscup declined to comment. Senior U.S. District Judge Clarence C. Newcomer refused a defenserequest to delay entry of judgment for 10 days, saying he saw no reasonto do so immediately, as is his practice. All three lawyers spoke with the jurors immediately after the verdict.Afterward, Concannon said the jury explained how it had calculated itsaward of $30 million in punitives. The jury’s rationale, Concannon said, was that Sunrise should be orderedto pay CGB all of its profits for a six-month period since it took thatlong for CGB’s business to recover. Focusing on evidence that Sunrise’s annual profits are $60 million, thejury awarded $30 million, Concannon said.

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