Skilled Healthcare Falls Most Since 2007 After $671 Million Jury Verdict
By Margaret Cronin Fisk - Jul 7, 2010
Skilled Healthcare Group Inc. plunged the most since its
initial public offering in New York trading after a
California jury returned a $671 million verdict against the
nursing-home operator.
Skilled Healthcare dropped $4.70, or 76 percent, to $1.52 on
the New York Stock Exchange, the largest decline since the
shares went on sale in May 2007.
The plaintiffs accused Skilled Healthcare of improperly
staffing 22 California facilities. A Humboldt County jury
yesterday found the company liable for $613 million in
statutory damages, the maximum allowed by state law, and $58
million for restitution. Skilled Healthcare, based in
Foothill Ranch, California, said today that it will appeal.
“We strongly disagree with the outcome of this legal matter
and we intend to vigorously challenge it,” Chief Executive
Officer Boyd Hendrickson said in a statement. “Our
facilities are appropriately staffed,” he said.
The verdict is the largest jury award in the U.S. this year,
according to data compiled by Bloomberg. Skilled Healthcare
said the award exceeds the policy limits of its insurance.
The jury will return later to determine punitive damages,
said the company, which posted a net loss of $133 million
last year on revenue of $759.8 million.
Staffing Rates
The lawsuit was filed in 2006 on behalf of current and
former residents of 22 Skilled Healthcare operations in
California, plaintiffs’ attorney Tim Needham said.
California law requires nursing homes to maintain staff at a
rate of 3.2 nursing hours per patient per day, he said.
“That’s the minimum; they would treat it as a target,”
Needham said today in a phone interview. “Using their own
figures, they understaffed 30 to 40 percent of the time.”
The lawsuit was certified as a class action in June 2008,
allowing the plaintiffs to pursue their claims as a group.
About 32,000 people, including families of residents who
died, are in the class, Needham said.
Skilled Healthcare, which operates in seven states, said
pursuing an appeal would require posting a bond for 150
percent of the verdict. There is $94 million available on
revolving credit, although availability may be limited by
covenants in the loan, the company said.
JMP Securities equity analyst Peter Martin cut Skilled
Healthcare today to “market perform” from “market
outperform.” Ralph Giacobbe of Credit Suisse downgraded the
shares to “underperform” from “outperform.”
TThe case is Lavender v. Skilled Healthcare Group, DR060264,
Superior Court, Humboldt County, California (Eureka).
reprinted from Bloomberg.com