A victory for small business

[Subfiend]

On Thursday, August 23, 2007, the U.S. Court of Appeals for the Third Circuit issued its decision in the case of CGB Occupational Therapy, Inc. v. Sunrise Senior Living, Inc., a David v. Goliath case involving a small business that was nearly destroyed by a billion dollar company.

Writing for the majority, Judge Kent Jordan excoriated Sunrise Senior Living, Inc. (NYSE: SRZ) for its "remarkable" and "abusive litigation tactics," as well as its intentional disregard for the rights of CGB Occupational Therapy, Inc., a provider of therapists to two nursing homes managed by Sunrise. The Third Circuit affirmed the trial court's decision that CGB deserved an award of substantial punitive damages, although not the $2 million amount previously set by the District Court or the $30 million amount imposed by a federal court jury that heard the incredible testimony of Sunrise's senior executives. The appellate court imposed a punitive damages award of $750,000, or seven times the $109,000 compensatory damages awarded to CGB in an earlier trial.

In reaching this award, the Third Circuit totally rejected Sunrise's arguments that its conduct toward CGB was "barely a tort," as well as the company's argument that the maximum punitive damages allowed under the U.S. Constitution is only a 1:1 ratio of punitive damages compared to compensatory damages. The court issued a blistering rebuke of Sunrise's litigation tactics, saying: "litigants should not have to face something akin to medieval trial by combat to resolve a basic business dispute."

Although the damages award was significantly reduced, the appellate court was clearly sending a message: Large companies will be held accountable for trying to destroy small businesses if they don't play by the rules.

[Governor]

Good decision! needs to happen more often, but sometimes its not the big companies who do the dirty work in litigation, its their lawyers.

[Subfiend]

Not this time. The company went through four different law firms during the course of the litigation.

The case was actually tried twice. The company's executives refused to show up for the first trial, in violation of a court order. The jury awarded $1.3 million in punitive damages. The executives showed up for the second trial and cried crocodile tears in their testimony. The second jury awarded $30 million in punitive damages.