Pursuing Corporate Overseers On A “Joint Venture” Theory Of Liability
As discussed in earlier blogs, affixing liability against an elder care facility’s corporate overseer is critical in elder abuse litigation. This is important morally, as the corporate overseers are invariably responsible for neglect that occurs at the facility because they control key features of facility operations such as staffing, supplies, and staff pay. Securing corporate liability also is important to ensure that corporate defendants are held accountable for their wrongdoing. Typically, the financial benefits of nursing home operators’ ill- conceived plan to maximize profits at the expense of patient care are maintained by the corporate overseers. Thus, a judgment against solely the facility not only may be uncollectible but also will be substantially less than would be available if the corporate defendants were held liable because punitive damages are capped at 10% of the overall net worth of the defendants.
There are many different legal theories elder abuse practitioners can use to pursue corporate overseers in connection with the neglect that their clients suffered while residing in an elder care facility. These theories include, but are not necessarily limited to, direct, joint venture, conspiracy, aider and abettor, and alter ego liability.
This blog addresses pursuing corporate entities under a “joint venture” theory of liability. Under the governing jury instructionI, “each of the members of a joint venture, and the joint venture itself, are responsible for the wrongful conduct of a member acting in furtherance of the venture.” CACI 3712. A joint venture exists if (1) two or more persons or business entities combine their property, skill, or knowledge with the intent to carry out a single business undertaking; (2) each has an ownership interest in the business, (3) they have joint control over the business, even if they agree to delegate control, (4) they agree to share the profits and losses of the business. See id.
As to this derivative theory of liability, if the elements necessary to establish it are present, the Corporate Defendants are liable to the same extent as is the facility defendant not because of their direct conduct toward the plaintiff but instead because of the relationship between these defendants. See CACI 3712 (“Each of the members of a joint venture, and the joint venture itself, are responsible for the wrongful conduct of a member acting in furtherance of the venture.”).
Joint venture is an attractive theory of liability because the manner of operations between the Corporate Defendants and the facility defendant, especially as it relates to the flow of money from the facility defendant to the corporate defendant, simply feels intuitively to a jury like a “joint venture.” Why should corporate defendants who have been reaping all of the financial benefits from the operation of their facilities be able run and hide when those same operations cause harm to someone?
Plaintiffs can attempt to meet element 1 by proving that the facility defendant and the Corporate Defendants have combined their property, skill and knowledge to carry out a single business undertaking – to wit, the operation of the facility defendant in a manner that maximizes profits. The facility defendant has contributed its labor at the facility, among other things. And the Corporate Defendants contribute their skill, knowledge, and property (as often the facility operated on a Corporate Defendants owned facility) to the undertaking to ensure that the facility squeezes every penny of profit out of its operations. The Corporate Defendants’ contributions include “financial management” and consulting services, among other things.
As to element 2, plaintiffs can argue that each party has an ownership interest in the parties’ joint undertaking to maximize profits. Often the facility’s owners have a legally defined ownership interest in the facility and its operations. Meanwhile, as discussed, plaintiffs can argue that the Corporate Defendants have a de facto ownership interest in the facility defendant and its activities because of the operational structure in place at all times.
As to element 3, plaintiffs can argue that the facility defendant and the Corporate Defendants have joint control of the business enterprise at issue. The facility has some control business of the enterprise in that its employees are providing care at the bedside and making a host of decisions that affect both patient care and the facility’s ability to maximize profits. Meanwhile, the Corporate Defendants often have
overarching control over the facility defendant’s operations.
As to element 4, plaintiffs can argument that there is an agreement between the facility defendant and the Corporate Defendants to share the profits secured by these two entities’ operation of the facility defendant in a manner that maximizes profits. To the extent that facility personnel receive bonuses tied to the income of the facility, this is clear evidence of the sharing of profits and losses between the facility and the Corporate Defendants who, of course, reap the largest portion of the profits.
As the above shows, in many cases there is a compelling case to be made in many elder abuse cases that the Corporate Defendants overseeing your facility defendant are engaged in a joint venture within the meaning of California law.
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