CGB Occupational Therapy, Inc. v. RHA Health Servs.

CGB Occupational Therapy, Inc. v. RHA Health Servs.

Opinion

 [*186]  OPINION OF THE COURT

JORDAN, Circuit Judge.

Before us are cross-appeals arising from the reduction of a $ 30 million punitive damages verdict to $ 2 million. The District Court ordered the reduction on the ground that the verdict was constitutionally excessive. Defendants Sunrise Assisted Living Management, Inc. and Sunrise Assisted Living, Inc. (collectively, "Sunrise") contend that the reduced verdict is still unconstitutional and seek a further reduction. In a cross-appeal, Plaintiff CGB Occupational Therapy, Inc. ("CGB") challenges the District Court's reduction of the verdict and seeks either reinstatement of the original verdict or some enhancement  [*187]  of the reduced verdict. For  [**2] the reasons that follow, we will vacate the District Court's remittitur order and remand the case with instructions to enter a new judgment for punitive damages in the amount of $ 750,000. CGB's cross-appeal will be dismissed.

This case is before us for the second time, following a second jury trial. It is, as we said on the first go-around, a case that "has been characterized by its contentious history." CGB Occupational Therapy v. RHA Health Servs., 357 F.3d 375, 379 (3d Cir. 2004) ("CGB I"). Since we have previously set forth the facts in detail, the following factual recitation is limited to the background necessary for our ruling.

CGB is a provider of rehabilitation therapy services in long-term care and assisted-living facilities. Beginning in 1995, CGB contracted with a company known as RHA Pennsylvania Nursing Homes ("RHA") to provide physical, occupational, and speech therapy to residents at two nursing home facilities owned by RHA, the Pembrooke facility and the Prospect Park facility. CGB's agreements with RHA contained an "anti-raiding" clause providing that, in the event CGB was terminated as the provider of therapy services, the Pembrooke and Prospect Park  [**3] facilities would not, for a period of twelve months, seek to hire or contract with therapists employed by CGB.

At all times relevant to this case, Sunrise managed RHA's Pembrooke and Prospect Park facilities. In 1998, the federal Medicare program altered its process for reimbursing care facilities for therapy services provided to residents. Under the revised process, RHA claimed that it was more difficult to pay CGB, and, on June 30, 1998, at RHA's direction, Sunrise notified CGB in writing that RHA intended to terminate its contracts with CGB, effective September 30, 1998. Almost immediately after giving that notice, Sunrise, again acting on behalf of RHA, executed agreements with another provider of therapy services, Symphony Health Services, Inc. ("Symphony"), to retain Symphony as the new therapy provider at both the Pembrooke and Prospect Park facilities, effective October 1, 1998.

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