Elder Law Litigation: Nursing Facility Collection Actions

Carmine Perri
Czepiga Daly Pope & Perri

Admission into a nursing facility exposes residents, family members, and friends to potential liability for any purported debt owed to the nursing facility.

The following two developments over the past year will affect the prosecution and defense of nursing facility collection actions: (1) the passing into law of a statutory cause of action for nursing facilities and (2) the case of Aaron Manor Inc. versus Janet Irving.

I. Transferor/ Transferee Liability- Connecticut General Statute §17b-261.

Effective October 1, 2013, Public Act 13-234, also known as the Governor’s Implementer Bill, substantially revised, among other sections of the General Statutes, Connecticut General Statute (herein “C.G.S.”) §17b-261.

This statutory cause of action can be brought against a transferor or a transferee, as defined by the statute. The statute imposes the following two conditions on the cause of action: (1) the debt recovery does not exceed the fair market value of the transferred asset at the time of transfer and (2) the asset transfer that triggered the penalty period took place not earlier than two years prior to the date of the nursing facility resident's Medicaid application; a penalty period is “a period of Medicaid ineligibility imposed pursuant to 42 United States Code §1396p(c) . . . on a person whose assets have been transferred for less than fair market value for the purposes of obtaining or maintaining Medicaid eligibility.” Public Acts 2013, No. 13-234, §128(a).

If the nursing facility proves, based upon clear and convincing evidence, that the defendant incurred a debt for unpaid care provided to a resident who has been subject to a penalty period by (1) willfully transferring assets that are the subject of a penalty period, (2) receiving such assets with knowledge of such purpose, or (3) making a material misrepresentation or omission concerning such assets, then a court may award the nursing facility actual damages, court costs, and reasonable attorneys’ fees. If, on the other hand, the defendant successfully defends the action, the court shall, as a matter of law, award the defendant court costs and reasonable attorneys’ fees. It must be noted that this statutory cause of action is in addition to all other rights or remedies a nursing facility has or may believe it has.

Finally, a conservator of the estate who transfers income or principal with the approval of the Probate Court is not subject to suit from the nursing facility.

Time will tell whether this statutory change is used as a vehicle to collect from one who willfully transferred assets resulting in a debt owed to the nursing facility or whether this new legislation will be used by nursing facilities as another collection tactic employed to overpower residents, family members, and friends.

II. Aaron Manor vs. Janet Irving - A Successful Defense of a Nursing Facility Collection Action.

Janet Irving’s fight against Aaron Manor, Inc. (herein “Aaron Manor”), which unfolded at every level of our state court system took many years to unfold. After five years of litigation, Janet Irving, who was represented by Attorney Gerald Garlick, defeated Aaron Manor’s collection attempt and forced it to pay her attorney’s fees.

Ms. Irving’s father was a resident at Aaron Manor’s nursing facility. Ms. Irving signed the Resident Admission Agreement as the Responsible Party. Aaron Manor, Inc. vs. Janet Irving, 2008 Conn. Super. LEXIS 2392, 1 (Sept. 24, 2008). After Ms. Irving’s father passed away, Aaron Manor sued Ms. Irving for the purported debt owed to it.

After trial, Judge Clarance J. Jones entered judgment in Ms. Irving’s favor finding that she did not hold power of attorney over her father’s affairs, that she did not have access to her father’s checking account, and that she did not have access to her father’s financial resources.

After Judge Jones’ decision, Ms. Irving filed a Motion for Counsel Fees pursuant to C.G.S. §42-150bb. The trial court awarded Ms. Irving her attorney’s fees.

Aaron Manor appealed. The following two issues were presented to the Appellate Court: (1) whether the trial court improperly failed to find that Ms. Irving breached her contract with Aaron Manor and (2) whether the trial court improperly awarded attorney’s fees to Ms. Irving pursuant to C.G.S. §42-150bb. Aaron Manor, Inc. vs. Janet Irving, 126 Conn. App. 646, 648 (2011).

As to whether Ms. Irving breached her contract with Aaron Manor, the Appellate Court agreed with the trial court that Ms. Irving had no control or access to her father’s income and assets and concluded that Ms. Irving was “not obligated under the admission agreement to remit to the plaintiff any sums that she received from her father as gifts or reimbursements.” Id. at 655. As to the attorney’s fees issue, the Appellate Court held, with Judge Barry J. Schaller dissenting, that C.G.S. §42-150bb did not apply to Ms. Irving because she was not a consumer since she was “not a buyer, debtor, lessee or personal representative” of her father. Id. at 661.

Ms. Irving petitioned for certification to the Supreme Court seeking the Court to address whether the Appellate Court properly reversed the trial court's award of attorney's fees under C.G.S §42-150bb. Aaron Manor, Inc. v. Irving, 301 Conn. 908 (2011). The Court granted Ms. Irving’s Petition for Certification. On January 1, 2013, the Court issued its opinion that Ms. Irving was a consumer under C.G.S. §42-150bb and that she was entitled by operation of law to reasonable attorney’s fees as provided in the Resident Admission Agreement. Aaron Manor, Inc. vs. Janet Irving, 307 Conn. 608 (2013).

Part of the Court’s reasoning focused on the apparent inconsistency that Aaron Manor could file suit against a responsible party, not the resident that received its services, and also seek its attorney’s fees from the responsible party but, if the responsible party successfully defended the lawsuit, he or she would not be entitled to attorney’s fees.

It would be wholly incongruous with this design to conclude that the plaintiff would be entitled to fees for successfully prosecuting the present action but that the defendant would not be entitled to fees for mounting a successful defense. Id. at 618.

The Court reversed the Appellate Court’s decision as to the award of attorney’s fees and remanded to the Appellate Court with direction to affirm the judgment of the trial court. Id. at 620.

On June 28, 2013, five and a half months after the Court issued its opinion, the trial court, the Honorable Julia J. Aurigemma, held a hearing to address the following three issues: (1) the reasonableness of the requested attorney’s fees incurred in connection with the appeal of the action to the Appellate Court and the Supreme Court, (2) whether a discretionary award of post-judgment interest is appropriate, and (3) if post-judgment interest is appropriate, the date from which interest shall accrue and the rate of interest to be awarded. Aaron Manor, Inc. vs. Janet Irving, 2013 Conn. Super. LEXIS 2009, 1 (2013).

On September 9, 2013, almost five years after Judge Jones’ decision in Ms. Irving’s favor, Judge Aurigemma issued her decision.

As to the first issue, Judge Aurigemma accepted the Court’s finding that the trial court’s initial award of $36,000.00 in attorney’s fees pursuant to C.G.S. §42-150bb was reasonable. As to the second issue, Judge Aurigemma found the award of post-judgment interest appropriate because “without such an award, a judgment debtor could, theoretically, evade payment of the entire judgment.” Id. at 7. As to the third issue, Judge Aurigemma found February 27, 2009, the date on which $36,000.00 was initially awarded by Judge Jones, to be the date from which interest shall accrue. Id. In total, Judge Aurigemma awarded “the defendant a total of $14,865.58 for attorney’s fees attributable to the appeals to the Appellate and Supreme Courts and interest [of $1,559.31] on the original award of $36,000.00.” Id. at 9.

III. Conclusion:

Janet Irving’s defense against Aaron Manor serves as precedent for both shield and sword in the battle against aggressive nursing facilities. Whether the precedent set by Janet Irving’s defense is counter-balanced by nursing facilities’ growing collection arsenal will be an issue most likely addressed in the coming year.

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