CALIFORNIA ASSOCIATION OF HEALTH FACILITIES v. DEPARTMENT OF HEALTH SERVICES

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Court of Appeal, Third District, California.

CALIFORNIA ASSOCIATION OF HEALTH FACILITIES, Plaintiff and Appellant, v. DEPARTMENT OF HEALTH SERVICES, Defendant and Appellant.

No. C021880.

Decided: August 28, 1996

Jonathan E. Cohn, J. Mark Waxman, and Foley, Lardner, Weissburg & Aronson, Inc., Los Angeles, for Plaintiff and Appellant. Daniel E. Lungren, Attorney General, Charlton G. Holland, Senior Assistant Attorney General, Jennifer S. Cady and Edward H. Ochoa, Deputy Attorney Generals, for Defendant and Appellant.

The California Association of Health Facilities (Association) brought this declaratory relief action against the Department of Health Services (Department) seeking a resolution of a dispute between the Association and the Department concerning the interpretation of a statute.   The statute, Health and Safety Code section 1424, provides a defense to civil penalties against a long-term health care facility licensee when a patient in the facility is injured or endangered if the licensee proves it “did what might reasonably be expected of a long-term health facility licensee, acting under similar circumstances, to comply with the regulation.”  (Health & Saf.Code, § 1424, subds. (b), (c), (d).)   The dispute hinges on whether the licensee must only prove it acted reasonably or must prove its employee, who committed the violation, also acted reasonably.   We conclude the licensee must only prove it acted reasonably.   Accordingly, we modify the judgment to so state and affirm.

THE CONTROVERSY

The Health and Safety Code (undesignated statutory references are to this code) provides for civil citations against long-term health care facility licensees in which patients are injured or endangered. (§ 1424.)   The citations are investigated by the Department and, if the licensee challenges the citation, it is adjudicated in a citation review conference by a hearing officer employed by the Department.   If dissatisfied with the hearing officer's determination, the licensee may seek review by an administrative law judge or the courts, depending on the severity of the citation. (§§ 1417.1, 1428.)

Section 1424 sets up three classes of citations relevant here.  “AA” citations are meted out for a patient's death caused by a violation of a regulation.  “A” citations are for violations that place the patient in imminent danger of death or serious harm or result in a substantial probability of such harm.  “B” citations are for violations the Department determines have a direct or immediate relationship to the health, safety, or security of the patient.   Civil penalties, ranging from $100 to $25,000, may be imposed for citations. (§ 1424.)

Section 1424 also provides a defense:  “In the event of any citation ․, if the state department establishes that a violation occurred, the licensee shall have the burden of proving that the licensee did what might reasonably be expected of a long-term health care facility licensee, acting under similar circumstances, to comply with the regulation.   If the licensee sustains this burden, then the citation shall be dismissed.” (§ 1424, subds.(b), (c), (d).)

The manner of application of this statutory reasonableness defense is the subject of the parties' dispute.   The Department contends the defense looks to the reasonableness of the actions of the licensee's employees, while the Association claims the defense looks to the reasonableness of the licensee itself.   To give meaning to the dispute, we offer a hypothetical:

A health care facility licensee did everything it could to prevent the physical abuse of Mr. Patient.   It conducted in-service training for its staff, assured that staff members had good records of treating the patients appropriately, and maintained procedures for monitoring potential problems and investigating actual problems.   One day, a previously model staff member became frustrated with Mr. Patient and beat him.   In proceedings against the licensee, the Department proved a violation of a regulation prohibiting physical abuse.

Under the Department's interpretation of the reasonableness defense, the licensee must be cited because the employee's actions were unreasonable and the employee's unreasonableness is imputed to the licensee.   Under the Association's interpretation, the citation must be dismissed because the licensee, itself, acted reasonably in doing everything it could to prevent the abuse.

Even though there is no specific citation to review in this case, we must adjudicate the parties' dispute to avoid a multiplicity of actions.   (Californians for Native Salmon etc. Assn. v. Department of Forestry (1990) 221 Cal.App.3d 1419, 1429–1430, 271 Cal.Rptr. 270.)

The trial court granted summary judgment nominally in favor of the Association.   However, the court imposed conditions, detailed below, on the invocation of the reasonableness defense.   Both parties appeal.   They agree there is no factual dispute;  they seek only an interpretation of the reasonableness defense in section 1424.

DISCUSSION

 The Department bases its position in this dispute on the doctrine of nondelegable duties giving rise to vicarious liability.   In its view, the regulations impose nondelegable duties on the licensee which, if delegated and breached, may result in a citation against the licensee regardless of the licensee's own reasonableness under the circumstances.   The licensee, the Department asserts, must prove it acted reasonably and must step into the employee's shoes and prove the employee acted reasonably to obtain the benefit of the reasonableness defense.

The Department derives this doctrine of nondelegable duties from the Restatement Second of Agency, section 214.   That section states:  “A master or other principal who is under a duty to provide protection for or to have care used to protect others or their property and who confides the performance of such duty to a servant or other person is subject to liability to such others for harm caused to them by the failure of such agent to perform the duty.”   This is a common law rule of tort liability, as is obvious from the reference in the section to the principal's liability to an injured person.

The Department's unstated premise that the Legislature intended to import common law tort principles into this realm of statutory civil penalties is false.   Nowhere in the statutory scheme is such an intent manifested.   The basis for imposing civil penalties is violation of applicable regulations (§ 1423), not the violation of a common law duty.   Furthermore, the penalty is paid to the government, not to the injured person.   Liability in tort to the injured person and liability in the form of civil penalties result from two different systems, separate and distinct.

To be sure, the Legislature could adopt elements of tort law in creating its system of civil penalties.   But there is no hint it has done so here.   Quite the contrary, the statutory scheme shows the Legislature did not intend to adopt tort law with respect to the reasonableness defense.

When the Legislature adopted principles of vicarious liability in regulating health care facilities in other respects, it did so specifically.   For example, a patient has a statutory right to recover civil damages from a licensee for violation of the Patients' Bill of Rights.   Under this statutory scheme, which is more like common law tort liability than the civil penalties at issue in this case, the licensee is liable for the acts of its employees, up to $500 plus costs and attorney fees, payable not to the government but to the patient. (§ 1430, subd. (b).)  In addition to these statutorily-permitted civil damages, an injured party may recover damages under common law.   The remedies are cumulative. (§ 1433.)   The Legislature knows how to make licensees liable for the acts of their employees but has not done so in connection with civil penalties when the licensee acts reasonably.

The Department cites cases, primarily Camacho v. Youde (1979) 95 Cal.App.3d 161, 157 Cal.Rptr. 26, in which holders of state licenses in various professions and trades were held responsible for the actions of their employees.   These cases, however, have no bearing on the outcome here because they do not involve a statute which, on its face, provides the licensee a defense to a citation if the licensee acted reasonably.   In effect, the Department seeks to take away the statutory reasonableness defense of long-term health care facility licensees because it is not available under other statutory schemes.   So stated, the argument is exposed as illogical.

 Civil penalties are similar to criminal fines.   Indeed, they are treated the same for double jeopardy purposes when, as here, the civil penalty is penal rather than remedial.  (United States v. Halper (1989) 490 U.S. 435, 447, 109 S.Ct. 1892, 1901, 104 L.Ed.2d 487, 501.)  “[T]he labels ‘criminal’ and ‘civil’ are not of paramount importance.”  (Ibid.)

“[I]n related matters there are differences in defenses to torts and defenses to crimes, because torts are wrongs to private individuals but crimes are wrongs to the public.”  (LaFave & Scott, Criminal Law (1972) ch. 1, § 3, p. 12.)  “The aim of the criminal law ․ is to protect the public against harm, by punishing harmful results of conduct or at least situations (not yet resulting in actual harm) which are likely to result in harm if allowed to proceed further.   The function of tort law is to compensate someone who is injured for the harm he has suffered.”  (Id. at p. 11.)

 Thus, civil penalties, much like criminal penalties, punish wrongdoing, while tort law compensates the injured.   It is therefore consistent to allow a licensee a defense to civil penalties based on the reasonableness of the licensee, even though that defense may not be available when an injured party sues in tort, because the licensee, having acted reasonably, has done nothing wrong.

The scheme of civil penalties against long-term health care facility licensees is one of strict liability on the part of the licensee for violations of the applicable regulations.   The scheme offers a defense to strict liability, however, if the licensee proves it “did what might reasonably be expected of a long-term health care facility licensee, acting under similar circumstances, to comply with the regulation.” (§ 1424, subds.(b), (c), (d).)

The plain meaning of the language employed in section 1424 gives the licensee this absolute defense if it acted reasonably.   While the employees of the licensee act under the authority of the license, the defense is not predicated on proof the employee, acting under the authority of the license, acted reasonably.   As the Legislature did with respect to civil damages, it could have expressly made the licensee liable for civil penalties for the acts of its employees, regardless of the licensee's reasonableness.  (See § 1430, subd. (b).)  The Legislature chose to treat civil damages and civil penalties differently.   That is the Legislature's prerogative.

The Department asserts, using hypotheticals, the interpretation of section 1424 urged by the Association leads to absurd results.   We find no merit in this assertion and illustrate its falsity using one of the Department's hypotheticals:

“A nursing facility [licensee] is cited for failing to provide proper care and assessment of an elderly patient who received second and third degree burns from an improperly placed heating pad applied by a certified nurse assistant.   The patient, who was both paralyzed and unable to verbally communicate, was physically unable to move off the heating pad or cry out for help.   The facility licensee, however, establishes that it had done everything reasonably expected to prevent the violation because the facility properly hired and trained the nurse assistant and because the facility had a current written policy and procedure on the correct application of heating pads.   Thus, although the actions taken by the facility to hire staff and maintain policies and procedures have absolutely nothing to do with the violations for failing to provide proper care and continually assess the patient's needs, under the [Association's] theory, the citation would be dismissed.”

Assuming the Department is correct that the licensee, itself, acted reasonably under the circumstances, it does not lead to an absurd result to dismiss the citation based on the reasonableness defense.   Dismissal of the citation does not mean nothing went wrong.   Indeed, the hypothetical may give rise to civil damages under section 1430 and common law tort liability.   Under both theories, the licensee could be held vicariously liable.   These damage awards against the licensee are justified because they are remedial;  however, a penalty in the form of civil penalties is unnecessary because the licensee, itself, did nothing wrong.

The remainder of the Department's arguments are based on its view of public policy.   It may make those arguments to the Legislature, if it so chooses, not here.  (Thomas v. City of Richmond (1995) 9 Cal.4th 1154, 1165, 40 Cal.Rptr.2d 442, 892 P.2d 1185.)

 We now turn to the trial court's resolution of the dispute.   After reviewing the parties' respective summary judgment motions and hearing argument, the court ruled as follows:

“When a citation is issued against a licensee for conduct which does not involve unreasonable conduct of an employee of the institution, the reasonable conduct defense clearly applies.

“When a citation is issued for the conduct of an employee which is unreasonable, and the conduct of the institution is otherwise in all respects reasonable, the statute requires that the citation be dismissed when the following conditions are present:

“1. The conduct involved must not be so outrageous, so heinous, that it must, as a matter of law, be imputed to the licensee.  (For example, if an employee murdered numerous patients, etc.)

“2. The conduct in question must be by a primary care-giver.

“3. The primary care-giver involved must not be a management employee.”

This ruling inappropriately seeks to resolve matters of a factual nature and, in any event, is unresponsive to the requests of the parties for declaratory relief.

The reasonableness of the licensee's actions is a question for the trier of fact unless reasonable minds cannot differ concerning whether the actions were reasonable.   Then, it may be determined as a matter of law.  (See People v. Czahara (1988) 203 Cal.App.3d 1468, 1478, 250 Cal.Rptr. 836.)   Since the declaratory relief action does not present specific facts, further consideration and resolution is premature.

In summary, section 1424 imposes strict liability on licensees for a violation of a regulation when the violation causes injury to or endangers a patient or resident of a long-term health facility licensee.   The reasonableness of the licensee's actions, however, are an absolute defense to a citation issued for a violation.   The reasonableness of an employee's actions is not to be imputed to the licensee.   Of course, there may be instances in which the reasonableness of the employee's actions are relevant in determining the reasonableness of the licensee's actions.   The determination of reasonableness, however, must be made on a case-by-case basis.

DISPOSITION

We modify the judgment of the trial court by replacing its declaration with the following:  In applying the section 1424 reasonableness defense, the Department shall not impute to the licensee the unreasonableness of an employee.   The Association shall recover its costs on appeal.

As modified, the judgment is affirmed.

NICHOLSON, Acting Presiding Justice.

RAYE and MORRISON, JJ., concur.

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