Kenneth W. KIZER, as Director, etc., Plaintiff and Appellant, v. COUNTY OF SAN MATEO, Defendant and Respondent.
The question in this appeal is whether current law prevents the state from imposing statutory civil penalties on a state licensed, county-operated long-term health care facility whose violations of law pertaining to patient care may have resulted in the death of one patient and imminent danger or a substantial probability of death or serious physical harm to others. Bound by principles of stare decisis, we reluctantly conclude that unlike a privately owned facility, the county facility is immune from liability for these penalties, but we urge reconsideration of this question either by the Supreme Court or the Legislature.
Respondent County of San Mateo, Department of Health Services (the County) is licensed by the State Department of Health Services (the Department) to operate Crystal Springs Rehabilitation Center (the Center), a long-term health care facility in San Mateo. Appellant Kenneth W. Kizer, M.D., M.P.H., is the Director of the Department.
The Long–Term Care, Health, Safety, and Security Act of 1973 (Health & Saf.Code, § 1417 et seq.; hereafter the Act) 1 authorizes the Department both to inspect long-term health care facilities for compliance with statutes and regulations pertaining to patient care, and to impose civil sanctions on facilities which violate those laws and regulations. (§ 1417.1; Lackner v. St. Joseph Convalescent Hospital, Inc. (1980) 106 Cal.App.3d 542, 546, 165 Cal.Rptr. 198; see Myers v. Eastwood Care Center, Inc. (1982) 31 Cal.3d 628, 631, 183 Cal.Rptr. 386, 645 P.2d 1218.) 2
The Department is authorized to enter any facility for inspection (§ 1421), and must inspect every facility at least once every two years (§ 1422, subd. (b)) or upon receipt of a complaint (§§ 1419, 1420). When the Department observes a violation of statute or regulation, it issues a citation to the facility. (§ 1423.) Citations are classified according to the seriousness of the violation, and a penalty range is prescribed for each class. Among the criteria for a class AA violation is a determination by the Department that the violation was “a direct proximate cause of death of a patient.” The penalty for a class AA violation is not less than $5,000 and not more than $25,000. (§ 1424, subd. (b).) Class A violations are those which present either imminent danger or the substantial probability that death or serious harm to the patients would result. The penalty for a class A violation is not less than $1,000 and not more than $10,000. (§ 1424, subd. (c).) Class B violations are violations which “have a direct or immediate relationship to the health, safety, or security of ․ patients, other than class ‘AA’ or ‘A’ violations.” The penalty for a class B violation is not less than $100 and not more than $1,000. (§ 1424, subd. (d).) Under certain circumstances, timely correction of a class B violation may preclude a penalty assessment. (§ 1424, subd. (d).) Failure to correct a violation within the time specified in the citation may result in an additional penalty of $50 for each day that the deficiency continues. (§ 1425.) Repeated violations may result in a trebling of the penalty assessed. (§ 1428, subd. (f).)
A licensee may contest a citation and penalty assessment by requesting an administrative “citation review conference.” When a licensee contests a class AA or class A citation after the administrative review, the Attorney General must “promptly take all appropriate action to enforce the citation and recover the civil penalty ․ in the court of competent jurisdiction for the county․” (§ 1428, subds. (a), (b); see Myers v. Eastwood Care Center, Inc., supra, 31 Cal.3d at p. 632, 183 Cal.Rptr. 386, 645 P.2d 1218.) Judicial review of a class B citation is also available, but must be initiated by the licensee. (§ 1428, subd. (c).)
The Act also provides for an alternative enforcement mechanism where the Department has not taken action and violations have not been corrected. Under those circumstances, a civil action for damages may be prosecuted either by the Attorney General in the name of the people of the state or by any board, officer, corporation, association or person acting for the interests of itself, its members, or the general public; in such an action, the damages recoverable are not to exceed the maximum amount of civil penalties which could be assessed for the violation or violations. (§ 1430, subd. (a).) 3 Section 1430 does not foreclose civil actions for damages by patients who have been injured by a violation, as the remedies specified in that section are “in addition to any other remedy provided by law.” (§ 1430, subd. (c).)
Several provisions of the Act are intended to provide information to the public about the citation record of facilities. For instance, the Department must prepare periodic reports listing the number, nature, and disposition of citations issued to each licensee during the preceding 12–month period, among other information, and must issue a public information release each quarter identifying all facilities which have had no violations in the past 12 months. (§§ 1430.5, 1435, 1435.5.) A facility must post a notice informing the public that copies of citations for certain violations which have become final are available upon request. (§ 1429.)
Failure to correct violations for which citations were issued is grounds for suspension or revocation of a facility's license. For each class AA violation within a 12–month period which has become final, the Department “shall consider” the suspension or revocation of the facility's license. (§ 1424, subd. (b)(3).)
In the present case, the Department issued one class AA and two class A citations against the Center; the penalties assessed totaled over $27,000. At a citation review conference held at respondent's request, the citations and penalties were upheld. Respondent contested the administrative decision. Appellant then filed the present civil action to affirm the citations and assess the penalties. Respondent demurred. Relying on People ex rel. Younger v. Superior Court (1976) 16 Cal.3d 30, 127 Cal.Rptr. 122, 544 P.2d 1322, respondent argued that the penalties were punitive or exemplary damages and that Government Code section 818 forbids the imposition of such damages on a public entity. After a hearing, the trial court sustained the demurrer without leave to amend and dismissed the action.
Appellant contends that Government Code section 818 does not preclude the imposition of civil penalties on respondent for its violations of statutory and regulatory standards governing patient health and safety.
Government Code section 818 provides: “Notwithstanding any other provision of law, a public entity is not liable for damages awarded under Section 3294 of the Civil Code or other damages imposed primarily for the sake of example and by way of punishing the defendant.”
The relationship between that section and a statutory scheme imposing civil penalties or fines was considered by the Supreme Court in People ex rel. Younger v. Superior Court, supra, 16 Cal.3d 30, 127 Cal.Rptr. 122, 544 P.2d 1322. At issue in Younger was whether Government Code section 818 immunized the Port of Oakland, a public entity, from civil penalties under Water Code section 13350 for causing or permitting oil to be discharged into the Oakland Estuary. The statutory penalty was not more than $6,000 for each day in which a violation or deposit occurred.
The Younger court's discussion of the issue presumed that Government Code section 818 was applicable and had to be accounted for if the penalties were to be imposed. Initially, the court explained that damages which are punitive in nature, but are not simply or solely punitive in that they fulfill legitimate and fully justified compensatory functions, have been held not to be punitive damages within the meaning of Government Code section 818. As authority for this principle, the court cited Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 1, 84 Cal.Rptr. 173, 465 P.2d 61 (damages awarded in tort cases where the plaintiff has been compensated by an independent collateral source are not punitive within the meaning of Gov.Code, § 818, because one function of collateral source rule is to effectuate a closer approximation to full compensation for the injured party), and State Dept. of Corrections v. Workmen's Comp. App. Bd. (1971) 5 Cal.3d 885, 97 Cal.Rptr. 786, 489 P.2d 818 (Lab.Code, § 4553, which increases the compensation recoverable by an employee injured in an industrial accident by an employer's serious and willful misconduct, is not solely punitive because it does not result in an award greater than full compensation for the injury). (People ex rel. Younger v. Superior Court, supra, 16 Cal.3d at pp. 35–37, 127 Cal.Rptr. 122, 544 P.2d 1322.)
The Younger court then held that although the civil liability imposed by Water Code section 13350 was punitive in that it sought to deter oil spills by making it costly to be held responsible for them, the liability was not solely punitive, as it fulfilled legitimate compensatory functions. The court reasoned that because an oil spill causes “unquantifiable” damage both to the waters and to dependent marine life and wildlife, the civil penalties more fully compensated the people of the state for the harm done, even though the statutory scheme also permits a civil action for damages. The court also reasoned that the penalties served a compensatory purpose because they were to be paid to the State Water Pollution Cleanup and Abatement Account, and might then be used to clean up a spill. The court concluded that because the penalties were compensatory as well as punitive, they were not punitive damages within the meaning of Government Code section 818 and could be recovered from a public entity. (People ex rel. Younger v. Superior Court, supra, 16 Cal.3d at pp. 35–39, 127 Cal.Rptr. 122, 544 P.2d 1322.)
The court applied the same analysis in a companion case, San Francisco Civil Service Assn. v. Superior Court (1976) 16 Cal.3d 46, 127 Cal.Rptr. 131,544 P.2d 1331, and held that civil penalties imposed pursuant to Water Code section 13385 on the City and County of San Francisco for the discharge of raw sewage into the ocean and San Francisco Bay were not punitive damages within the meaning of Government Code section 818, because the penalties served to compensate more fully for the severe unquantifiable damage caused by the pollution. (Id., at pp. 50–51, 127 Cal.Rptr. 131, 544 P.2d 1331; see also 68 Ops.Cal.Atty.Gen. 56 (1985) [civil penalties under § 442.3 imposed for health facility's failure to file accounting reports and use approved accounting system do not come within Gov.Code, § 818, immunity, as they serve to mitigate actual damages difficult to quantify].)
As we understand the Supreme Court's analysis in Younger, that court declared that statutory civil penalties are punitive in nature because they are imposed to deter noncompliance with applicable rules and regulations, and that Government Code section 818 prohibits the imposition of such penalties on a public entity unless the penalties can be construed to serve some compensatory purpose in addition to their punitive function. In the present case, respondent argues and the trial court concluded that under Younger, penalties assessed pursuant to section 1417 et seq. are solely punitive and cannot be imposed on a public entity which operates a long-term health care facility, no matter how serious are that facility's violations of regulations pertaining to patient care. Urging that the trial court erred, appellant argues that the penalties do have both a compensatory and a punitive purpose. Appellant acknowledges that an injury to a patient is not always required before a citation may be issued and a penalty assessed, and that even if a patient injury occurs, the penalties do not compensate the patient. However, appellant urges that even if a violation does not result in a patient injury, that violation results in real, serious, but unquantifiable damage to the quality of health care available to the people of this state. Appellant then argues that the penalties serve to compensate more fully for that unquantifiable harm because the Act requires that penalties are to be applied to offset the state's enforcement costs. (§ 1428, subd. (j).)
Appellant's argument is unconvincing. It is true that the Younger court held that statutory civil penalties may fulfill a compensatory purpose when the damage at issue is “unquantifiable.” But in that case, the people of the state suffered actual damage from the oil spill; that damage was unquantifiable because its extent or scope was difficult to determine, and because its impact was not easy to measure in terms of dollars and cents. (See People ex rel. Younger v. Superior Court, supra, 16 Cal.3d at pp. 37–38, fn. 5, 127 Cal.Rptr. 122, 544 P.2d 1322.) The Younger court did not suggest or imply that a compensatory purpose may be found absent actual injury or damage to persons or property. Appellant cites no case which supports the proposition that the public is entitled to compensatory damages for some intangible or abstract harm which may result when its laws are violated.
The Supreme Court's analysis in Younger permitted it to uphold the imposition of civil penalties on public entities both in that case and in San Francisco Civil Service Assn. v. Superior Court, supra, 16 Cal.3d 46, 127 Cal.Rptr. 131, 544 P.2d 1331, because the nature of the statutory violations in each case was such that actual damage resulted, albeit difficult to assess and calculate in money terms. Given the existence of actual damages, finding some compensatory purpose in the penalties was not difficult. As the present case illustrates, however, not all statutory schemes which provide for the imposition of civil penalties are predicated on actual damage; thus a principled analysis which detects a compensatory function in those penalties is impossible.
Applied in the present case, the Younger court's analysis compels a conclusion that Government Code section 818 precludes the imposition of civil penalties on the Center for its violations of the Act because those penalties fulfill no compensatory purpose. As an intermediate appellate court, this court is bound by the decisions of the California Supreme Court. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.) Nevertheless, we consider the analysis in Younger unfortunate, and we strongly urge either that court or the Legislature to reconsider the liability of public entities for statutory civil penalties. We question whether the Legislature intended Government Code section 818 to apply to statutory civil penalties such as those in question here. In our view, the Supreme Court in Younger may have unnecessarily blurred the difference between such penalties and punitive or exemplary damages within the scope of Government Code section 818.
In a common law tort action, actual damages must be found as a predicate for an award of exemplary or punitive damages (Mother Cobb's Chicken T., Inc. v. Fox (1937) 10 Cal.2d 203, 205–206, 73 P.2d 1185; see Hilliard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391, 196 Cal.Rptr. 117), and ordinarily an award of punitive damages must bear some reasonable relationship to the actual damages suffered (see Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 922–923, 114 Cal.Rptr. 622, 523 P.2d 662). Moreover, the wealth of the wrongdoer may be relevant to the size of the award. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 65, 118 Cal.Rptr. 184, 529 P.2d 608.)
Government Code section 818 does not alter those fundamental rules concerning the nature of punitive damages. A statute cannot be read in isolation, but must be construed in its statutory context. (See Bozung v. Local Agency Formation Com. (1975) 13 Cal.3d 263, 274, fn. 7, 118 Cal.Rptr. 249, 529 P.2d 1017.) Section 818 is part of the so-called Tort Claims Act (Gov.Code, § 810 et seq.), enacted to deal comprehensively with the problem of governmental tort liability. (See Milligan v. City of Laguna Beach (1983) 34 Cal.3d 829, 831, 196 Cal.Rptr. 38, 670 P.2d 1121.) That Act specifies when a public entity will be liable for injuries which arise out of its acts or omissions or those of its employees. (See, e.g., Gov.Code, §§ 815, 815.2, 815.4, 815.6, 818.2, 818.4, 818.6, 818.7, 818.8.) The term “injury” is defined by the Act as “death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person.” (Gov.Code, § 810.8.) Government Code section 818 means only that under the Tort Claims Act, a plaintiff who alleges injury caused by a public entity may be entitled to seek actual damages for that injury, but not punitive damages. (See McAllister v. South Coast Air Quality etc. Dist. (1986) 183 Cal.App.3d 653, 656–657, 228 Cal.Rptr. 351; Austin v. Regents of University of California (1979) 89 Cal.App.3d 354, 358–359, 152 Cal.Rptr. 420.) But we find nothing in the Tort Claims Act which suggests that Government Code section 818 was intended to apply to statutory civil penalties designed to ensure compliance with a regulatory scheme such as the penalties at issue in the present case, even though they may have a punitive effect.
Unlike punitive damages, statutory civil penalties are not necessarily predicated on an injury to a person or property or actual damage. Imposition of such penalties to secure obedience to statutes and administrative regulations has, increasingly in modern times, become a means by which legislatures implement public policy. (Hale v. Morgan (1978) 22 Cal.3d 388, 398, 149 Cal.Rptr. 375, 584 P.2d 512.) As the statutory scheme in the present case illustrates, frequently such penalties are imposed in an arbitrary sum irrespective of actual damage suffered. (See, e.g., § 1317.3 [$1,000 per day fine for failure of hospital with an emergency department to timely adopt policies and protocols prohibiting discrimination in provision of emergency services]; § 1317.6 [civil penalty of up to $25,000 for hospital's violation of law prohibiting discrimination in provision of emergency services based on race, ethnicity, religion, insurance status, and economic status, among other criteria]; 6 Witkin, Summary of Cal.Law (9th ed. 1988) Torts, § 1332, p. 790.) While civil penalties undoubtedly have a punitive effect when imposed, they exist primarily to deter conduct inconsistent with legislatively declared public policy.
The public policy which the Legislature sought to implement with the citation and penalty provisions of the Act is readily apparent. Under its licensing scheme, the Legislature has mandated standards to insure quality health care which are applicable to all state licensed long-term health carefacilities, whether privately or publicly owned. (See generally § 1250 et seq.; Cal.Code Regs., tit. 22, § 72001 et seq.) All those facilities provide extended care, sometimes for years, to patients who are often weak and helpless, either from old age or a long-term progressive disease. Unlike patients in acute care hospitals who receive temporary care and are under constant medical surveillance, patients in long-term facilities may be attended for long periods of time without seeing a physician. Because these patients are “at the mercy of the facility,” the inspection, citation, and penalty system established by the Legislature is necessary to assure that they receive quality care. (Lackner v. St. Joseph Convalescent Hospital, Inc., supra, 106 Cal.App.3d at p. 556, 165 Cal.Rptr. 198; see Beach v. Western Medical Enterprises, Inc. (1981) 116 Cal.App.3d 153, 161, 171 Cal.Rptr. 846.)
Given the unquestionable importance of this legislative purpose, we perceive no significant public policy reason to exempt a state licensed health-care facility from liability for penalties under the Act simply because it is operated by a public rather than a private entity, even though it is the taxpayer who ultimately bears the burden when such penalties are imposed on a publicly owned facility. The citation and penalty provisions of the Act serve to encourage compliance with state mandated standards for patient care and to deter conduct which may endanger the well-being of patients. City councils and county boards of supervisors are as likely as private entities to heed the threat of monetary sanctions and make certain that their facilities are operated in compliance with the law. While it is true that all facilities, including those which are publicly owned, may be subject to the loss of license for repeated violations, that draconian sanction should not be the only real tool available to the Department to foster regulatory compliance by a publicly operated facility.4
To summarize, the citation and penalty scheme of the Act was intended not just to punish facilities when injuries occur, but to prevent those injuries in the first place. The application of the Younger court's analysis in the present case undermines the state's ability to insure quality health care and prevent patient injuries in those state licensed long-term health care facilities which are operated by public entities such as San Mateo County. We cannot believe this result is what the Legislature intended when it enacted the Tort Claims Act.
We therefore respectfully suggest that the Supreme Court may wish to reconsider whether Government Code section 818 and the punitive-compensatory analysis utilized in Younger have any applicability to a licensingscheme which has among its components statutory civil penalties or fines imposed to implement legislative policy. But the real question, of course, is what the Legislature intended. Legislation specifying precisely and unambiguously whether public entities which operate state licensed long-term health care facilities are exempt from civil penalties under the Act would readily resolve the problem. We urge legislative attention at least to this matter in particular, if not to the broader question of the relationship between Government Code section 818 and the liability of public entities for statutory civil penalties.
The trial court correctly concluded that current law prohibits the recovery of penalties from the Center for its regulatory violations. However, the complaint filed in the present case sought both to affirm the citations issued and to assess penalties. The unavailability of the penalties should not foreclose the Department from proceeding with its action to affirm the contested citations. Accordingly, the trial court erred when it sustained respondent's demurrer without leave to amend and dismissed the action in its entirety.
The judgment of dismissal is reversed, and the matter remanded to give appellant an opportunity to amend its complaint by deleting its request that penalties be assessed. If appellant elects not to amend the complaint, judgment should be entered in favor of respondent. Each party to bear its own costs.
1. Unless otherwise indicated, all further statutory references are to the Health and Safety Code.
2. The Act was also intended to establish a provisional licensing mechanism to insure that full-term licenses are issued only to those facilities meeting state standards for patient care. (§ 1417.1.) Facilities within the scope of the Act include skilled nursing facilities and intermediate care facilities, including intermediate care facilities which serve the developmentally disabled. (§ 1418.)
3. In addition, a resident or patient of a skilled nursing facility or an intermediate care facility may bring a civil action against the licensee of any such facility who violates certain rights of any resident or patient; in such an action, the licensee shall be liable for up to $500, and may be enjoined from permitting the violation to continue. (§ 1430, subd. (b).)
4. The possibility that adverse publicity will result from citations is unlikely to be an effective deterrent to a publicly operated facility, whose patients are apt to be poor and without many options in their choice of facility.
STRANKMAN, Associate Justice.
BARRY–DEAL, Acting P.J., and MERRILL, J., concur.