                                          PUBLISHED

                            UNITED STATES COURT OF APPEALS
                                FOR THE FOURTH CIRCUIT


                                          No. 17-1900


GERALDINE L. VANDEVENDER, Administrator of the Estate of Del Ray
Baird, deceased, and Jacqueline Ann Baird, deceased; NORWOOD R. JONES,
Co-Executor of the Estate of Elizabeth J. Jones, deceased; LISA J. PATE, Co-
Executor of the Estate of Elizabeth J. Jones, deceased; JOYCE K. HARRISON,
Administrator of the Estate of Bettie Mae Kee, deceased and Samuel Kee, Sr.,
deceased; RALPH D. JONES, JR., Co-Executor of the Estate of Elizabeth J.
Jones, deceased,

               Plaintiffs - Appellants,

        and

SAMUEL KEE, SR., Individually,

               Plaintiff,

        v.

BLUE RIDGE OF RALEIGH, LLC, d/b/a Blue Ridge Health Care Center; CARE
VIRGINIA MANAGEMENT, LLC, d/b/a Care Virginia; CARE ONE, LLC, d/b/a
CareOne,

               Defendants - Appellees,

        and

RALEIGH REGIONAL REHAB CENTER, LLC, d/b/a Crabtree Valley Rehab
Center; NC MANAGEMENT HOLDINGS, LLC,

               Defendants.

------------------------------

NORTH CAROLINA ADVOCATES FOR JUSTICE,
               Amicus Supporting Appellant.


                                          No. 17-1951


RALPH D. JONES, JR., Co-Executor of the Estate of Elizabeth J. Jones,
deceased; GERALDINE L. VANDEVENDER, Administrator of the Estate of Del
Ray Baird, deceased, and Jacqueline Ann Baird, deceased; NORWOOD R.
JONES, Co-Executor of the Estate of Elizabeth J. Jones, deceased; LISA J. PATE,
Co-Executor of the Estate of Elizabeth J. Jones, deceased; JOYCE K.
HARRISON, Administrator of the Estate of Bettie Mae Kee, deceased and Samuel
Kee, Sr., deceased,

               Plaintiffs - Appellees,

        and

SAMUEL KEE, SR., Individually,

               Plaintiff,

        v.

BLUE RIDGE OF RALEIGH, LLC, d/b/a Blue Ridge Health Care Center; CARE
VIRGINIA MANAGEMENT, LLC, d/b/a Care Virginia; CARE ONE, LLC, d/b/a
CareOne,

               Defendants - Appellants,

        and

RALEIGH REGIONAL REHAB CENTER, LLC, d/b/a Crabtree Valley Rehab
Center; NC MANAGEMENT HOLDINGS, LLC,

               Defendants.

------------------------------

NORTH CAROLINA ADVOCATES FOR JUSTICE,

               Amicus Supporting Appellant.


                                              2
Appeals from the United States District Court for the Eastern District of North Carolina,
at Raleigh. Terrence W. Boyle, District Judge. (5:14-cv-00150-BO)


Argued: May 10, 2018                                           Decided: August 2, 2018
                              Amended: August 27, 2018


Before TRAXLER and DIAZ, Circuit Judges, and Richard M. GERGEL, United States
District Judge for the District of South Carolina, sitting by designation.


Affirmed in part, reversed in part, and remanded with instructions by published opinion.
Judge Gergel wrote the opinion, in which Judge Traxler and Judge Diaz joined.


ARGUED: Rachel Alexis Fuerst, HENSON & FUERST, PA, Raleigh, North Carolina,
for Appellants/Cross-Appellees. Gregory Wenzl Brown, BROWN LAW LLP, Raleigh,
North Carolina, for Appellees/Cross-Appellants. ON BRIEF: Thomas W. Henson, Jr.,
HENSON & FUERST, P.A., Raleigh, North Carolina, for Appellants/Cross-Appellees.
Kristi L. Gavalier, BROWN LAW LLP, Raleigh, North Carolina, for Appellees/Cross-
Appellants. Burton Craige, Narendra K. Ghosh, Paul E. Smith, PATTERSON
HARKAVY LLP, Chapel Hill, North Carolina, for Amicus Curiae.




                                           3
GERGEL, District Judge:

       After a jury returned verdicts awarding compensatory and punitive damages for

each Plaintiff in three wrongful death nursing home malpractice claims, Defendants

moved for judgment as a matter of law, arguing Plaintiffs failed to produce evidence of

an aggravating factor necessary to support an award of punitive damages under North

Carolina law and failed to produce evidence necessary to support a verdict regarding

Plaintiff Jones. The district court order granted the motion as to Plaintiffs’ punitive

damages awards and denied it as to Plaintiff Jones’ award of compensatory damages.

Plaintiffs appeal the grant of judgment for Defendants as to Plaintiffs’ award of punitive

damages.     Defendants cross-appeal the denial as to Plaintiff Jones’ award of

compensatory damages. For the reasons stated below, we affirm the denial of the motion

for judgment as a matter of law as to Plaintiff Jones’ award of compensatory damages,

reverse as to Plaintiffs’ award of punitive damages, and remand with instructions to enter

judgment for Plaintiffs consistent with North Carolina’s statutory limits on punitive

damages.

                                             I.

       Defendants operated a long-term skilled nursing facility known as the Blue Ridge

Health Care Center (“Blue Ridge”) in Raleigh, North Carolina. Blue Ridge operated a

“vent unit,” a special facility for ventilator-dependent patients. North Carolina requires

vent units to provide 5.5 hours of nursing care per patient day and that “the direct care

nursing staff shall not fall below a registered nurse and a nurse aide I at any time during a

24-hour period.” 10A N.C. Admin. Code 13D.3003 & 13D.3005. Defendants, however,


                                             4
consistently provided fewer than five hours of nursing care per day, and failed to staff a

registered nurse for the third shift.

         At trial, multiple former employees of Blue Ridge testified that Blue Ridge

management was repeatedly warned that the staffing levels were a safety risk. In May

2011, the administrator of Blue Ridge, Darryl Taylor, resigned because his superiors

“continued to push him to cut supplies and staff to levels that would not allow the staff to

properly care for the patients.” He was replaced by Ben McGovern on May 3, 2011.

McGovern told employees that “he came in to cut staffing and that there was a new

sheriff in town . . . and he was going to do whatever he needed to do to cut costs.”

Plaintiffs’ accounting expert testified that Defendants’ deviation from the required

minimum staffing in the vent unit resulted in cost savings during 2011 of $1,523,939.16.

When a staffing coordinator complained about the unsafe staffing levels, the coordinator

was fired. McGovern himself was fired and replaced by interim administrator Pamela

Street on February 6, 2012. Street testified that she knew more staff was needed to

provide care for the vent unit patients, but her superiors would not allow her to hire more

staff.

         In addition to cutting staff, Blue Ridge management also reduced expenditures on

supplies. E.g., “And then [soon after Mr. McGovern took over] we started getting

supplies of lesser value and supplies that really didn’t work well . . . ;” “[T]he bill hadn’t

been paid, so supplies weren’t coming;” “I [Respiratory Therapist Myra Dotson] spoke

with the administrator of the facility about several issues, one in particular was the fact

that we did not have adequate equipment and supplies.”


                                              5
       The estates of three decedents who were ventilator-dependent patients at Blue

Ridge in late 2011 and early 2012 claim the inadequate staffing and supplies about which

Blue Ridge had been repeatedly warned proximately caused decedents’ deaths. Del Ray

Baird was admitted to the vent unit on December 29, 2011. He received an anoxic brain

injury in the early morning of December 30, 2011. He was found in his room with his

ventilator and alarms turned off for an unknown period. Because of understaffing, the

respiratory therapist for Mr. Baird could not check the alarms in his room to make sure

they were on. Bettie Mae Kee was found dead in the vent unit on March 20, 2012, with

her breathing apparatus pulled from her neck and with no alarm or oxygen monitor in

use. The standard of care required a sitter for Ms. Kee, but no sitter was provided

because of understaffing. Elizabeth Jones died in the vent unit on March 2, 2012, when

staff members were unable to replace her tracheostomy tube in a timely manner.          The

delay was caused by a lack of proper bedside supplies due to budget cuts.

        The Plaintiff estates filed suit against three Defendant LLCs: Blue Ridge of

Raleigh, the nursing facility; CareOne, which owned Blue Ridge; and CareVirginia

Management, which helped manage the facility. The complaint was removed to federal

court on March 13, 2014, and trial commenced on February 13, 2017. All former Blue

Ridge employees who testified at trial did so for Plaintiffs. Defendants’ only witnesses

were two medical experts. After a four-day trial, the jury returned verdicts for Plaintiffs.

The jury awarded compensatory damages of $50,000 for Plaintiff Baird, $300,000 for

Plaintiff Jones, and $300,000 for Plaintiff Kee. The jury also awarded punitive damages

of $1,523,939.16 for each Plaintiff.


                                             6
      Soon thereafter, Defendants filed a motion for judgment as a matter of law on the

award of compensatory damages for Plaintiff Jones and on the awards of punitive

damages.   The district court denied the motion as to Plaintiff Jones’ compensatory

damages but granted the motion as to punitive damages, ruling Plaintiffs had failed to

present evidence sufficient for a reasonable jury to find Defendants liable under North

Carolina’s punitive damages statute.

      Plaintiffs timely appealed the district court’s order on punitive damages, and

Defendants cross-appealed the order on Plaintiff Jones’ compensatory damages. We

review a district court’s order on a motion for judgment as a matter of law de novo,

viewing the evidence in a light most favorable to the non-moving party and drawing

every legitimate inference in that party’s favor. Huskey v. Ethicon, Inc., 848 F.3d 151,

156 (4th Cir. 2017).

                                           II.

      North Carolina law allows punitive damages only if a claimant proves that the

defendant is liable for compensatory damages and that one of three possible aggravating

factors was present and related to the injury for which compensatory damages were

awarded. N.C. Gen. Stat. § 1D-15 (2017). The three possible aggravating factors are

“Fraud,” “Malice,” and “Willful or wanton conduct.” Id. “Willful or wanton conduct” is

defined as “the conscious and intentional disregard of and indifference to the rights and

safety of others, which the defendant knows or should know is reasonably likely to result

in injury, damage, or other harm.” N.C. Gen. Stat. § 1D-5(7) (2017). Proof must be by

clear and convincing evidence, and a court reviewing an award of punitive damages


                                           7
under this statute must itself review the evidence under that standard. Scarborough v.

Dillard’s, Inc., 693 S.E.2d 640, 643 (N.C. 2009). Moreover, North Carolina does not

permit punitive damages based on vicarious liability. Punitive damages may be awarded

against a business enterprise only if “the officers, directors, or managers of the

corporation participated in or condoned the conduct constituting the aggravating factor

giving rise to punitive damages.” N.C. Gen. Stat. § 1D-15.

       The amount of punitive damages is limited to three times compensatory damages

or $250,000, whichever is greater. N.C. Gen. Stat. § 1D-25 (2017). To determine the

amount of punitive damages, the jury considers the purpose of punitive damages, “to

punish a defendant for egregiously wrongful acts and to deter the defendant and others

from committing similar wrongful acts,” and evidence related to several statutory factors.

N.C. Gen. Stat. § 1D-35 (2017).

       Applying the punitive damages statute to the evidence presented at trial, the

district court found Plaintiffs failed to present sufficient evidence to support an award of

punitive damages for two reasons. First, the district court found that Plaintiffs failed to

present evidence showing Defendants’ officers, directors, or managers participated in or

condoned the asserted willful or wanton conduct. Second, the district court found that

even if such participation or condonation were assumed, Plaintiffs failed to present

sufficient evidence to show they had the requisite state of mind to establish any

aggravating factor. For the reasons set forth below, both reasons are in error.




                                             8
                                            A.

       North Carolina does not permit respondeat superior for punitive damages.

Companies are liable for punitive damages for the acts or omissions of their employees

only if the “officers, directors, or managers” of the company “participated in or condoned

the conduct constituting the aggravating factor giving rise to punitive damages.” N.C.

Gen. Stat. § 1D-15. Although the statute specifically refers to “corporations” and not

other business entities with employees, North Carolina courts nonetheless apply the

statute to limited liability companies and partnerships. See, e.g., Phillips v. Rest. Mgmt.

of Carolina, L.P., 552 S.E.2d 686, 694–95 (N.C. Ct. App. 2001). North Carolina courts

define “manager” as “one who ‘conducts, directs, or supervises something.’” Miller v.

B.H.B. Enterprises, Inc., 568 S.E.2d 219, 225 (N.C. 2002). In determining whether an

employee was a manager, courts consider whether “(1) the employee was designated a

manager; (2) the employee had supervisory powers; (3) the employee gave input on

hiring and firing decisions and participated in personnel meetings; (4) the employee set

work schedules for other employees; and (5) the employee handled money.” Everhart v.

O’Charley’s Inc., 683 S.E.2d 728, 738 (N.C. Ct. App. 2009).

       The district court found that Plaintiffs failed to present evidence showing

Defendants’ managers participated in or condoned the decision-making on staffing and

supplies that is asserted to constitute an aggravating factor. That finding was erroneous

for three reasons.

       First, the record clearly shows that Defendants’ manager—Administrator Ben

McGovern—participated in the decisions regarding staffing and supplies asserted to


                                            9
constitute willful or wanton conduct. E.g., Ben McGovern “had said that, you know, he

came in to cut staffing and that there was a new sheriff in town—his words—there was a

new sheriff in town, and he was going to do whatever he needed to do to cut costs”;

“Soon after Ben McGovern arrived as administrator he made a lot of policy changes and

began to drastically cut back on staff at Blue Ridge Health Care Center”; testimony that

the administrator “runs the nursing home.” The uncontroverted record is that he was

jointly employed by all three Defendants. cf. Salinas v. Commercial Interiors, Inc., 848

F.3d 125, 129–30 (4th Cir. 2017) (providing, in the context of the Fair Labor Standards

Act, that “joint employment exists when (1) two or more persons or entities share, agree

to allocate responsibility for, or otherwise codetermine—formally or informally, directly

or indirectly—the essential terms and conditions of a worker’s employment”).

       Indeed, the district court never explicitly held that Mr. McGovern did not

participate in staffing decisions or that Mr. McGovern was not a manager for punitive

damages purposes.     The district court’s repeated reference to “unidentified officers,

directors, or managers,” however, implies that Mr. McGovern (and other Blue Ridge

employees) was not identified as Defendants’ officer, director, or manager. Any such

implication, however, is belied by the record.       Administrator Ben McGovern was

identified both as a person participating in conduct constituting an aggravating factor and

as the chief administrator of Blue Ridge.   His duties satisfy every Everhart factor except

possibly the handling of money. If an “assistant dining room manager” is a manager, the

chief administrator of a medical facility unquestionably is one too. Cf. Everhart, 683

S.E.2d at 738.


                                            10
       Second, the district court found “there is nothing in the record that shows or would

allow the reasonable inference that staffing was cut because of a corporate policy”

regardless of whom is identified as a manager. But the extensive trial testimony that

Defendants’ policy was to cut staffing to save money, viewed in a light most favorable to

Plaintiffs and with all legitimate inferences drawn in Plaintiffs’ favor, clearly and

convincingly shows that staffing was cut because of company policy. E.g., Former Blue

Ridge Administrator “Darryl Taylor left because he said he was getting pressure from

New Jersey to cut staff”; Business Office Manager Peggy Singletary “said that she

couldn’t take it anymore, that she was—because she was doing payroll, and she would

see how—how the staffing was so short, but [Administrator] Ben [McGovern] kept

telling her that this is how it has to be”; “The administration of Blue Ridge [H]ealth Care

Center and CareOne knew that the facility was understaffed and we could not properly

care for the needs of the patients”; “Darryl Taylor quit after Blue Ridge Health Care

Center and CareOne continued to push him to cut supplies and staff to levels that would

not allow the staff to properly care for the patients”; Ben McGovern “had been told that

[cutting staffing] was his job there. . . .” and “a corporate representative by the name of

[Regional Director of Operations for CareOne Virginia] Don [Mc]Hale[] . . . came down

and held a meeting [about staffing] with the staff at Blue Ridge.” Defendants offered no

fact witnesses to dispute this testimony.

       Third, the punitive damages statute is satisfied if a company manager condones

conduct constituting an aggravating factor.      “The plain meaning of ‘condone’ is to

‘forgive or overlook,’ or ‘permit the continuance of.’” Miller v. B.H.B. Enters., Inc., 568


                                            11
S.E.2d 219, 225 (N.C. Ct. App. 2002) (citations omitted).          A manager condones

employees’ actions when the manager is aware of those actions and fails to intervene.

See, e.g., Wallace v. M, M & R, Inc., 600 S.E.2d 514, 518 (N.C. Ct. App. 2004). Here,

there was clear and convincing evidence that Defendants were fully aware of the

dangerously inadequate staffing levels yet did nothing or worse. E.g., Registered Nurse

Kate Cogan testifying that in response to complaints to CareOne from Blue Ridge patient

family members about inadequate staffing, Regional Director of Operations Don

[McHale] went to Blue Ridge and fired more staff; “I [Respiratory Therapist Myra

Dotson] spoke to the administrator and my boss and . . . the supervisor of respiratory

[therapy] and told him that this is just—there’s just—there’s too many [vent unit] patients

to take care of. . . . So I told him that it was just a dangerous situation.” Again,

Defendants offered no fact witnesses to dispute this testimony.

                                            B.

       Since there was clear and convincing evidence that Defendants’ managers did

participate in and condone the conduct asserted to constitute an aggravating factor, we

turn to the district court’s ruling that even if Defendants’ managers did participate in or

condone that conduct, Plaintiffs failed to present sufficient evidence to show they did so

with the state of mind necessary for that conduct to constitute an aggravating factor. The

three possible aggravating factors are “Fraud,” “Malice,” and “Willful or wanton

conduct.” Since there is no assertion of fraud or actual malice toward any decedent, the

issue is whether the conduct of Defendants’ managers constituted “willful or wanton

conduct” as defined by North Carolina law: “the conscious and intentional disregard of


                                            12
and indifference to the rights and safety of others, which the defendant knows or should

know is reasonably likely to result in injury, damage, or other harm.” N.C. Gen. Stat. §

1D-5(7). “In the medical context, a medical provider acts willfully and wantonly when

she knowingly, consciously, and deliberately places a patient at risk of harm by acting

contrary to known protocols and procedures.” Clarke v. Mikhail, 779 S.E.2d 150, 160

(N.C. Ct. App. 2015).

      The evidence produced at trial clearly and convincingly shows that Defendants

engaged in willful or wanton conduct by intentionally failing to follow federal and state

laws on staffing, by intentionally violating Blue Ridge’s policy regarding sitters for

agitated patients, by intentionally failing to monitor oxygen levels or to provide

continuous monitoring of alarms, and by intentionally failing to have necessary bedside

supplies in the vent unit. Cuts to staffing and supplies were a deliberate corporate policy

enacted to increase profits by millions of dollars. Defendants were repeatedly informed

that those cuts placed patients at risk of death or serious injury—patients whose lives

were entirely dependent upon Blue Ridge’s diligence in providing care—yet after such

warnings Defendants continued to profit by endangering their patients.

      The district court, however, held that evidence insufficient because Plaintiffs

failed to show Defendants acted with “malicious intent” or with a “wicked purpose” in

causing the decedents’ injuries. But under North Carolina’s punitive damages statute,

willful or wanton conduct does not require proof of malicious intent.         Cockerham-

Ellerbee v. Town of Jonesville, 660 S.E.2d 178, 181 (N.C. Ct. App. 2008); see also

Everhart, 683 S.E.2d at 737 (“[Defendant’s] claims that ‘there is nothing “wicked” or


                                            13
“needless” about [its conduct] . . . fails to apply N.C. Gen. Stat. § 1D–5(7)’s definition of

“willful or wanton conduct.”’”). Willful or wanton conduct only requires proof of “the

conscious and intentional disregard of and indifference to the rights and safety of others,

which the defendant knows or should know is reasonably likely to result in injury,

damage, or other harm.” N.C. Gen. Stat. § 1D-5(7).

         The district court improperly read “willful or wanton conduct” to require proof of

“wanton” conduct. At common law, “willful negligence involves a deliberate purpose

not to discharge some duty necessary to the safety of the person or property of another,

which duty the person owing it has assumed by contract, or which is imposed on the

person by operation of law.” Bailey v. N.C. R. Co., 62 S.E. 912, 914 (N.C. 1908). That is

virtually synonymous with the statutory definition of “willful or wanton conduct.” But

“wanton” conduct arguably does require a wicked purpose: “An act is wantonly done

when it is needless for any rightful purpose, and manifests a reckless indifference to the

rights and interests of another.” Everett v. Receivers of Richmond & D.R. Co., 27 S.E.

991, 991–92 (N.C. 1897). North Carolina courts continue to apply these definitions

today:

         In order to warrant punitive damages, an act of negligence must be willful
         or wanton.

               A wanton act is an act done with a “wicked purpose or . . .
               done needlessly, manifesting a reckless indifference to the
               rights of others.” An act is willful when there is a deliberate
               purpose not to discharge a duty, assumed by contract or
               imposed by law, necessary for the safety of the person or
               property of another.




                                             14
Lashlee v. White Consol. Indus., Inc., 548 S.E.2d 821, 827 (N.C. App. 2001) (quoting

Benton v. Hillcrest Foods, Inc., 524 S.E.2d 53, 60 (N.C. App. 1999)).

       Here, Defendants deliberately failed to discharge their duty to provide adequate

staff and supplies for their nursing facility. That duty is imposed by state and federal law

because it is necessary for patient safety. See 42 C.F.R. §§ 483.25 & 483.30; 10A N.C.

Admin. Code 13D.3003. Defendants knew—because they were repeatedly told—that the

failure to provide minimum staffing and supplies was reasonably likely to result in

patient injury or death. They nonetheless deliberately continued to disregard duties

imposed by law because doing so would increase profits. This is precisely the type of

egregious conduct punitive damages are meant to deter. See N.C. Gen. Stat. § 1D-1.

                                            III.

       Defendants argue in their cross-appeal that the evidence was insufficient to show

medical malpractice claim regarding Elizabeth Jones’s death, because her representatives

failed to show that Defendants breached any applicable standard of care or that their acts

or omissions proximately caused her death.          Defendants argue the evidence was

insufficient to show malpractice because it is undisputed that all caregivers present when

Ms. Jones died acted within the standard of care when attempting to replace her

tracheostomy tube. The district court correctly disregarded this argument when denying

Defendants’ motion for judgment as a matter of law as to Ms. Jones, finding that there

was sufficient evidence that others at Blue Ridge breached the standard of care by failing

to supply the proper bedside supplies and by being understaffed. Likewise, the district

court correctly disregarded Defendants’ argument that their acts did not proximately


                                            15
cause Ms. Jones’s death, noting that the jury was not obliged to find testimony from

Defendants’ expert Dr. Phillip Ashburn that lung cancer complications proximately

caused Ms. Jones’s death outweighed testimony from Plaintiffs’ expert Dr. Mark Bernat

that the failure to have adequate staffing and proper bedside supplies proximately caused

Ms. Jones’s death.

                                             IV.

       Having determined that the district court correctly found Plaintiffs presented

sufficient evidence that Defendants’ negligence proximately caused the death of

Elizabeth Jones but erred in finding Plaintiffs failed to present evidence sufficient for a

reasonable jury to award punitive damages, we turn to the proper amount of punitive

damages for each Plaintiff. The district court held that “should the award of punitive

damages stand, such awards must be reduced to comply with North Carolina law.”

Plaintiffs concede that is correct. North Carolina limits punitive damages to three times

the amount of compensatory damages or $250,000, whichever is greater. N.C. Gen. Stat.

§ 1D-25. On remand, the district court is instructed to enter judgment reducing the award

of punitive damages to $250,000 for the estate of Del Ray Baird, $900,000 for the estate

of Elizabeth Jones, and $900,000 for the estate of Bettie Mae Kee.

                                             V.

For the reasons set forth above, the judgment of the district court is

                                             AFFIRMED IN PART, REVERSED IN PART,
                                              AND REMANDED WITH INSTRUCTIONS.




                                             16
