Wilkes & McHugh Law Firm's Departure Highlights Fall in Nursing Home Lawsuits

Google the word pairs "Wilkes & McHugh" and "Little Rock" and the first entry to pop up is “Nursing Home Abuse Attorneys|Wilkes & McHugh P.A.”

Sometime in the fall of last year, however, the Florida law firm, once pre-eminent in the field of nursing home litigation in Arkansas, quietly shut down its Little Rock office, as well as its Memphis location.

The departure of Wilkes & McHugh, known for winning historic, multimillion-dollar verdicts against nursing homes, illustrates the changing economics of nursing home litigation in Arkansas.

And, some say, it also reflects an improvement in care in long-term care facilities, an improvement reflected in a decline in documented nursing home violations. The Arkansas Health Care Association, the lobbying arm of the nursing home industry in Arkansas, holds that improved staffing has led to a decline in claims of abuse and neglect.

“Probably one of the largest reasons why they’re not here is the decline in nursing home litigation,” said Brian Reddick, who established Wilkes & McHugh’s Little Rock office in 1998. He left the firm in 2009 to open his own firm, Reddick Moss. “The number of lawsuits that were filed in 2001, ’02 or ’03 compared to what they are now would just be staggering, the change in the number of lawsuits.”

No entity tracks nursing home lawsuits, but a number of plaintiff’s lawyers in Little Rock agreed with Reddick that litigation had decreased. They also generally agreed on at least one of the reasons: Many nursing homes are either carrying no liability insurance or minimal policies, limiting the amount of money families and lawyers can recover.

“I don’t have any personal knowledge as to why they left. I can guess,” said Thomas Buchanan.

Buchanan is the lawyer who last year won a $5.2 million judgment against Greenbrier Nursing & Rehabilitation Center in the 2008 death of patient Martha Bull. Circuit Judge Michael Maggio later reduced that sum to $1 million.

(Maggio is now under investigation over thousands of dollars in contributions made by Michael Morton of Fort Smith, owner of the Greenbrier center and 31 other nursing homes, to political action committees that gave money to Maggio’s campaign for the Arkansas Court of Appeals. Maggio halted his campaign and the Arkansas Supreme Court has stripped the judge of all cases.)

“My guess is that we’re in a different climate than we were in in the late ’90s and part of the early 2000s,” Buchanan said. “When you talk to nursing home owners, what they will tell you is that in around 2002, liability insurance premiums went up significantly. I would say by 2005 or ’06, very few nursing homes had significant insurance. In fact, a lot of them have gone to $100,000 eroding policies or $250,000 eroding policies, and it’s not the way it was.”

“Eroding” policies, also known as “wasting” or “self-consuming” policies, pay the cost of defending a claim from the policy. That means that once the clock starts ticking on court and attorney’s fees, the amount recoverable from insurance is reduced by the amount of those fees.

“It used to be there were substantial policies that were in place, sometimes even excess policies and basically you knew that you could recover,” Buchanan said. “That’s just not the case now. And frankly, I think that some of it may be by design,” he said. “It’s the best tort reform for them because if you say you don’t have any insurance, then a lot of plaintiff’s lawyers won’t sue.”

Legal Strategies

Wilkes & McHugh’s success at winning big verdicts in nursing home abuse and neglect cases was largely responsible for the spike in insurance premiums. Its biggest judgment came in 2001, $78 million in Mena in the nursing home death of a 93-year-old woman, a case that Reddick oversaw for the firm.

It was at the time the largest judgment ever awarded in Arkansas. And though the state Supreme Court reduced that verdict to $26 million (including $21 million in punitive damages), it helped spark so-called tort reform in Arkansas, the Civil Justice Reform Act of 2003. The act limited punitive damages to $1 million, but in 2011, the state Supreme Court ruled that cap unconstitutional.

David Couch was one of the Little Rock attorneys defending the nursing home in the Mena case. He went on to form his own firm, and now pursues abuse and neglect cases against nursing homes.

Couch thinks that Wilkes & McHugh, which is based in Tampa, left Arkansas primarily because nursing home owners in Arkansas are increasingly using mandatory arbitration clauses, but he agreed that the lack of liability insurance was a major factor.

The state reimburses nursing homes for their liability insurance premiums. A report from the Arkansas Department of Human Services shows that of 192 nursing homes submitting their cost reports to the agency, 21 did not submit expenses for liability insurance, indicating they didn’t have it.

The Arkansas Health Care Association, asked to respond to the issue of liability insurance, said in a statement to Arkansas Business:

“The availability of commercial professional liability insurance for nursing home operators in Arkansas is extremely limited. As a result, our members must utilize a wide variety of insurance options, each of which is determined by the business and risk management needs to the specific operator purchasing insurance.

“We commend the nursing home operators for attempting to find coverage wherever they can, if it is affordable and the cost does not negatively impact the facility’s financial ability to provide quality care.”

Couch, Buchanan, Reddick and others also point to the increasingly complex corporate structure adopted by nursing homes in Arkansas.

“A common liability avoidance strategy employed by players in the nursing home industry (in Arkansas and elsewhere) has been corporate restructuring,” said Robert B. Leflar, a health care lawyer at the University of Arkansas School of Law. “Nursing home chains often incorporate each separate facility as a limited liability corporation.”

“There will be one company that owns the real estate,” Buchanan said. “There will be one company that provides nursing consultants and related services. There will be another company that provides billing and accounting and those types of services. Basically, in the end you’re left with an entity that may have some cash, but no or very few hard assets.”

These strategies — limited or no insurance, complex corporate structure — have discouraged plaintiff’s lawyers.

“Just being a plaintiff’s lawyer is risky,” Buchanan said. “But when you’re dealing with sometimes folks who are intentionally trying to hide assets and evade any and all liability, it makes my job even more risky.”

“The vast majority of folks don’t have the resources to retain a lawyer, much less one who has any experience in this practice area,” he said.

Deficiencies Decline

As for whether care at nursing homes in Arkansas has improved since the big-judgment days at the turn of the century, state statistics indicate a decrease in deficiencies.

A chart by the Arkansas Department of Human Services shows that from 2002 through 2013, deficiencies found in nursing homes in the state reached a high of 4,119 in 2006 and fell to a low of 1,944 in 2013. (See table.) The number of “non-life safety code deficiencies,” which the department describes as encompassing hundreds of issues, ranging from patient privacy to quality of care and staffing, showed a similar pattern.

Asked about the decline in litigation and the disappearance of Wilkes & McHugh, the AHCA said:

“The Arkansas Health Care Association does not follow the ins and outs of law firms in Arkansas, nor do we track the number of lawsuits filed against nursing homes. If a plaintiff’s law firm known for focusing on nursing home lawsuits were to leave Arkansas, we can only point to the fact that the quality of care in our nursing homes continues to increase. Where quality of care for patients and peace of mind for families is the number one objective, there will obviously be less opportunity for trial lawyers.

“Our methodology has resulted in one of the highest care-to-patient staffing ratios in the nation. Enhanced staffing is the result of positive actions recommended by our profession, and championed by the Arkansas General Assembly, the Department of Human Services, Governor Beebe and our members and stakeholders. We believe that as the staffing ratios have improved in Arkansas, the high-profile claims of abuse and neglect have decreased.”

Plaintiff’s lawyers Reddick and Couch don’t think that nursing home care has substantially improved. However, Couch said, “I will say that a lot of bad actors have left the state,” citing defunct nursing home operator Beverly Enterprises as an example.

Reddick said the civil justice system worked in Arkansas to ferret out bad nursing home operators. Over the last 15 years, he said, “we’ve seen some of the rogue operators decide that this is not a good place to do business.”