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"Litigants Should Not Have to Face Something Akin to
Medieval Trial By Combat to Resolve a Basic Business Dispute"
CGB Occupational Therapy, Inc. v. Sunrise Senior Living, Inc. - On Thursday, August 23, 2007, the U.S. Court of Appeals for the Third Circuit issued a precedential decision excoriating Sunrise Senior Living, Inc. (NYSE: SRZ) for its "remarkable" and "abusive litigation tactics," and intentional disregard of the rights of the firm’s client, CGB Occupational Therapy, Inc.
The Third Circuit affirmed a trial court’s decision to impose significant punitive damages against Sunrise for its tortious interference with CGB’s contractual relations with its staff of physical therapists, although not the $2 million amount previously set by the trial court, nor the $30 million amount imposed by a federal court jury after it heard the incredible testimony of Sunrise’s senior executives. The appellate court imposed a punitive damages award of $750,000, or seven times the $109,000 compensatory damages awarded to CGB in an earlier trial.
In determining this award, the Third Circuit rejected Sunrise’s arguments that its conduct was "barely a tort," as well as the company’s argument that the maximum amount of punitive damages allowed under the U.S. Constitution is ratio of 1:1 when punitive damages are compared to compensatory damages. The court issued a blistering rebuke of Sunrise’s litigation tactics, saying: "litigants should not have to face something akin to medieval trial by combat to resolve a basic business dispute."
The initial $30 million punitive damages award was one of the largest ever awarded in a tortious interference case. It was the second highest jury verdict entered in Pennsylvania, and the 50th highest jury verdict entered in the United States, in 2005.
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