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California Advocates for Nursing Home Reform, Inc. v. Chapman

United States District Court, N.D. California

June 2, 2014

CALIFORNIA ADVOCATES FOR NURSING HOME REFORM, INC., et al., Plaintiffs,
v.
RON CHAPMAN, et al., Defendants.

ORDER DENYING RULE 60(B) MOTION FOR RELIEF FROM JUDGMENT Re: ECF No. 54

JON S. TIGAR, District Judge.

Plaintiffs California Advocates for Nursing Home Reform, Inc. and Gail Dawson move the Court for an order: (1) vacating its prior Order of dismissal with prejudice of the First Amended Complaint, and (2) permitting Plaintiffs to file their proposed Second Amended Complaint.[1] Mot., ECF No. 54; Order, ECF No. 53. Plaintiffs also seek, in the alternative, amendment of the court's Order of dismissal such that Plaintiffs' claims against the Country Villa Defendants are remanded to state court rather than dismissed.[2]

As an initial matter, the Court notes that this action was automatically stayed as to Defendants Country Villa East, LP and Country Villa Westwood by virtue of the Chapter 11 bankruptcy petitions they filed, pursuant to 11 U.S.C. § 362. See Not. of Filing of Pet. for Relief Under Chapter 11, ECF No. 59. Defendants Country Villa Service Corp. and Steven Reissman are not subject to the stay.

I. MOTION FOR RELIEF FROM DISMISSAL

Plaintiffs seek relief "from the mistake and inadvertence of Plaintiffs' counsel" and the Court's Order dismissing the First Amended Complaint for lack of Article III standing because Plaintiffs' counsel "failed to previously grasp the requirement imposed by law and this court to plead the element of causation with some specificity, in order to show Plaintiffs' standing to bring this action." ECF No. 54 at 2. Plaintiffs' counsel state that, though they are "experienced litigators, their experience is essentially limited to litigation in California state courts. According to their attached declarations, neither has ever had to plead causation with specificity in state court matters. Neither has previously faced a motion to dismiss based on lack of standing. Accordingly, they were each slow to grasp the necessity of pleading the element of causation in order to respond to defendants' claims that Plaintiffs lacked standing to bring this action." Id. at 4.

In support of their motion, Plaintiffs attach a proposed Second Amended Complaint, which Plaintiffs also seek leave to file. The proposed Second Amended Complaint modifies a single paragraph of the First Amended Complaint so that it reads as follows:

As a result of the management agreement's provisions which usurp the power and responsibility of the facility's Administrator, the management company designated in the management agreement acts unencumbered by any federal and state regulatory and state statutory requirements for the operation of the skilled nursing facility, and is free to operate the facility in violation of patient care standards, since those licensing standards apply only to licensed nursing home Administrators. Accordingly, because the Administrator is powerless to direct the operation of the nursing facility, operational control of which is illegally delegated to the management company, the management company will operate and has operated the facility - and particularly its patient care operations - in violation of law. In addition, because the management agreement sets the management fee as a percentage of the facility's gross revenue, as alleged, hereinafter, management agreements, including those specifically approved by the State defendants, drain enough of the financial resources from the facility's operation - and particularly its patient care operations - to preclude legally compliant patient care. These two factors had led to the licensee's repeated and historical failure to comply with the crucial safeguards expressed in federal and state law establishing care standards. Those are generally expressed at 22 Cal. Code Regs. §§72301, et seq. and 42 C.F.R. 483.1, et seq. The failure to comply with these standards caused harm, injury and death to the licensee's residents, including members of CANHR and Dawson's aunt Minnie Bell Green. If the facility's Administrator were free to operate the facility within the law establishing patient care standards and had a sum equal to 5% of gross revenue available to pay for additional nursing staff, Plaintiffs relatives and members would more likely than not have escaped all or some of the injuries they experienced while resident/patients at said facilities.

Proposed SAC, ECF No. 54-1 ¶ 15.

Federal Rule of Civil Procedure 60(b) provides in relevant part: "On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for... mistake, inadvertence, surprise, or excusable neglect" or for "any other reason that justifies relief." It has long been held that "[n]either ignorance nor carelessness on the part of the litigant or his attorney provide grounds for relief under Rule 60(b)(1)." Engleson v. Burlington N. R. Co. , 972 F.2d 1038, 1043 (9th Cir. 1992) (quoting Kagan v. Caterpillar Tractor Co. , 795 F.2d 601, 607 (7th Cir. 1986)). Ignorance of the law does not constitute "mistake, inadvertence, surprise, or excusable neglect." Id . Rule 60(b) is not to be used to remedy "[n]eglect or lack of diligence." Lehman v. United States , 154 F.3d 1010, 1017 (9th Cir. 1998). Cf. Briones v. Riviera Hotel & Casino , 116 F.3d 379, 382 (9th Cir. 1997) ("A late filing will ordinarily not be excused by negligence.").

Further, though Rule 60(b)(6) allows a court to relieve a party from a final judgment for "any other reason that justifies relief, " motions on those grounds are to be granted "sparingly as an equitable remedy to prevent manifest injustice." United States v. Alpine Land & Reservoir Co. , 984 F.2d 1047, 1049 (9th Cir. 1993). The moving party must show that "circumstances beyond its control prevented timely action to protect its interests." Id . And, of course, relief is only appropriate where the claim or defense presented would be meritorious but for the judgment. Engleson , 972 F.2d at 1043.

Finally, the court is required to examine four factors in determining whether a litigant has shown excusable neglect: the danger of prejudice to the non-movant, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith. Briones , 116 F.3d at 381 (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship , 507 U.S. 380 (1993)).

Here, the Court concludes that Plaintiffs have failed to show excusable neglect. Their essential argument is that they were unaware of the pleading and standing requirements of federal law. It is well settled that ignorance of the law does not constitute excusable neglect. See Engleson , 972 F.2d at 1043.

Moreover, even if Plaintiffs' counsel had shown excusable neglect, their proposed Second Amended Complaint would not cure the deficiencies that were the basis of the Court's prior orders of dismissal. See ECF Nos. 35, 53. In its prior orders, the Court explained that Plaintiffs lacked standing because they failed to allege a sufficient causal connection between the payment of management fees to third party management companies and any injury suffered by Plaintiff nursing home patients. The Court noted,

Plaintiffs... fail to satisfy the redressability requirement, because the issuance of the injunction Plaintiffs are seeking (to invalidate certain provisions of state law and invalidate certain management agreements) would not address the injuries they are claiming (substandard care). That is because the care provided to the individual plaintiff's decedent and the organizational plaintiff's members depend on the ...

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