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Bernstein v. Extendicare Health Svcs., Inc.: US District Court : TORT - nursing home claims puffery, not misrepresentations; "will obey law" creates no independent private cause of action

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Laura Bernstein, Civil No. 08-5874 (DWF/JSM)
individually and on behalf of
All Others Similarly Situated,
Plaintiff,
v. MEMORANDUM
OPINION AND ORDER
Extendicare Health Services, Inc. and
Extendicare Homes, Inc.
Defendants.
Brad J. Moore, Esq., Kevin Coluccio, Esq., and Paul L. Stritmatter, Esq., Stritmatter
Kessler Whelan Coluccio; David M. Medby, Esq., and Stephen M. Garcia, Esq., The
Garcia Law Firm; and Gale D. Pearson, Esq., Kenneth L. LaBore, Esq., and Stephen J.
Randall, Esq., Pearson, Randall & Schumacher, PA, counsel for Plaintiff.
Barbara J. Duffy, Esq., Ryan P. McBride, Esq., and Vicki L. Smith, Esq., Lane Powell
PC; and Steven E. Rau, Esq., Flynn Gaskins & Bennett, LLP, counsel for Defendants.
INTRODUCTION
This matter is before the Court upon a Motion to Dismiss brought by the
Defendants Extendicare Health Services, Inc. and Extendicare Homes, Inc.
(Defendants). For the reasons set forth below, the Court grants Defendants motion.
2
BACKGROUND
Defendants own and operate nursing homes in numerous states, including
Minnesota. Plaintiff Laura Bernstein (Plaintiff) is a resident in the Texas Terrace
Nursing Home owned by Defendants and located in Minnesota. Plaintiff has asserted
claims against Defendants under Minnesota law for alleged violations of the Prevention
of Consumer Fraud Act, Minn. Stat. 325F.68-.70, the Deceptive Trade Practices Act,
Minn. Stat. 325D.43-.48, and the False Statement in Advertisement law, Minn. Stat.
325F.67.1 Plaintiff also claims that, in addition to civil penalties allowed pursuant to
these statutes, she is entitled to the enhanced penalties provided under Minn. Stat.
325F.71 for violations of such laws directed toward senior citizens and disabled
persons.
Plaintiff contends that Defendants violated these Minnesota statutes by making
false representations regarding the quality of care in their facilities. According to
1 In her Complaint, Plaintiff also asserted a claim under the Minnesota Vulnerable
Adults Act (VAA), Minn. Stat. 626.557 and 626.5572. Plaintiff filed an Amended
Complaint during the hearing on the Defendants present motion. Plaintiffs Amended
Complaint no longer includes a claim under the VAA and, therefore, Plaintiff has
abandoned her VAA claim. In any event, the Court notes that Plaintiffs VAA claim was
based on a misinterpretation of the statute. Plaintiff contended that nursing homes are
mandated reporters under the VAA and that Defendants had failed to fulfill the reporting
obligations the VAA imposes on mandated reporters. Nursing homes are facilities
under the statute; facilities are not included in the definition of the term mandated
reporter though their employees are considered mandated reporters. See Minn. Stat.
626.5572, subd. 6 (defining facility), subd. 16 (defining mandated reporter).
Facilities are required to establish procedures to ensure reporting of suspected abuse and
to pass on to designated authorities any internal reports of maltreatment they receive from
mandated reporters. Minn. Stat. 626.557. The statute, therefore, draws a distinction
between mandated reporters and facilities and imposes different obligations upon each of
them. As Plaintiffs claim was based upon a misreading of the VAA, her VAA claim
would not have been successful.
3
Plaintiff, though Defendants claimed to provide quality care, Defendants utilized
admissions policies that actually led to substandard care. Plaintiff further claims that the
care provided to patients receiving Medicaid was particularly poor. Plaintiff also
contends that this action is appropriate for class action status.
Defendants counter that the alleged fraudulent statements are non-actionable and
that the Plaintiff has failed to plead her claims with particularity.2 Defendants also argue
against class action certification in this case. Defendants request that the Court dismiss
Plaintiffs claims.
DISCUSSION
The Court concludes that Plaintiff fails to state a claim upon which relief may be
granted. The Court must, therefore, dismiss the Plaintiffs Complaint.
I. Legal Standard
In deciding a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, a court assumes all facts in the complaint to be true and construes all
reasonable inferences from those facts in the light most favorable to the complainant.
Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). In doing so, however, a court need
not accept as true wholly conclusory allegations, Hanten v. Sch. Dist. of Riverview
2 In her opposition to the motion, Plaintiff requested that she be permitted to amend
her Complaint in the event the Court determined that she had failed to plead her
allegations with sufficient particularity. Plaintiff filed her Amended Complaint before
the Court had an opportunity to rule on this request. At the time of the hearing on this
matter, Defendants had not yet reviewed the Amended Complaint and objected to the
Courts consideration of this new filing. The Court has reviewed the Amended
Complaint in its entirety, and will consider the Amended Complaint in connection with
this motion because the Court concludes that the content of the Amended Complaint does
not alter the result in this case.
4
Gardens, 183 F.3d 799, 805 (8th Cir. 1999), or legal conclusions drawn by the pleader
from the facts alleged. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
A court may consider the complaint, matters of public record, orders, materials embraced
by the complaint, and exhibits attached to the complaint in deciding a motion to dismiss
under Rule 12(b)(6). Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.
1999).
To survive a motion to dismiss, a complaint must contain enough facts to state a
claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955,
1974 (2007). Although a complaint need not contain detailed factual allegations, it
must contain facts with enough specificity to raise a right to relief above the speculative
level. Id. at 1964-65. This standard calls for enough fact[s] to raise a reasonable
expectation that discovery will reveal evidence of [the claim]. Id. at 1965.
II. Failure to State a Claim
Plaintiff contends that Defendants made misrepresentations and material
omissions of fact upon which they intended Plaintiff and other similarly situated persons
to rely via the Defendants Internet web-site and in the Defendants facility admissions
agreement. According to Plaintiff, these statements misrepresented the quality and
character of Defendants services, violating several state consumer protection statutes.
See, e.g., Minn. Stat. 325F.69, subd. 1 (prohibiting the use of fraud or
misrepresentation with the intent that others rely thereon in connection with the sale of
merchandise); Minn. Stat. 325D.44, subd. 1(5) (identifying a representation that goods
or services have characteristics or benefits they do not have as a deceptive trade practice)
5
and 1(7) (stating deceptive trade practices include representing goods and services are of
a particular standard, quality or grade if they are of another); Minn. Stat. 325F.67
(prohibiting the use of untrue, deceptive or misleading statements in advertisements made
available to the public with the intent to sell merchandise or services).
Specifically, Plaintiff identifies as actionable Defendants statements that they will
provide care in accordance with or exceeding applicable laws and regulations. Plaintiff
cites several statements from Defendants web-site as materially misrepresenting the
quality and characteristics of the services Defendants provide. Plaintiff identifies one
such statement as: Extendicare has always maintained quality standards above
government regulations and this is a tradition that will continue within our new operating
structure. (Compl. 2, Ex. 1.) Plaintiff also contends that Defendants Code of
Conduct distributed on Defendants web-site contains the misleading statement that
Extendicare Health Services, Inc. is committed to providing health care services in
compliance with applicable laws and regulations. (Id. 3.) Another alleged
misrepresentation from Defendants website is the statement that Defendants have
established rigorous standards to ensure that we meet the physical, spiritual, social,
emotional and intellectual needs of our residents and health care customers. (Id. 47,
Ex. 1.) Further, Plaintiff contends that Defendants materially misrepresented their
services by stating in their admission agreement that Defendants would provide basic
6
room and board, general nursing care, social services, dietary services, and activities as
required by law.3 Plaintiff alleges she relied on these representations to her detriment.4
Plaintiff contends that Defendants statements are misrepresentations because,
according to Plaintiff, Defendants do not operate their nursing homes in accordance with
legal standards. Plaintiff notes that state regulatory officials have cited Defendants
nursing homes with deficiencies, showing that Defendants have not complied with all
applicable legal standards. Plaintiff argues that Defendants have also violated state laws
and regulations by including prohibited terms in their admission agreements. Plaintiff
contends that Defendants, in an effort to seek additional profits, have adopted an
admissions policy that discourages admission of Medicaid patients and that Medicaid
patients, particularly those without families, are transferred to other homes to make beds
available for Medicare or private pay patients. Plaintiff further alleges that Defendants
have adopted a policy mandating admission of patients with certain medical conditions
3 Plaintiffs Complaint included the admissions agreement as an attachment, but the
Complaint did not emphasize any alleged misrepresentation in the admissions agreement.
Plaintiffs substantive arguments regarding the admissions agreement first appeared in
her opposition to the Defendants Motion to Dismiss, and the statement in the admissions
agreement is a central allegation in her Amended Complaint. The Court will consider
this argument as though raised at the outset of the case.
4 Plaintiffs Complaint lacked any allegation that Plaintiff relied on the Defendants
statements. In fact, Plaintiffs admission agreement was signed after she entered the
nursing home, suggesting that she could not have relied on its terms in selecting that
particular facility. Plaintiffs Amended Complaint includes the allegation that she and
others relied on Defendants statements. The Court determines that this issue is
immaterial to the resolution of the issues presented at this time.
7
without regard to the capacity of the Defendants facilities to provide adequate care,
leading to violations of law.5
Defendants respond that the statements Plaintiff identifies are non-actionable
puffery. Defendants contend that these statements cannot serve as the basis for claims
under Minnesota consumer protection statutes. Defendants, therefore, argue that Plaintiff
fails to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). The
Court agrees with Defendants.
Puffery includes exaggerated blustering or boasting and vague, subjective
statements of superiority. Am. Italian Pasta Co. v. New World Pasta Co., 371 F.3d 387,
391 (8th Cir. 2004) (holding statement that product was Americas Favorite Pasta was
puffery); LensCrafters, Inc. v. Vision World, Inc., 943 F. Supp. 1481, 1498 (D. Minn.
1996) (adopting report and recommendation concluding statement that lens maker used
the most advanced equipment available was puffery). General assertions of quality are
also puffery because quality is a vague, subjective concept. Am. Italian Pasta Co., 371
F.3d at 393; see also Evanston Hosp. v. Crane, 627 N.E.2d 29 (Ill. App. Ct. 1993)
(holding that statements that hospital would provide high quality care to patients were
expressions of opinion or puffing); Porous Media Corp., 173 F.3d 1109 (holding
5 In making this allegation, Plaintiff relies in part upon a script through which a
member of Defendants staff is directed to inquire into the health conditions of a potential
resident when determining whether to take the admission. (Am. Compl. 10, Ex. 5.)
Plaintiff filed only a redacted copy of this script. The Court requested an unredacted
copy of the script, but after several inquiries from the Court, Plaintiffs counsel indicated
that they do not possess an unredacted version of the document. As the Court is unable to
examine this document fully, it is of limited value.
8
statements of product superiority and that product was industry approved were
puffery).
The contrast between puffing statements and statements constituting fraud can be
seen in Corley v. Rosewood Care Center, Inc. of Peoria, 388 F.3d 990 (7th Cir. 2004). In
Corley, the plaintiff contended that the nursing home engaged in a scheme to fill its beds
by fraudulently inducing residents to sign contracts for nursing home services. 388 F.3d
at 1003. The Plaintiff alleged that the nursing home made a number of fraudulent
statements about the care the nursing home would provide. For instance, the plaintiff
contended that the nursing home fraudulently represented that it provided high quality
care, but in fact had a policy requiring it only to meet minimum standards imposed by the
state. 388 F.3d at 1008. The Seventh Circuit, however, determined that the generic
promise to provide high quality care was puffery; no reasonable person would rely on
such a statement and, therefore, the statement was not material. Id. at 1009. The Seventh
Circuit also considered as puffery the nursing homes statement in a sales brochure that a
nurse would be on duty in the dining hall, acting as a maitre d, to look after patients
during meals. Id. The court noted that sales brochures contain all sorts of puffery and
held that this statement was also immaterial. Id.
In contrast, the Seventh Circuit noted that some residents of the nursing home had
prevailed in a separate state court lawsuit under the Illinois consumer fraud statute. Id. at
996. Those patients claimed that the nursing home promised continuing care for
Medicaid eligible patients but failed to provide such continuing care; the nursing home
was never eligible to serve Medicaid patients and an affiliated facility ceased its
9
participation in the Medicaid program and stopped providing care to residents receiving
Medicaid. Id. at 998. A promise of continuing care and services under a specifically
identified program, therefore, is substantially different from general statements that care
will be of high quality.
In this case, the statements Plaintiff identifies in her Complaint and Amended
Complaint are so general and unspecific that they cannot serve as the basis for a claim
under any of the consumer protection statutes upon which Plaintiff relies. None of the
statements references any particular standard or makes any specific promise. Statements
that a nursing home will comply with or exceed applicable laws, or that it has
established rigorous standards, are similar to statements that services provided will be
high quality. These statements are puffery. Further, the statement in the admissions
agreement that services will be provided as required by law is a redundancy. Nursing
homes are required by law to provide certain services under a comprehensive regulatory
scheme. The admission agreements recitation of that fact does not create a promise
independent of the legal obligations already imposed by State and Federal laws and
regulations.
It is possible that the Defendants are violating state laws and regulations and are
not providing adequate care to residents. Plaintiff may have rights and remedies
available to her under applicable laws for any such violations. A consumer protection
action simply is not the path to resolution of those issues and neither the Plaintiffs
original Complaint, nor her Amended Complaint, state a cause of action. Plaintiffs
claims must, therefore, be dismissed.
10
As the Court has determined that Plaintiff fails to state a claim, the Court does not
address Defendants argument that Plaintiff failed to plead her fraud claims with
sufficient particularity. Fed. R. Civ. P. 9(b). The Court also denies Plaintiff leave to
amend. Federal Rule of Civil Procedure 15(a)(2) provides that courts should freely give
leave [to amend] when justice so requires. Here, however, Plaintiff has already filed an
Amended Complaint and the Court has considered this pleading in reaching its decision.
As the Amended Complaint failed to identify any solid ground on which the Plaintiff
could stand in this litigation, the Court respectfully concludes that another attempt to
amend would not likely be fruitful.
CONCLUSION
According to the Plaintiff, she is a vulnerable and disabled adult who was injured
while in Defendants care. Plaintiff also contends that she has received services that are
inadequate and that her nursing home generally does not provide quality care.6 The
Court is very sympathetic to the Plaintiff. Plaintiff, however, has not asserted a claim
against Defendants for negligence related to an injury or for violation of specific
substantive laws or regulations. Instead Plaintiff seeks to initiate a class action against
Defendants for violation of Minnesota consumer protection laws. Plaintiff may well have
6 The Court inquired at the hearing whether Plaintiff had sought admission at
another facility, given her allegations regarding substandard care at her current facility.
Plaintiffs counsel represented that Plaintiff was not able to transfer to another facility
because no other facility would take the Plaintiff due to her status as a Medicaid
recipient. The Court inquired as to the number of facilities to which Plaintiff has applied
and been turned away, but Plaintiffs counsel was unable to provide the Court with this
information.
11
claims against the Defendants, but a consumer protection class action does not lie on the
facts Plaintiff has alleged.7
Accordingly, IT IS HEREBY ORDERED that:
1. The Motion to Dismiss brought by Defendants Extendicare Health
Services, Inc. and Extendicare Homes, Inc. (Doc. No. 7) is GRANTED.
2. Plaintiffs Complaint (Doc. No. 1) is DISMISSED WITHOUT
PREJUDICE.
Dated: March 4, 2009 s/Donovan W. Frank
DONOVAN W. FRANK
Judge of United States District Court
7 At the hearing on this motion, Plaintiffs counsel asserted that the issues presented
in this case were of national importance. Plaintiffs counsel also took great umbrage with
Defendants suggestion that this suit was styled as a consumer protection class action
because of the attorney fees such a suit could yield and stated that [l]awyer-driven
litigation is what made this country great. (Tr. at 57.) The Court agrees that there are
complicated and vexing issues regarding the quality of care provided to elderly and
infirm persons, especially those who are indigent, and that these are matters of great
concern. The Court also notes that Plaintiff, along with other nursing home residents, is
entitled be treated with respect and dignity. It may be that serious scrutiny regarding
Plaintiffs care should be applied by the Minnesota Departments of Health and Human
Services. The Court hopes that Plaintiffs counsel is seriously committed to ensuring
proper care for the Plaintiff and that the three law firms and eight individual attorneys
representing her will assist her in pursuing any negligence claims she may have or in
bringing complaints about the quality of her care to appropriate regulatory authorities,
notwithstanding that these actions may not be as lucrative.
 

 
 
 

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