2015 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-26-2015

In Re: Lemington Home for the Aged

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"In Re: Lemington Home for the Aged" (2015). 2015 Decisions. Paper 77.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 13-2707

_____________

In re: LEMINGTON HOME FOR THE AGED

OFFICIAL COMMITTEE OF UNSECURED CREDITORS, 

ON BEHALF OF THE ESTATE OF LEMINGTON HOME 

FOR THE AGED

v.

ARTHUR BALDWIN; LINDA COBB; JEROME 

BULLOCK; ANGELA FORD; JOANNE ANDIORIO; J.W. 

WALLACE; TWYLA JOHNSON; NICOLE GAINES; 

WILLIAM THOMPKINS; ROY PENNER; MELODY 

CAUSEY; JAMES SHEALEY; EUGENE DOWNING; 

GEORGE CALLOWAY; B.J. LEBER; REVEREND 

RONALD PETERS,

 Appellants

_____________

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil No. 2-10-cv-0800)

District Judge: Honorable Arthur J. Schwab

_____________

 
2

Argued May 14, 2014

Before: SMITH, VANASKIE, and SHWARTZ, Circuit 

Judges.

(Filed: January 26, 2015)

Michael J. Bowe, Esq. [ARGUED]

Jennifer S. Recine, Esq.

Kasowitz, Benson, Torres & Friedman

1633 Broadway

21st Floor

New York, NY 10019

John R. Gotaskie, Jr., Esq. 

Fox Rothschild

625 Liberty Avenue

29th Floor

Pittsburgh, PA 15222

Mark R. Hamilton, Esq.

Rebecca S. Izsak, Esq.

Philip J. Sbrolla, Esq.

Cipriani & Werner

650 Washington Road

Suite 700

Pittsburgh, PA 15228

Counsel for Appellants

Robert S. Bernstein, Esq.

Kirk B. Burkley, Esq.

Nicholas D. Krawec, Esq. [ARGUED]

Shawn P. McClure, Esq.
3

Arthur W. Zamosky, Esq.

Bernstein-Burkley

707 Grant Street

Suite 2200, Gulf Tower

Pittsburgh, PA 15219

Counsel for Appellee

_____________ 

OPINION OF THE COURT

_____________

VANASKIE, Circuit Judge.

This lawsuit, which concerns the mismanagement of a 

Pittsburgh-area nursing home and its ensuing bankruptcy, 

comes before the Court for a third time on appeal. In the 

present appeal, the Defendants, two former Officers and 

fourteen former Directors of the nursing home, present 

several challenges to the jury’s verdict, which found them 

liable for breach of fiduciary duties and deepening 

insolvency. The jury also imposed punitive damages against 

the two Officers and five of the Directors.

We will affirm the jury’s liability findings and the 

punitive damages award imposed against the Administrator 

and the Chief Financial Officer of the nursing home. We 

will, however, vacate the jury’s award of punitive damages 

against the Defendants who served on the nursing home’s 

Board of Directors. We conclude that the punitive damages

award against those Defendants was not supported by 

evidence sufficient to establish that they acted with “malice, 

vindictiveness and a wholly wanton disregard of the rights of 

others.” Smith v. Renaut, 564 A.2d 188, 193 (Pa. Super. Ct. 

1989) (citations omitted). 
4

I.

The Lemington Home for the Aged (“the Home”), 

established in 1883, “was the oldest, non-profit, unaffiliated 

nursing home in the United States dedicated to the care of 

African-America[n] seniors.” App. 857. As part of its 

mission statement, the Home sought to “[e]stablish, support, 

maintain and operate an institution that is able to extend 

nursing home care for persons who are infirm due to age and 

other reasons, without regard to age, sex, race, religion, and to 

do so regardless of whether such persons themselves have the 

ability to pay for such care.” App. 858. 

Defendant Mel Lee Causey was hired to serve as the 

Home’s Administrator and Chief Executive Officer in 

September 1997. Defendant James Shealey became the 

Home’s Chief Financial Officer in December 2002 and 

reported to Causey.1 Defendants Arthur Baldwin, Jerome 

Bullock, Angela Ford, Joanne Andiorio, J.W. Wallace, Twyla 

Johnson, Nicole Gaines, William Thompkins, Roy Penner, 

Eugene Downing, George Calloway, B.J. Leber, and the 

Reverend Ronald Peters all served as members of the Board 

of Directors of the Home (collectively, “Director 

Defendants”), and had “direct supervisory control, authority 

and responsibility” over Causey. App. 859. 

The Home had been “beset with financial troubles” for 

decades, but had remained afloat with help from the City of 

Pittsburgh, Allegheny County, and donations from several 

 

1 When discussed collectively, Shealey and Causey 

will hereinafter be referred to as the “Officer Defendants.”
5

private foundations. In re Lemington Home for the Aged

(“Lemington I”), 659 F.3d 282, 285 (3d Cir. 2011). The 

Home’s financial difficulties became particularly acute during 

the early 2000s, under the management of the Officer 

Defendants. The Home was cited by the Pennsylvania 

Department of Health for deficiencies at a rate almost three 

times greater than the average nursing home operating in the 

state. In 2004, Causey began working part-time in her 

capacity as Administrator, although state law required all 

nursing homes to employ full-time Administrators. That 

year, two patients died under suspicious circumstances while 

residing at the Home, resulting in investigations by the

Pennsylvania Department of Health. The Home’s patient 

recordkeeping and billing were in a state of disarray.

On January 6, 2005, the Board convened and voted to 

close the Home. However, its Chapter 11 petition was not 

filed until April 13 of that year. During the intervening 

period, the patient census dropped to as low as 37 patients. 

“At a Bankruptcy status conference held on June 23, 2005, no 

one expressed any interest in funding or acquiring the Home,” 

and the Bankruptcy Court therefore approved the Home’s 

closure. Lemington I, 659 F.3d at 289. It was later revealed 

that the Home had “delayed filing its Monthly Operating 

Reports for May and June until September 2005,” although 

the reports “would have shown that the Home received nearly 

$1.4 million in Nursing Home Assessment Tax payments,” 

which could have increased its chances of finding a buyer. 

Id. 

In November 2005, the Bankruptcy Court granted the 

request made by the Committee of Unsecured Creditors (“the 

Committee”) to bring this adversary proceeding against 

Causey, Shealey, and the Director Defendants claiming
6

breach of fiduciary duty, breach of the duty of loyalty, and 

deepening insolvency. The District Court granted summary 

judgment in favor of Defendants on all claims. 

On appeal, we vacated the District Court’s grant of 

summary judgment in its entirety, concluding that “our 

independent review of the record discloses genuine disputes 

of material facts on all claims.” Id. at 285. On remand, the 

District Court set stringent time limits for trial, which the 

Defendants contested before this Court in a request for a writ 

of mandamus. We denied the Defendants’ request but urged 

the District Court to consider increasing the time allotted for 

trial. In re Baldwin, 700 F.3d 122 (3d Cir. 2012). 

The District Court increased the time limits and the 

case proceeded to a six-day jury trial, which began on 

February 19, 2013. At the close of the Committee’s case, the 

Defendants moved for judgment as a matter of law, which the 

District Court granted with respect to the breach of the duty 

of loyalty claim against the Director Defendants and denied in 

all other respects. Following the close of trial, the jury 

deliberated for three days before returning a compensatory 

damages verdict against fifteen of the seventeen Defendants, 

jointly and severally, in the amount of $2,250,000. The jury 

awarded punitive damages in the amount of $350,000, 

individually, against five of the Director Defendants. The 

jury also awarded punitive damages of $1 million against 

Shealey and $750,000 against Causey. 

Following the verdict, the Defendants filed a motion 

for judgment as a matter of law, a new trial, or remittitur. 

The District Court denied that motion in its entirety. This 

appeal followed.
7

II.

“We exercise plenary review of an order granting or 

denying a motion for judgment as a matter of law and apply 

the same standard as the district court.” Lightning Lube, Inc. 

v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993) (citation 

omitted). “[A] judgment notwithstanding the verdict may be 

granted under Fed. R. Civ. P. 50(b) only if, as a matter of law, 

the record is critically deficient of that minimum quantity of 

evidence from which a jury might reasonably afford relief.” 

Trabal v. Wells Fargo Armored Serv. Corp., 269 F.3d 243, 

249 (3d Cir. 2001) (quotation marks and citations omitted)). 

“Because the jury returned a verdict in favor of the plaintiff, 

we must examine the record in a light most favorable to the 

plaintiff, giving her the benefit of all reasonable inferences, 

even though contrary inferences might reasonably be drawn.” 

Dudley v. S. Jersey Metal, Inc., 555 F.2d 96, 101 (3d Cir. 

1977). 

III.

The Defendants first argue that the Committee 

introduced insufficient evidence at trial to establish that the 

Director and Officer Defendants had breached their duty of 

care and that the Officer Defendants had additionally 

breached their duty of loyalty. We disagree. The Committee 

presented evidence to the jury that was sufficient to support a 

rational finding that the Defendants had breached their 

fiduciary duties by failing to exercise reasonable diligence 

and prudence in their oversight and management of the 

Home. 
8

A. Officer Defendants

Pennsylvania law provides: 

[A]n officer shall perform his 

duties as an officer in good faith, 

in a manner he reasonably 

believes to be in the best interests 

of the corporation and with such 

care, including reasonable 

inquiry, skill and diligence, as a 

person of ordinary prudence 

would use under similar 

circumstances.

15 Pa. Cons. Stat. Ann. § 5712(c). The duty of loyalty under 

Pennsylvania law “requires that corporate officers devote 

themselves to the corporate affairs with a view to promote the 

common interests and not their own.” Tyler v. O’Neill, 994 F. 

Supp. 603, 612 (E.D. Pa. 1998).

The Committee presented extensive evidence at trial of

Causey’s mismanagement of the Home in her role as 

Administrator, clearly satisfying the “minimum quantity of 

evidence” required to sustain the jury’s verdict on appeal. 

Trabal, 269 F.3d at 249. The jury heard testimony that it was 

Causey’s responsibility as the nursing home Administrator to: 

make[] sure that there are 

contracts in place, that the facility 

is being managed financially, that 

bills are being paid, that the

nursing staff is adequate in its 

numbers as well as in their 
9

education and training, and that 

the facility is operating in 

compliance with both Federal and 

State regulations, which are really 

very extensive. 

App. 1077.

Evidence presented at trial demonstrated that Causey 

fell far short of fulfilling these responsibilities. Throughout 

Causey’s tenure, the Home was not in compliance with 

federal and state regulations. Causey began her role as 

Administrator in 1997. “[T]here were significant problems 

identified by the Pennsylvania Department of Health, the 

inspectors of the nursing home from 1998 through 2004 . . . .” 

App. 1081. The Home was cited repeatedly for failing to 

keep proper documentation of residents’ clinical records. In 

2004, the Department of Health launched an investigation 

following the death of patient Elaine Carrington. The review 

concluded that “Causey lacks the qualifications, the 

knowledge of the PC regulations and the ability to direct staff 

to perform personal care services as required.” App. 1349–

50, 2283. This evaluation, citing Causey’s inexperience and 

lack of qualifications, came after Causey had already been in 

the role of Administrator for more than six years. 

The jury also heard testimony that, at the time of Ms. 

Carrington’s death, Causey was not working at the Home 

full-time, despite holding the title of Administrator and 

collecting her full salary. Pennsylvania law requires all 

facilities of the Home’s size to employ a full-time 

Administrator. But in an application for long-term disability 

benefits she filed with the state, Causey represented that she 

was working only “20 to 24 hours per week at Lemington” 
10

for more than eight months in 2004. App. 1457. When 

confronted at trial with this portion of her benefits 

application, Causey avoided giving a precise figure for how 

many hours she worked during this period, although she 

eventually admitted, “I was working part-time.” App. 1820. 

We are satisfied that the jury was presented with more 

than sufficient evidence to conclude that Causey breached her 

duty of care. Additionally, testimony regarding Causey’s 

self-interested decision to stay on as an Administrator despite 

being unable to serve full-time as required under state law 

supported the jury’s verdict that she breached her duty of 

loyalty by collecting her full salary while not in fact fulfilling 

the duties of the role for which she was being compensated. 

The jury also heard sufficient evidence to support its 

determination that defendant Shealey breached his duties of 

care and loyalty as Chief Financial Officer. The Committee 

presented testimony from William Terrence Brown, a nursing 

home consultant who had conducted an assessment of the 

Home on behalf of a major creditor in May 2005. Brown 

testified that during his review, he requested records from 

Shealey, including “the latest financial statements, monthly, 

internally prepared, the annual audits[,] . . . the last year’s 

Medicare and Medicaid cost reports[,] . . . the nursing reports, 

the census data[,] . . . accounts receivable and accounts 

payable, [and] aging reports . . . .” App. 1196. Brown 

testified that he repeatedly asked Shealey for this information, 

but it was not provided to him. 

Brown also testified that, towards the end of his review 

of the Home, Shealey, in an attempt to avoid Brown’s 

persistent requests for basic financial information, locked 

himself in his office. Brown responded by “camp[ing] 
11

outside” of Shealey’s office, waiting for him to leave in order 

to speak with him about the Home’s finances. App. 1201. 

Brown testified that when he finally managed to speak with 

Shealey:

I said, Mr. Shealey, there really 

aren’t any books; are there? And 

he said no. 

So I said, well, Mr. Shealey, you 

got to have something that you 

keep an idea of what kind of cash 

is in the bank. So what do you 

use for that? 

And he said, well, I’ve got, you 

know, a little Excel spread sheet I 

use, only I try to keep a bank 

balance.

Id. When pressed by Brown as to how long he had operated 

without a general ledger that recorded the Home’s finances in 

detail, Shealey admitted that “June 30, 2004, was the last time 

they kept any books.” Id. Brown testified that Shealey never 

provided him with the Excel spreadsheet he allegedly used in 

lieu of a general ledger. Despite Shealey’s failure to provide 

these documents to Brown, minutes from a Board meeting 

following Brown’s visit state that Shealey informed the Board 

that Brown had “received everything he requested.” App. 

1870, 3088. Brown also testified that, under Shealey, the 

Home had failed to bill for Medicare since August 2004. 

Brown calculated that this resulted in the Home failing to 

collect at least $500,000 it was due for services rendered. 

App. 1206. 
12

The Committee also introduced into evidence an email 

that Shealey sent to a representative of Mount Ararat Baptist

Church (“Mt. Ararat”) in April 2005, before the Home had 

filed for bankruptcy. The proposal suggested that Mt. Ararat 

purchase Lemington “to create a revitalized faith based 

retirement community” named Mount Ararat Retirement 

Community (“MARC”). App. 6351. The proposal indicated 

that Shealey would “assume the position of MARC President 

and Chief Executive Officer.” App. 6360. Director Baldwin 

testified that he believed Shealey’s involvement in this 

potential sale was inappropriate, as Shealey would receive a 

benefit if the Home was merged with Mt. Ararat. App. 1303, 

1315. 

The jury therefore heard sufficient evidence to find 

that Shealey fell far short of fulfilling his duty to act “with 

such care, including reasonable inquiry, skill and diligence, as 

a person of ordinary prudence would use under similar 

circumstances.” 15 Pa. Cons. Stat. Ann. § 5712(c). A person 

serving as Chief Financial Officer with reasonable skill and 

diligence would not fail to maintain a general ledger for over 

nine months, refuse to meet with a consultant hired by a 

major creditor of the Home, and forgo collection of upwards 

of $500,000 due to the Home in Medicare payments. 

Shealey’s decision to stay on as CFO despite his inability to 

competently fulfill the duties with which he was charged, 

combined with his proposal that Mt. Ararat purchase the 

Home and elevate him to the position of President and CEO, 

also gave the jury a sufficient basis for concluding that 

Shealey acted in self-interest, breaching his duty of loyalty to 

the Home. 
13

B. Director Defendants

The evidence also supported a finding that the Director

Defendants breached their duty of care by failing to take 

action to remove Causey and Shealey once the results of their 

mismanagement became apparent. 

Pennsylvania law provides:

(a) Directors.--A director of a 

nonprofit corporation shall stand 

in a fiduciary relation to the 

corporation and shall perform his 

duties as a director . . . in good 

faith, in a manner he reasonably 

believes to be in the best interests 

of the corporation and with such 

care, including reasonable 

inquiry, skill and diligence, as a 

person of ordinary prudence 

would use under similar 

circumstances. In performing his 

duties, a director shall be entitled 

to rely in good faith on 

information, opinions, reports or 

statements, including financial 

statements and other financial 

data, in each case prepared or 

presented by any of the following: 

(1) One or more officers or 

employees of the corporation 

whom the director reasonably 

believes to be reliable and 

competent in the matters 
14

presented. (2) Counsel, public 

accountants or other persons as to 

matters which the director 

reasonably believes to be within 

the professional or expert 

competence of such person . . . . 

(b) Effect of actual knowledge.—

A director shall not be considered 

to be acting in good faith if he has 

knowledge concerning the matter 

in question that would cause his 

reliance to be unwarranted.

15 Pa. Cons. Stat. Ann. § 5712.

The jury heard testimony that the Board was 

“responsible for the oversight of the nursing home 

Administrator and for the hiring and firing” of the Home’s 

management staff. App. 1076. The Directors were aware 

that the Home had “three times the deficiencies” of the 

average nursing home operating in the state during Causey’s 

tenure as Administrator. App. 1872. The jury heard 

testimony that an independent review of the Home in 2001 

recommended that, due to the Home’s continued citations for 

health violations, Causey should be replaced with a “seasoned 

nursing home administrator.” App. 1095. The report further 

urged that “[t]he facility cannot improve overall patient care 

without a competent administrator on staff . . . .” App. 2210. 

Although the Board sought and obtained a grant of $178,000 

from the Pittsburgh Foundation to fund the search for a new 

Administrator, the funds were never used to find a 

replacement for Causey, who remained at the Home despite 
15

increasing evidence that her “performance as the nursing 

home administrator was poor.” App. 1095.

Although the date by which the Directors became 

aware that Causey was working part-time from April through 

December 2004 was contested at trial, some evidence was 

introduced that the Board allowed Causey to continue to 

operate and collect her full salary as Administrator with the 

knowledge she was working part-time, in violation of state 

law. Director Andiorio testified that Causey informed the 

Board that she would be working part-time and the Board did 

not intervene to replace her with a full-time Administrator. 

App. 1867. The jury also heard testimony from Director 

Baldwin that the Board elevated Shealey into a role as a 

“CEO type figure” from December 2004 through May 2005, 

even after the Board discovered that Shealey had not been 

maintaining proper financial records for the Home in his role 

as CFO. App. 1297.

This evidence supported the jury’s finding that the 

Director Defendants did not exercise reasonable prudence and 

care in continuing to employ Causey and Shealey. The 

Director Defendants kept Causey in the role of Administrator

and CEO for six years in the face of abnormally high

deficiency findings. Even after she ceased working at the 

Home full-time, in violation of state law, the Director 

Defendants allowed Causey to continue in her role as 

Administrator. This is not a case where directors, acting in 

good-faith reliance “on information, opinions, reports or 

statements” prepared by employees or experts, made a 

business decision to continue to employ an Administrator

whose performance was arguably less than ideal. 15 Pa. 

Cons. Stat. Ann. § 5712(a). The jury heard testimony that the 

Director Defendants received several independent reports 
16

documenting Causey’s shortcomings and urging that she be 

replaced. The Director Defendants therefore had actual 

knowledge of her mismanagement, yet stuck their heads in 

the sand in the face of repeated signs that residents were 

receiving care that was severely deficient. This is enough to 

support the jury’s verdict that the Director Defendants 

breached their duty of care to the Home. 

IV.

The Defendants next argue that the Committee 

introduced insufficient evidence to support the jury’s verdict 

that the Defendants had deepened the Home’s insolvency. 

“Even when a corporation is insolvent, its corporate property 

may have value,” which can be damaged by “[t]he fraudulent 

and concealed incurrence of debt . . . .” Official Comm. of 

Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 

349 (3d Cir. 2001). Thus, we have predicted that 

Pennsylvania courts would recognize the tort of deepening 

insolvency, defining it as “an injury to the Debtors’ corporate 

property from the fraudulent expansion of corporate debt and 

prolongation of corporate life.” Id. at 347.2 We are satisfied 

 

2 As they did in Lemington I, the Defendants urge us to 

revisit our prior decision in Lafferty, calling to our attention 

the subsequent decisions of other courts which have refused 

to recognize deepening insolvency as a tort. As we observed 

in response to this argument in Lemington I, we continue to 

be bound to follow Lafferty unless it is overturned by our 

Circuit sitting en banc. 659 F.3d at 294 n.6. We also 

reserved opining on the question of whether deepening 

insolvency “may not apply to, or may involve a different 
17

that the Committee introduced sufficient evidence to support 

the jury’s deepening insolvency verdict. 

The Committee presented evidence that the Director 

Defendants concealed for over three months the Board’s 

January 2005 decision to close the Home and deplete the 

patient census. In Lemington I, we held that this evidence 

could suggest to a jury that “although the Board knew that its 

actions would cause further deterioration of the Home’s 

finances to the detriment of its creditors, by its silence, the 

Board consciously defrauded the Home’s creditors by 

implementing these policies and delaying the filing of 

bankruptcy . . . .” 659 F.3d at 295. Trial testimony from 

Brown, the bankruptcy consultant for the major creditors, 

supported the Committee’s theory that the Board’s decision to 

deplete the patient census before it filed for bankruptcy 

resulted in a “slow death” of the Home’s ability to generate 

revenue. App. 1214. The Committee presented additional 

evidence that, during the bankruptcy process, the Board failed

to disclose in its monthly operating reports that the Home had 

received a $1.4 million Nursing Home Assessment Tax 

payment in May 2005, which could have increased the 

Home’s chances of finding a buyer. An email from the 

Board’s bankruptcy attorney to the Board summed up the 

mismanagement of the bankruptcy process, warning that “we 

have not established a sale process in a manner that is 

 

standard for, a non-profit corporation,” as no party had raised 

the argument. Id. In the present appeal, the Defendants again 

do not argue that a different standard should apply to 

deepening insolvency in the non-profit context, so we will not 

address that question. 
18

customarily done in Chapter 11 cases. Nobody has had the 

opportunity to bid and we have no meaningful financial 

records.” App. 3208.

As to the Officer Defendants, the Committee presented 

evidence that Causey and Shealey’s mismanagement of the 

Home’s finances, inattention to recordkeeping and patient 

billing, and failure to conduct a proper bankruptcy process 

damaged the already insolvent Home’s value. Shealey did 

not maintain a general ledger of the Home’s finances in his 

capacity as CFO. As a result of the patient-documentation 

errors repeatedly identified by the Pennsylvania Department 

of Health during Causey’s tenure, the Home did not recoup 

reimbursements it was due for care provided to Medicare 

patients, resulting in an estimated loss to the Home of 

$500,000. App. 1085–86, 1206. During the bankruptcy 

process, Shealey refused to meet with Brown, the consultant 

hired by the Home’s major creditors, and did not make 

information about the Home’s financial condition available to 

potential buyers. All of this conduct damaged the Home’s 

financial viability after it had already become insolvent. 

Thus, the jury’s verdict on the deepening insolvency claim 

had ample evidentiary support.

V.

Finally, the seven Defendants against whom the jury 

imposed punitive damages argue that the jury was not 

presented with certain factual prerequisites necessary to 

support a punitive damages award. First, the Defendants 

argue that there was no evidence introduced of any 

Defendant’s financial status, even though wealth is a relevant 

consideration for punitive damage awards under Pennsylvania 

law and the District Court instructed the jury that they could 
19

consider the Defendants’ wealth in fixing the amount of 

punitive damages. The Defendants also argue that the jury 

was not presented with sufficient evidence of the Defendants’ 

subjective state of mind to justify the imposition of punitive 

damages.

Although we conclude that wealth evidence is not a 

necessary prerequisite for an award of punitive damages 

under Pennsylvania law, we agree that the evidence presented 

to the jury did not contain the minimum quantum of proof of 

outrageous conduct necessary to support a punitive damages

award against any of the Director Defendants. We will 

therefore vacate the punitive damages imposed against five of 

the Director Defendants. However, because we conclude that 

adequate state-of-mind evidence was presented to support a 

finding that Shealey and Causey acted “outrageously,” we 

will affirm the jury’s punitive damages verdict as to them. 

A. Evidence Regarding Wealth of the Defendants

At the close of trial, the District Court instructed the 

jury on the relevant factors they could consider in fashioning 

a punitive damages award under § 908(2) of the Second 

Restatement of Torts, which Pennsylvania has adopted. In 

particular, the Court instructed the jurors that they could 

consider “[t]he wealth of the Defendant or Defendants insofar 

as it is relevant in fixing an amount that will punish him or 

her, and deter him or her and others from like conduct in the 

future.” App. 63. However, no evidence of the Defendants’

wealth had been introduced to the jury during the trial in any 

form, either testimonial or documentary.

Defendants argue that the punitive damage award 

cannot stand because the jury was not presented with any 
20

evidence regarding the wealth of any Defendant and therefore

could not evaluate what amount of punitive damages would 

serve as an appropriate deterrent. The wealth of a defendant 

is indeed one of the three factors that “can properly [be] 

consider[ed]” by the trier of fact in assessing an award of 

punitive damages under § 908(2). Nonetheless, that section’s 

use of the permissive “can,” rather than the compulsory 

“must,” suggests that evidence of a defendant’s wealth is not 

a necessary prerequisite to an award of punitive damages. 

The weight of Pennsylvania case law agrees that “evidence of 

a tortfeasor’s wealth is not a necessary condition precedent 

for imposition of an award of punitive damages.” Vance v. 46 

and 2, Inc., 920 A.2d 202, 207 (Pa. Super. Ct. 2007) 

(collecting cases). 

Despite § 908(2)’s permissive language, the 

Defendants urge that evidence of wealth is a necessary 

prerequisite to an award of punitive damages. The 

Defendants point to case law which they claim suggests that 

the fact finder is required to weigh a defendant’s wealth to 

properly calibrate an assessment of punitive damages. In 

Kirkbride v. Lisbon Contractors, Inc., 555 A.2d 800 (Pa. 

1989), the Pennsylvania Supreme Court rejected a 

defendant’s claim that a punitive damages award must be 

proportional to an award of compensatory damages, noting 

that such a requirement would undermine the deterrent 

purpose of such awards:

If the purpose of punitive 

damages is to punish a tortfeasor 

for outrageous conduct and to 

deter him or others from similar 

conduct, then a requirement of 

proportionality defeats that 
21

purpose. It is for this reason that 

the wealth of the tortfeasor is 

relevant. In making its 

determination, the jury has the 

function of weighing the conduct 

of the tortfeasor against the 

amount of damages which would 

deter such future conduct. In 

performing this duty, the jury 

must weigh the intended harm 

against the tortfeasor’s wealth. If 

we were to adopt the Appellee’s 

theory [of proportionality to 

compensatory damages], 

outrageous conduct, which only 

by luck results in nominal 

damages, would not be deterred 

and the sole purpose of a punitive 

damage award would be 

frustrated. 

Id. at 803 (emphasis added).3

 

3 Kirkbride’s holding that a punitive damage award 

does not need to be proportional to the compensatory 

damages assessed in a given case has been subsequently 

called into question by a string of Supreme Court cases 

holding that, as a matter of due process, “courts must ensure 

that the measure of punishment is both reasonable and 

proportionate to the amount of harm to the plaintiff and to the 

general damages recovered.” State Farm Mut. Auto. Ins. Co. 

v. Campbell, 538 U.S. 408, 426 (2003). The Defendants do 
22

Although the reasoning of the Kirkbride decision 

evinced a concern with ensuring that a punitive damages

award must be sufficiently large to deter future wanton 

conduct by a wealthy defendant, a decision from the Eastern 

District of Pennsylvania has interpreted Kirkbride’s language 

as a limitation on a court’s ability to impose punitive damages 

absent any evidence of the defendant’s wealth. In Rubin 

Quinn Moss Heaney & Patterson, P.C. v. Kennel, 832 F.

Supp. 922, 936 (E.D. Pa. 1993), the District Court noted as a 

consideration in its decision declining to impose punitive 

damages that “the record is devoid of evidence concerning 

[the defendant’s] wealth.” Citing Kirkbride, the District 

Court concluded that it was “required to assess the impact the 

[punitive] damages would have on the Defendant's financial 

position,” which it could not do given the state of the record. 

Id. 

The weight of the Pennsylvania appellate case law, 

however, interprets Kirkbride differently and concludes that 

evidence of wealth is not required to assess punitive damages 

under Pennsylvania law. In Vance, the Superior Court of 

Pennsylvania rebuffed a claim that Kirkbride “requires that 

the jury be presented with evidence of a tortfeasor’s wealth 

before they can impose punitive damages.” 920 A.2d at 206. 

 

not press a constitutional due process claim regarding 

punitive damages as a part of this appeal, so we will “decline 

to resolve the thorny issue presented by the apparent conflict” 

between Kirkbride and the Supreme Court’s subsequent 

pronouncements on proportionality in punitive damage 

awards. Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 

741 (3d Cir. 1991). 
23

The Superior Court noted that Kirkbride was concerned with 

the distinct question of whether “an award of punitive 

damages had to be proportional to, or bear a reasonable 

relationship to, an award of compensatory damages.” Id. 

Although the Vance court acknowledged that “wealth of the 

tortfeasor is a relevant consideration in effectuating the 

purpose of punitive damages,” it concluded that 

“Kirkbride does not stand for the proposition that a jury 

cannot impose punitive damages without evidence of record 

pertaining to the defendant tortfeasor’s wealth.” Id. The 

Superior Court later reaffirmed this holding in Reading 

Radio, Inc. v. Fink, 833 A.2d 199, 215 (Pa. Super. Ct. 2003), 

which held that “the polestar for the jury’s assessment of 

punitive damages is the outrageous conduct of the defendants, 

not evidence of a defendant’s wealth.” Similarly, in Shiner v. 

Moriarty, 706 A.2d 1228, 1242 (Pa. Super. Ct. 1998), the 

Superior Court “reject[ed] the suggestion that evidence of net 

worth is mandatory” to impose punitive damages. 

In light of the aforementioned decisions and the 

permissive, rather than compulsory language of § 908(2), we 

agree with the District Court that Pennsylvania law does not 

require evidence of a defendant’s wealth before punitive 

damages may be imposed. For whatever reason, parties may 

make the strategic decision to not introduce such evidence at 

trial, and that decision is not a basis for vacatur of a punitive 

damages award on appeal. 

B. Evidence of Outrageous Conduct by Defendants

“‘Punitive damages may be awarded for conduct that 

is outrageous, because of the defendant’s evil motive or his 

reckless indifference to the rights of others.’” Feld v. 

Merriam, 485 A.2d 742, 747 (Pa. 1984) (quoting Restatement 
24

(Second) of Torts, § 908(2)). “Punitive damages . . . are not 

awarded to compensate the plaintiff for her damages but 

rather to heap an additional punishment on a defendant who is 

found to have acted in a fashion which is particularly 

egregious.” Phillips v. Cricket Lighters, 883 A.2d 439, 446

(Pa. 2005) (citation omitted). “The state of mind of the actor 

is vital. The act, or the failure to act, must be intentional, 

reckless or malicious.” Feld, 485 A.2d at 748. “[W]e must 

make a ‘careful analysis of the entire trial record’ and 

examine whether the plaintiffs provided sufficient evidence to 

support a punitive damage award.” David by Berkeley v. 

Pueblo Supermarket of St. Thomas, 740 F.2d 230, 237 (3d 

Cir. 1984) (quoting Berroyer v. Hertz, 672 F.2d 334, 341 (3d 

Cir. 1982)). “‘[F]or punitive damages to be awarded there 

must be acts of malice, vindictiveness and a wholly wanton 

disregard of the rights of others.’” Tunis Bros., 952 F.2d at 

741 (quoting Smith, 564 A.2d at 193) (emphasis added). 

1. Director Defendants

As to the Director Defendants—Andiorio, Baldwin, 

Thompkins, Johnson, and Bullock—insufficient evidence was 

presented to support a finding that any of them possessed a 

sufficiently culpable state of mind to warrant the imposition 

of the “extreme remedy” of punitive damages, which 

Pennsylvania courts have cautioned should be awarded “in 

only the most exceptional matters.” Phillips, 883 A.2d at 

445. In its decision affirming the punitive damages award 

against five of the Director Defendants, the District Court 

pointed to the same conduct that it held had supported the 

compensatory damages award against all of the Director 

Defendants. Specifically, the District Court noted the 

Board’s failure to replace Causey despite awareness of her 

poor performance as Administrator, the Board’s January 2005 
25

decision to close the Home which was not disclosed until 

April, and the mismanagement of the bankruptcy process by 

the Board. App. 42–43. Explaining the jury’s potential 

rationale for imposing punitive damages against only five of 

the members of the Board, the District Court concluded that, 

based on its “detailed review of the exhibits,” the Director 

Defendants against whom punitive damages were awarded 

had “received more correspondence relating to the closure of 

the Home than the other Defendants against whom liability 

was imposed, but no punitive damages were assessed.” App.

43–44. The amount of information individual directors knew 

is certainly relevant to establishing their liability for inaction 

and fraudulent nondisclosure. Nevertheless, we do not think 

that, on its own, evidence of the receipt of correspondence 

provided the jury with a sufficient basis to conclude that any 

of the five Director Defendants had engaged in “a quantum of 

outrageous conduct in addition to that undergirding the . . . 

liability . . . .” Tunis Bros., 952 F.2d at 741 (emphasis 

added). 

Our decision in Donaldson v. Bernstein, 104 F.3d 547 

(3d Cir. 1997), in which we sustained a punitive damages 

award against a debtor’s two principals who had engaged in 

self-dealing, provides a helpful point of contrast. Unlike the 

evidence in that case, no evidence was presented in this 

matter that the Directors against whom the jury assessed 

punitive damages acted out of self-interest. Indeed, in a 

decision that the Committee does not appeal, the District 

Court directed a verdict in favor of all of the Directors on the 

Committee’s claim that they had breached their duty of 

loyalty to the Home. App. 1677. The District Court therefore 

found the record could not possibly support an inference that 

the Directors’ conduct was motivated by the intention to 
26

extract a personal profit at the expense of the best interests of 

the Home. See In re Lampe, 665 F.3d 506 (3d Cir. 2011) 

(directors’ duty of loyalty prohibits them from “directly or 

indirectly, utiliz[ing] their position to obtain any personal 

profit or advantage other than that enjoyed also by their 

fellow shareholders” (quoting Tyler, 994 F. Supp. at 612)). 

The absence of evidence of self-dealing by any of the 

Director Defendants weighs heavily against the imposition of 

the “extreme” remedy of punitive damages. 

Moreover, the District Court acknowledged that three 

of the Director Defendants against whom punitive damages 

were imposed—Thompkins, Johnson, and Bullock—were

mentioned only fleetingly during the course of trial testimony. 

The District Court cast the failure to call Thompkins, 

Johnson, and Bullock as witnesses, or to ask questions of 

other witnesses about their conduct, as a strategic decision 

made by both parties, similar to the decision to not present 

testimony regarding the Defendants’ financial statuses. But 

unlike evidence of a defendant’s wealth, which “is not a 

necessary condition precedent for imposition of an award of 

punitive damages,” Vance, 920 A.2d at 207, evidence of 

“outrageous or malicious conduct” is a necessary “legal and 

factual prerequisite” for a punitive damages award. Tunis 

Bros., 952 F.2d at 740. Therefore, it is the plaintiff who bears 

the burden of proving that the defendants’ conduct was 

outrageous in order to obtain a punitive damages award. A 

vacuum of evidence at trial on this topic does not affect both 

sides equally; rather, plaintiff loses, having failed to carry her 

burden.

In light of the lack of state-of-mind evidence presented 

by the Committee regarding the Director Defendants against 

whom the jury imposed punitive damages, we will vacate the 
27

jury’s award of punitive damages against those five 

Defendants. 

2. Officer Defendants

We have no such concerns about the punitive damages 

assessed against the Officer Defendants. The 

mismanagement of the Home by Causey and Shealey was the 

focus of the Committee’s proof at trial. As detailed above, 

the Committee presented sufficient evidence at trial to sustain 

the jury’s verdict that both Officer Defendants breached their 

duty of loyalty to the Home. In Donaldson, we held that 

evidence of self-dealing by trustees provided sufficient 

factual support for imposition of a punitive damages award. 

104 F.3d at 556–57. Likewise, the evidence of self-dealing 

presented at trial gave the jury a sufficient factual basis to 

conclude that the Officer Defendants acted with the 

outrageous motive of pursuing self-enrichment at the expense 

of the non-profit nursing home to which they owed fiduciary 

duties. 

In addition to the evidence of self-dealing, the Officer 

Defendants’ state of mind was illuminated by their own 

testimony at trial. Both Causey and Shealey responded 

evasively under cross-examination to questions about their 

conduct, allowing the jury to infer that they had acted 

culpably and continued to avoid recognizing the gravity of 

their misconduct. For instance, the Committee questioned 

Causey about the apparent conflict between her state-benefits 

application and her trial testimony regarding how much time 

she had worked during an eight month period in 2004. 

Causey first attempted to claim that she had worked “a 

minimum of 35 hours a week,” as required by state law, 

throughout this period. App. 1819. When reminded that she 
28

had signed a state-benefits application “under penalties of 

law” claiming that she was working just 20 to 24 hours a 

week during the same period, Causey admitted, “I was 

working part-time.” App. 1820. Similarly, Shealey conceded 

at trial that he had refused to give Brown, the bankruptcy 

consultant for the creditors, the financial information he 

requested. Although Shealey initially claimed this was 

because Shealey “didn’t know who [Brown] was,” he later 

acknowledged that he had continued to refuse to cooperate 

even after being informed that Brown was a financial 

consultant. App. 1556–57. Taken together with the other 

evidence of their malfeasance, Causey and Shealey’s 

obfuscations at trial offered further support for the conclusion 

that they had acted outrageously, supporting the jury’s 

imposition of punitive damages against them. 

VI.

For the foregoing reasons, we will affirm the jury’s 

liability verdict as to all Defendants and the punitive damages 

award against the Officer Defendants. We will vacate the 

award of punitive damages imposed against Defendants 

Andiorio, Baldwin, Thompkins, Johnson, and Bullock.