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Nutt v. Kees

United States Court of Appeals, Eighth Circuit

August 12, 2015

Kevin Nutt; Lisa Nutt, Plaintiffs - Appellees
v.
Stafford Kees; Carroll County Nursing & Rehab Center, Inc, an Arkansas Corporation; Osceola Nursing Home LLP, an Arkansas Limited Liability Partnership, Defendants, Osceola Therapy & Living Center, Inc., an Arkansas Corporation, Defendant - Appellant, Osceola Healthcare PLLC, an Arkansas Professional Limited Liability Company; HOPE Healthcare LLC, an Arkansas Limited Liability Company, Defendants

Submitted June 10, 2015

Appeal from United States District Court for the Eastern District of Arkansas - Jonesboro.

For Kevin Nutt, Lisa Nutt, Plaintiffs - Appellees: Laura Ann Elizabeth Bailey, Alan Grady Crone, Crone & Mcevoy, Memphis, TN.

For Osceola Therapy & Living Center, Inc., an Arkansas Corporation, Defendant - Appellant: Kenneth P. Castleberry, Alfred F. Thompson III, Murphy & Thompson, Batesville, AR.

Before GRUENDER, MELLOY, and BENTON, Circuit Judges.

OPINION

GRUENDER, Circuit Judge.

Kevin and Lisa Nutt successfully sued their former employers under the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § 1001 et seq., for two claims: delinquent contributions and breach of the fiduciary duty of care. The district court found that the Nutts' former employers could not provide adequate relief and thus relied on a theory of successor liability to hold Osceola Therapy & Living Center, Inc. (" OTLC" ) liable. OTLC appeals, and we reverse.

I.

Kevin and Lisa Nutt were employed by Osceola Healthcare, PLLC, and worked at Osceola Nursing Home. During the Nutts' employment, Osceola Healthcare withheld funds from the Nutts' paychecks as " pre-tax insurance." The Nutts believed that these funds were withheld to pay for their health insurance. After Kevin was injured in an ATV accident, the Nutts learned that Osceola Healthcare had not paid their insurance premiums. As a result, their policy had lapsed, and the Nutts owed more than $233,000 for the medical services provided to Kevin. When Lisa called the insurance company, a representative told her that the insurer could reinstate the policy and pay the medical bills if Osceola Healthcare made the delinquent premium payments.

Lisa told Osceola Nursing Home's administrator about the lapsed insurance and her husband's medical bills. The administrator said that he would discuss the matter with Osceola Healthcare's majority partner, Stafford Kees. Kees did not correct the delinquent payments. Instead, in late July 2010, Kees and the administrator met with the Nutts and proposed that they file for bankruptcy to discharge the medical debt. Kees and the administrator then offered the Nutts a check for $1,500 to cover the bankruptcy expenses. The Nutts refused. As a result, they remained liable for approximately $233,000.

Around this time, Kees was seeking a buyer for Osceola Nursing Home. Kees entered into a purchase and sale agreement with Jim Cooper, a businessman who specialized in turning around financially troubled nursing homes, in late July 2010. Cooper's company, Berryville Properties, LLC, ultimately took title to the real property and assets when the sale closed in December of the same year. In the interim period before the closing, the purchase and sale agreement provided for a temporary lease in which Cooper " and/or his assigns" would assume management and operation of the nursing home. During this temporary lease period, Cooper or his assign would receive the residents' payment and, in exchange, pay rent to Kees. Cooper assigned this lease to OTLC, a nursing-home operation company created for the project and owned solely by Bobby Hargis. Though Hargis's company was independent from Cooper and Berryville Properties, Hargis regularly had worked with Cooper in previous nursing-home ventures, and Hargis attended meetings with Kees and Cooper leading up to the nursing-home sale. OTLC took over operation of the nursing home after the execution of the purchase and sale agreement, and OTLC continued to operate the facility for Cooper and Berryville Properties for approximately three years.

Not long after the initial takeover, Cooper met with the nursing home's department heads and told them that he planned to do necessary repairs, pay contractors, and " get everything where it need[ed]" to be. At a second meeting with all nursing-home employees, Cooper assured the staff that he would address the health-insurance problem and pay all debts. Kevin Nutt met with Hargis after this meeting to tell him about the outstanding medical bills from the ATV accident. A few days later, OTLC fired both Lisa and Kevin Nutt.

The Nutts sued several parties as a result of these events, including Osceola Healthcare and Osceola Nursing Home (" the Osceola defendants" ), Kees, and OTLC. The district court entered default judgment against the Osceola defendants after their attorneys withdrew due to nonpayment. After a bench trial, the court found Kees individually liable under ERISA for both breach of the fiduciary duty of care and delinquent contributions. Because neither Kees nor the Osceola defendants could satisfy the ...


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