Subsequent to the skilled nursing facility’s termination of its contract with a temporary staffing agency (“Plaintiff TSA”), it inadvertently permitted a per diem nurse, previously employed and placed by Plaintiff TSA at said facility, to provide services through the facility’s current staffing agency. Plaintiff TSA, upon becoming aware of said placement, filed suit against the skilled nursing facility for breach of the non-compete clause found within its contract with the facility, seeking damages in the amount of $70,621.47, inclusive of contractual interest and attorney’s fees.
While Cona explored and discussed settlement options with the facility throughout the course of the litigation, the facility felt strongly that the lawsuit was akin to extortion and believed it was necessary to set an example to deter behavior like this from occurring in the future, whether by this staffing agency or competitor agencies in the region. Opposing counsel’s position was that he had acquired several six figure settlements against skilled nursing facilities in New York relying on the same non-compete clause and each facility, even when represented by “national law firms”, ultimately settled the case for no less than 90% of the principal demand.
Cona Elder Law took this case all the way to trial, arguing that the “liquidated damages” called for in the contract constituted an unlawful “penalty” and was legally unenforceable. Through the submission of legal briefs, in addition to evidence adduced at trial, Cona Elder Law proved that the agency was only entitled to “actual damages” in the amount of $3,064 – a fraction of the $70,621.47 sought by the Plaintiff TSA. Cona Elder Law thus succeeded in proving that the “liquidated damages” were unenforceable (the contractual interest rate was also cut in half, from 18% to the 9% statutory rate per annum). When opposing counsel subsequently filed an application with the Court seeking an award of attorneys’ fees pursuant to the contract in the amount of $23,480, Cona Elder Law fought this application as well, successfully reducing this award to only one-third of the agency’s actual recovery, or $1,021.33.
In the Court’s decision and order, the Judge wrote, on the issues of liquidated damages and other questions of law involved, that “Plaintiff lost on both of these issues, and though it has recovered a small judgment herein it can scarcely be regarded as the ‘prevailing party’ . . . Plaintiff gambled and lost.” In the end, where the facility had initially faced a potential liability in excess of $70K under the contract, thanks to Cona Elder Law’s zealous and determined advocacy on behalf of the facility, the Court ultimately awarded a judgment of only $6,387.35 (inclusive of damages, interest, costs and attorneys’ fees) - and the staffing agency learned the hard way that it could not extort our health care facility client.
As always, Cona Elder Law is here to assist you in getting "Back in the Black". Questions or Concerns? Contact Partner Ken Kern at 631.390.5000 or Ken@conalaw.com.
This case was handled by Senior Associates Dana Walsh Sivak, Esq. and Brian Haran, Esq.