State appeals court rules DHHS can be held liable for both lax and overzealous adult care home oversight

The owner of a McDowell County adult care home recently won an appeals court case against the state in which he argued that over-zealous inspectors reached conclusions that were so off-base they amounted to negligence. Because of the ruling, the owner can claim damages. 

The three-judge appeals court panel split 2-1 in favor of owner Fred Leonard, who wants compensation for losses connected to sanctions against Cedarbrook Residential Center.  

When regulators suspended new admissions to Cedarbrook for about six months, Leonard said occupancy declined more than 50%, and he lost the chance to sell the facility. He is seeking the maximum $1 million allowed under the Tort Claims Act. 

The decision for the Cedarbrook owner came soon after the appeals court ruled in a separate case that state regulators didn’t do enough to ensure residents were safe. In that case, the court agreed the state should pay $500,000 to the family of a woman who died after wandering away from a Cleveland County adult care home in 2008.  

Mouy Tieng Tang disappeared from the Unique Living adult care home in 2008. Her remains were found in 2018. 

In both cases, the appeals court upheld NC Industrial Commission decisions, which under state law can decide civil claims against state agencies. The Industrial Commission decided that sovereign immunity did not shield DHHS, which is how the cases landed in appeals court. 

The Division of Health Services Regulation, or DHSR, within the state Department of Health and Human Services, inspects and licenses adult care homes. It was the defendant in both cases. 

A dilemma for regulators?

An attorney with Disability Rights North Carolina and one of the Appeals Court judges say the decision for Cedarbrook creates a dilemma for the agency responsible for enforcing health and safety standards in adult care homes.  

Judge John Arrowood, who wrote the majority opinion in both cases, said in the Cedarbrook opinion that the state was not protected by the public duty doctrine, which offers immunity to state agencies and government employees doing their jobs. 

Judge John Tyson dissented in the Cedarbrook case. He noted that the opinion in the Tang family’s favor means that DHHS can be held at fault for not enforcing safety standards, and the Cedarbrook opinion means the agency can be liable for enforcing them, he wrote.  

“Under the logic of Tang and the plurality’s opinion, and as DHHS argued during oral arguments, they and all state regulatory agencies would be held in an impossible standard (1) liable for enforcing the statutory mandates; and, (2) also liable for failing to enforce those very same mandates with the Industrial Commission sitting in judgment of their ‘reasonableness.’” Tyson wrote.  

In the majority opinion, Arrowood wrote that in an earlier case about a daycare center, the appeals court said the center could bring a civil claim. The appeals court is bound by that precedent, he wrote. 

Tyson’s concerns that DHHS “is squeezed between an impossible predicament” between the Tang and Cedarbrook decisions are misplaced, Arrowood wrote, because the facts of the cases were so different.  

In an email, Joseph A. Ponzi, a lawyer for Cedarbrook and owner Fred Leonard said, “We were pleased with the NC Court of Appeals’ opinion, which followed both established precedent and the General Assembly’s determination that State agencies should be held to a standard of ordinary care.“ 

DHHS said in an email Tuesday it has appealed the Cedarbrook case.  

According to appellate court and Industrial Commission documents, Unique Living, which had been known as a Yelton Family Care, had a troubled history before Mouy Tieng Tang wandered away on Sept. 3, 2008. Her remains were found less than 200 feet from the building nearly 10 years later, in February 2018.  

In July 2008, a few months before Tang disappeared, a state inspection found among numerous violations that seven of nine exit door alarms were not working, and the two working alarms weren’t being used. Inspectors did not return to Unique Living to make sure that the door alarms were fixed before the Aug. 29, 2008, deadline for the violations to be corrected.  

DHHS revoked Unique Living’s license soon after Tang disappeared.  

Tang’s sister-in-law testified that family members drove from Florida every weekend for months to search for the missing woman, according to the Industrial Commission decision. The family distributed flyers, bought a billboard ad, and hired a company that searches for missing people.  

The Industrial Commission concluded that the Division of Health Services Regulation failed in its duty to Tang by not taking appropriate action at a facility that had no working door alarms, a history of inadequately supervising residents, and where other resident had gone missing.  

Advocates voice concern

Kristine Sullivan, an attorney with Disability Rights North Carolina, said in an interview that the state owes a duty of care to facility residents, not to facilities. While the organization agrees with the appeals court in the Tang case, Sullivan said, its position is that the Cedarbrook case was wrongly decided.  

“We’re concerned about the chilling effect on DHSR on making findings,” she said, because it would be faced not only with challenges in administrative court, but potential financial liability.  

Jeff Horton, executive director of the NC Senior Living Association and a former director of DHSR, said the association is watching the Cedarbrook case.  

Horton was careful with his comments about the case, but said that as a regulator, he learned that rules must be used correctly.  

“Let the regulations speak for you,” he said. “If you have regulations to address a problem that you see, use your regulations. You can’t impose your personal feelings on something.” 

In a 2018 complaint filed with the Industrial Commission on Cedarbrook’s behalf says regulators let their personal views cloud their decisions when investigators found that residents were having sex in their rooms. Investigators also based a finding that a woman was exchanging sex for soda on rumors and gossip rather than facts.  

Further, the facility was penalized because residents with mental illness were displaying symptoms of their disorders, the complaint says.  

In their brief to the Industrial Commission, lawyers for the state wrote that Cedarbrook was arguing for “regulated entities to sue their own regulators when they disagree with regulators’ assessments of their facilities.”

Bill Lamb, chairman of the Friends of Residents in Long-Term Care board of directors, said adult care homes have plenty of chances to appeal their penalties. 

“They’ve got all kinds of due process,” Lamb said of facilities. “The resident who’s been harmed has no due process.” 

Carolina Public Press reported extensively in 2017 and 2018 on the inspection findings and the dispute between Leonard and the state. The state settled an administrative case that wiped out Cedarbrook’s deficiency reports and changed a no-star rating to four stars.