Appeals from the United States District Court for the Western District of Wisconsin. No. 79-C-570 -- John C. Shabaz, Judge.
Cummings, Chief Judge, Wood, Circuit Judge, and Grant, Senior District Judge.*fn*
GRANT, Senior District Judge.
Plaintiffs-Appellants, Cameo Convalescent Center, Inc. (Cameo), and three of its officers and directors brought this action under 42 U.S.C. § 1983 alleging that the defendants, officers and employees of the Wisconsin Department of Health and Human Services (WDHHS), acted individually and in concert to deprive the plaintiffs of constitutionally protected rights. For the reasons explained below, we affirm in part and reverse and remand in part for further proceedings consistent with this opinion.
Cameo Convalescent Center, Inc. (Cameo) is a closely held corporation in Milwaukee, Wisconsin whose primary business is operating a licensed nursing home. Nursing homes are subject to extensive federal and state regulation and in Wisconsin, the Wisconsin Department of Health and Human Services monitors the compliance of nursing homes with these federal and state regulations.This action arose by virtue of certain enforcement actions taken by the WDHHS.
On September 19, 1978, Darla Senn, a nurse-surveyor and employee of the WDHHS, served thirty-four notices of violation upon Cameo.*fn1 Thirty-one of the NOVs alleged deficiencies in Cameo's nursing program and three alleged deficiencies in Cameo's social services program. On October 17, 1978, the WDHHS imposed a plan of correction upon Cameo requiring that all the deficiencies noted by Senn be corrected within a day.*fn2 Despite a timely appeal of the NOVs and the plans of correction, Cameo never received a hearing within the thirty-day period required under Wisconsin law.*fn3
On October 26, 1978, Kacynski, a nurse-surveyor who had been with Senn when the thirty-four notices of violation were issued, and who was responsible for the issuance of the three social services NOVs, conducted a verification visit to determine if Cameo had complied with the plans of correction. Kacynski found that all three violations in the social services area had been corrected. On January 2, 1979, another verification visit was conducted. Of the thirty-one violations alleged by Senn, twenty-four were found to have been corrected, acceptable progress was found to have been made with respect to four, and only three remained uncorrected.
Cameo strongly opposed the issuance of the NOVs contending that they were without merit. Cameo suggested that the NOVs had been issued in retaliation for comments Cameo had made to Wisconsin government representatives concerning what Cameo alleged to be the poor quality and biased nature of the annual nursing home surveys which the WDHHS conducted. At trial, Cameo proffered evidence that Senn, shortly after issuing the 34 NOVs, told another nurse-surveyor "You know, I intend to screw them [Cameo]." Other evidence which Cameo produced at trial showed that the WDHHS became increasingly aware that many of the NOVs issued by Senn were meritless, but the WDHHS continued to pursue them nonetheless.
On March 21, 1979, Cameo was notified that it was being placed on the WDHHS" Suspension of Referrals list.*fn4 The Suspension of Referrals list (SOR list) is compiled by the WDHHS and consists of nursing homes with a certain number of uncorrected violations.*fn5 The legal effect of placement upon the SOR list is to preclude state social service agencies and departments from referring nursing home patients to homes on the SOR list.*fn6 Wisconsin law provides that no nursing home may be placed on the SOR list unless it has been afforded the opportunity for a hearing prior to its placement on the list.*fn7 Despite a timely appeal by Cameo, no hearing was ever held. Cameo's name appeared upon the April SOR list which was forwarded to over 600 social service departments and agencies.
Ultimately, the NOVs issued by Senn were the subject of a stipulated settlement between Cameo and the WDHHS. Plaintiffs filed the present action alleging that as a result of defendants' action, they suffered substantial and direct economic losses, loss of business reputation and deprivations of their constitutional rights under the first, ninth and fourteenth amendments of the Constitution. A bifurcated trial was held. Prior to the end of the liability phase of the trial, the district court dismissed the individual plaintiffs. At the conclusion of the liability phase of the trial, the jury found that nurse-surveyor Darla Senn had acted with malice in preparing and prosecuting the NOVs against Cameo, and that the NOVs were prepared and prosecuted against Cameo for ulterior or improper motives. No other defendant was found liable. The jury awarded Cameo compensatory damages of $65,000 and punitive damages of $10,000. Both Cameo and Senn appeal.
Cameo raises four issues on appeal:
I. Whether the district court erred in declining to present plaintiffs' conspiracy theory to the jury;
II. Whether the district court's due process instructions were erroneous;
III. Whether the district court erred in certain evidentiary rulings and in refusing to give a missing witness instruction;
IV. Whether the district court erred in dismissing the claims of the individual plaintiffs?
Darla Senn raises two issues for our consideration:
I. Whether the district court erred in entering a judgment of liability against Darla Senn based upon the special jury verdict;
II. Whether Darla Senn is entitled to absolute immunity under Butz v. Economou, 438 U.S. 478, 57 L. Ed. 2d ...