In a 5-4 decision, the Washington State Supreme Court upheld a Thurston County jury’s award of over $57 million to live-in individual care providers (“providers”). Eight of the nine justices agreed to overturn an additional $39 million in prejudgment interest the providers also received at trial. All of the justices agreed that the recipients of the providers’ care (“clients”) were not entitled to recover damages, though for different reasons.
Facts and Background
Washington’s Department of Social and Health Services (“DSHS”) provides public assistance for in-home care to the clients. DSHS contracts with individual providers to provide this care, but key provisions to that contract were left undefined until after the contract’s execution, including the required client-specific services and the number of hours for which the provider would be compensated by DSHS.
In 2003 DSHS implemented the Comprehensive Assessment and Reporting Evaluation (“CARE”) process to determine how many hours of paid assistance a client could receive. For the providers who also lived with the client, CARE guidelines automatically reduced the client’s assistance by 15 percent in its “shared living rule,” reasoning that for certain household activities the providers would be acting for both the client and providers’ benefit, such as grocery shopping, laundry, and housekeeping. The shared living rule was later invalidated by two trial courts for being inconsistent with federal law, and the state supreme court affirmed the trial courts in its 2007 decision, Jenkins v. Dep’t of Soc. & Health Servs, 160 Wn.2d 287, 157 P.3d 388.
The providers and clients filed three separate lawsuits against DSHS in 2008, seeking damages for those who were affected by the shared living rule before it was repealed. The actions were consolidated, and the trial court granted summary judgment to DSHS on the providers’ Minimum Wage Act claims. At trial, the jury found that DSHS breached its duty of good faith and fair dealing with the providers and found over $57 million in damages to the providers. The trial court then awarded nearly $39 million in prejudgment interest, but further found that the clients were not entitled to a monetary award because they received the services related to the shared living rule. Everyone appealed.
Justice Owens, joined by Justices Wiggins, Gonzalez, and Gordon-McCloud (and Justice C. Johnson, in part), first upheld the $57 million verdict for the providers, reasoning that the duty of good faith and fair dealing arises when one party has discretionary authority to determine a future contract term. Here, the majority held the duty applied since the number of hours authorized for DSHS compensation and scope of work were not assigned until after the contracts were entered, and were determined based on DSHS’s discretion. The majority then upheld the jury’s finding that DSHS breached this duty when DSHS automatically reduced the payments for in-home care providers pursuant to the previous shared living rule. Next, the majority affirmed the trial court’s denial of damages to the clients as complying with the court’s policy of preventing double recovery. Third, the court overturned the prejudgment interest award since the damages were neither liquidated nor ascertainable with certainty. Finally, the justices unanimously agreed that no party was entitled to attorney fees. Justice C. Johnson concurred as noted above, but dissented separately and contended that the providers were entitled to prejudgment interest.
Justice Stephens, joined by Chief Justice Madsen and Justices J. Johnson and Fairhurst, disagreed that DSHS had the discretionary authority cited by the majority to trigger the duty of good faith and fair dealing for these contracts. Since that claim would not have been available to the providers, the dissent would have reversed the $57 million verdict awarded on that theory. The dissent also agreed that the clients should not have received a monetary award, but wrote that the claims should have been dismissed on summary judgment as barred by the statute of limitations and the clients’ failure to exhaust administrative remedies.