San Diego Treatment Center Hit With $105 Million Verdict After Counselor Reported Sexual Harassment

A San Diego jury awarded $105 million to a substance abuse counselor who said she was fired after reporting sexual harassment, a hidden camera in an employee bathroom, and concerns about patient safety at an opioid treatment facility.

The May 12 verdict in Michelle Giaquinta v. San Diego Health Alliance, Inc. included $35 million in compensatory damages and $70 million in punitive damages. San Diego Health Alliance operates Fashion Valley Comprehensive Treatment Center and is an indirect subsidiary of Acadia Healthcare Company, Inc., one of the nation's largest behavioral healthcare companies. Acadia itself was not a defendant in the lawsuit.

The verdict is particularly notable because Giaquinta did not seek lost wages or other economic damages. According to court documents, jurors awarded $20 million for past noneconomic harm and $15 million for future noneconomic harm before adding the $70 million punitive award.

The company denies that Giaquinta was fired in retaliation and has said her termination was based on legitimate employment reasons. Acadia told federal securities regulators that Fashion Valley "strongly disagree[s]" with the verdict and intends to challenge it through post-trial motions and, if necessary, an appeal. The company repeated that position in its most recent quarterly SEC filing.

Giaquinta began working as a substance abuse counselor at the Fashion Valley treatment center in August 2022. According to the case summary, she later complained that a fellow counselor had sexually harassed her and said she believed the same employee had placed a hidden camera discovered in a gender-neutral staff bathroom.

Management told Giaquinta that it could not corroborate her allegations. The following day, according to the plaintiff's account of the evidence, a patient complained that the same counselor had sexually harassed her.

The facility suspended the counselor during the investigation. It also suspended Giaquinta, saying management had discovered discrepancies in her documentation concerning interactions with the same patient. The facility terminated both employees on Oct. 6, 2023.

At trial, San Diego Health Alliance maintained that it fired Giaquinta because she failed to properly document a patient interaction. Her attorneys countered that she had never previously been disciplined for documentation problems and presented evidence that supervisors had praised her recordkeeping. Plaintiff's counsel also argued that management had not investigated the supposed documentation deficiency before firing her.

The case also involved allegations that the treatment center failed to make required reports to state regulators concerning the workplace and patient-safety incidents. Giaquinta's lawyers argued that regulatory auditors arrived at the facility shortly after she was suspended and that her firing was intended to prevent her from disclosing management's handling of the complaints.

Those allegations placed retaliation at the center of the case.

California's Fair Employment and Housing Act makes it unlawful for an employer to discharge or otherwise discriminate against a worker for opposing practices prohibited by the state's employment discrimination law. The statute separately requires employers to take reasonable steps to prevent workplace harassment and can impose responsibility when an employer knows or should know about harassment and fails to take appropriate corrective action.

California also provides broad whistleblower protections under Labor Code Section 1102.5. The law prohibits retaliation when an employee reports information to a supervisor or another person with authority to investigate the matter when the worker reasonably believes the information reveals a violation of state, federal, or local law or regulation.

The $70 million punitive award adds another legal issue that is likely to receive attention as the case moves into post-trial proceedings.

Under California Civil Code Section 3294, punitive damages can be awarded when a plaintiff proves by clear and convincing evidence that a defendant acted with malice, oppression or fraud. When the defendant is a corporation, California law imposes additional requirements tying the conduct to an officer, director or managing agent, or requiring corporate authorization or ratification of the wrongful conduct.

Giaquinta's attorneys said the jury determined that the conduct in her case reached the level of malice, oppression and fraud.

The size of that award does not necessarily mean Giaquinta ultimately will recover the full $105 million.

Punitive damages are subject to constitutional review even when state law permits them. In State Farm Mutual Automobile Insurance Co. v. Campbell, the U.S. Supreme Court said courts reviewing punitive awards should consider the seriousness of the misconduct, the relationship between punitive and compensatory damages, and comparable civil penalties. The Court said there is no fixed mathematical limit, although awards within a single-digit ratio to compensatory damages are more likely to satisfy due process. It also cautioned that when compensatory damages are already substantial, a smaller multiplier can approach the constitutional limit.

Giaquinta's $70 million punitive award is twice the $35 million compensatory award. That 2-to-1 ratio is far below the ratios the Supreme Court has invalidated in some cases, but the unusually large compensatory award, consisting entirely of noneconomic damages, according to the verdict report, gives the defendant a potential basis to seek a reduction. Whether the award is excessive will depend on the trial record and the degree of misconduct the evidence supports.

San Diego Health Alliance has already signaled that such challenges are coming. In its May SEC filing, Acadia said the verdict "far exceeds any reasonable expectation based on precedent for comparable employment cases" and that Fashion Valley intends to vigorously challenge the award. Acadia's subsequent quarterly filing continued to report the $105 million verdict and the company's intention to seek post-trial or appellate relief.

Until those proceedings are complete, the $105 million figure remains a jury verdict, not necessarily the amount that will ultimately be paid.

The case is Michelle Giaquinta v. San Diego Health Alliance, Inc., San Diego County Superior Court case No. 37-2024-00002653-CU-WT-CTL.