Brookdale Senior Living will be required to adopt corporate governance reforms and pay $1.9 million in attorneys’ fees and expenses under the terms of a settlement to a lawsuit over the company’s staffing algorithm.

Judge Aleta A. Trauger of the US District Court for the Middle District of Tennessee approved the settlement, filing her order and final judgment July 9. 

A Brookdale spokesperson told McKnight’s Senior Living that the company was “pleased with the settlement.” 

“Resolving this matter allows Brookdale to further focus on providing quality care and services to its residents,” the spokesperson said.

Patricia Templin, a Brookdale shareholder, had filed the lawsuit in 2021, alleging that current and former Brookdale board members and executive officers breached their fiduciary duties by relying on a staffing algorithm to determine community staffing levels at the corporate level, which she said led to chronic understaffing at individual communities.

This so-called “intentional understaffing,” the lawsuit asserted, led to communities breaching their residency agreements, causing residents harm by misrepresenting the levels of care advertised, promised and provided to residents. In addition, the suit alleged that executives were paid “excessive and unwarranted” compensation, bonuses and termination payments and were “unjustly enriched.”

Brookdale denied the claims contained in the lawsuit, saying the company board members and executives acted “in good faith” and in the best interests of the company and its shareholders.  The company said in court documents that it agreed to the settlement to eliminate the “uncertainty, distraction, disruption, burden and expense” of further litigation. Both sides said the settlement is in the best interests of Brookdale and its shareholders.

Court documents did not specify the reforms that Brookdale will make.

An appeal in another staffing algorithm case involving Brookdale, from 2020, was paused late last month after a tentative settlement was announced in the Templin case. The 6th US Circuit Court of Appeals granted a request from shareholder Brian Davis and Brookdale to put those proceedings on ice while the Templin case played out. 

Davis alleged misconduct by company executives trying to meet financial targets and said those actions were causing the company to intentionally underestimate data used for staffing algorithms.

A federal judge had ruled in January 2024 that the lawsuit could not move forward because the investors had not approached the board before filing it, and the judge had said that the the plaintiffs failed to show that going to the board would have been futile because of material benefits to the Brookdale directors in a proxy statement at the center of the lawsuit’s claims.

The plaintiffs appealed in February 2024, but both sides in the Davis case indicated that they anticipated filing motions to dismiss the appeal as moot if the Templin settlement was approved. 

Brookdale has faced other criticism and legal action in recent years based on allegations related to service quality and company representation of services to the public.

In spring 2024, The Washington Post delved into a staffing algorithm used by the company, alleging that the system underestimated the number of staff members needed to meet residents’ needs. The article was part of the Post’s Memory Inc. series, begun in December 2023 with a focus on elopements in assisted living.

Brookdale said it disagreed with the characterization of the program in the Post story, saying that the company had created the staffing algorithm “as a way to identify best practices to meet the needs of residents” and that it did not dictate staffing maximums or determine care costs.

The April 2024 Washington Post article came after the company faced a lawsuit related to staffing levels. In 2023, a federal judge denied class action certification for some claims in a 2017 California staffing lawsuit, Stiner vs. Brookdale Senior Living,  because the plaintiffs could not show that the communities were similarly staffed, according to The Post.

But last summer a federal judge granted a motion to certify three community-based subclasses in the 2017 case, in which current and former residents of Brookdale’s California assisted living communities sued the company, alleging elder financial abuse and widespread violations of the Americans with Disabilities Act. The complaint alleged that understaffing prevented residents’ activities of daily living needs from being met.