Acadia Healthcare Pays $400 Million to Settle Three New Mexico Foster Care Abuse Cases

Clarence Garcia held a foster care license through Familyworks, Inc., a nonprofit operating under contract with Acadia Healthcare's New Mexico subsidiary, Youth and Family Centered Services of New Mexico, known as Desert Hills. Court records show that abuse allegations against Garcia dated to at least 2000. Despite those prior allegations, Familyworks continued placing children in his Albuquerque home. Garcia later pleaded guilty to seven counts of criminal sexual contact with a minor and was connected to the abuse of six children over a six-year period.

Three separate civil lawsuits named Acadia Healthcare, Desert Hills, Youth and Family Centered Services of New Mexico, and Familyworks as defendants. The cases alleged that the corporate network's negligent placement and supervision decisions put vulnerable children in harm's way. One of those cases, brought on behalf of a child identified in court records as G.S., went to trial in Rio Arriba County in July 2023. The jury returned a verdict of $485 million, at the time one of the largest personal-injury awards in New Mexico history.

Joshua Conaway of Fadduol, Cluff, Hardy and Conaway served as co-counsel for G.S. in that trial alongside Claggett and Sykes and Martinez, Hart, Sanchez and Romero. Conaway and firm partner Richard Hardy also represented plaintiffs in related Garcia cases that remained pending as the verdict was entered.

Facing the $485 million judgment and two additional pending trials, Acadia Healthcare reached a global settlement in October 2023. The company agreed to pay an aggregate $400 million to resolve all three cases. Of that sum, $200 million was allocated to G.S.'s case, while each of the two other plaintiffs received $100 million. Acadia and Desert Hills admitted no liability under the settlement terms, which required New Mexico State District Court approval.

Acadia disclosed the settlement in an SEC Form 8-K filing dated October 30, 2023, describing it as a resolution of all claims related to the Desert Hills litigation. The company said it would fund the payment through a combination of insurance proceeds, cash on hand, and its credit facility.