In re Chartercare Cmty. Bd.
| Decision Date | 19 October 2020 |
| Docket Number | C.A. No. PC-2019-11756 |
| Parties | IN RE: CHARTERCARE COMMUNITY BOARD, ST. JOSEPH HEALTH SERVICES OF RHODE ISLAND, and ROGER WILLIAMS HOSPITAL. |
| Court | Superior Court of Rhode Island |
DECISION
Before this Court is the motion of Stephen Del Sesto (the Plan Receiver), as Receiver for the St. Joseph Health Services of Rhode Island Retirement Plan (the Plan), and Thomas Hemmendinger (the Liquidating Receiver), as Liquidating Receiver of CharterCARE Community Board (CCCB), St Joseph Health Services of Rhode Island (SJHSRI), and Roger Williams Hospital (RWH) (together, the Receivers), to enjoin Adler Pollock & Sheehan P.C. (AP&S) from representing the Prospect Entities, as defined infra, in matters relating to the Change in Effective Control (CEC) proceedings pending before the Rhode Island Department of Health (DOH) and the Hospital Conversion Act (HCA) proceedings pending before the Rhode Island Attorney General (AG) (the 2019 Regulatory Proceedings), and from sharing knowledge or work product with the Prospect Entities or successor counsel. AP&S and Prospect Medical Holdings Inc. (PMH) (and its affiliated entities) have objected to the motion. Those affiliated entities include Chamber Inc.; Ivy Holdings Inc.; Ivy Intermediate Holding Inc.; Prospect East Holdings, Inc.; Prospect East Hospital Advisory Services, LLC; Prospect CharterCARE, LLC; Prospect CharterCARE SJHSRI, LLC; Prospect CharterCARE RWMC, LLC; Prospect Blackstone Valley Surgicare, LLC; and Prospect CharterCARE Home Health and Hospice, LLC. For the sake of clarity, the Court will refer to these entities collectively as the "Prospect Entities." Jurisdiction is pursuant to G.L. 1956 § 8-2-13, as well as Rule 65 of the Superior Court Rules of Civil Procedure.
As the parties are familiar with the details of this case, the Court will only recount those facts relevant to the instant motion. Since at least November of 2011, AP&S rendered legal services for SJHSRI, RWH, and CCCB (collectively, the Oldco Entities). See generally Receivers' Mem. Ex. 1. AP&S represented the Oldco Entities before the DOH and AG "for CEC and HCA approval for the transaction set forth in the September 24, 2013 Asset Purchase Agreement, which transferred ownership of the two licensed not-for-profit hospitals, Our Lady of Fatima Hospital and RWH, as well as other licensed not-for-profit medical facilities to for-profit Prospect CharterCARE, LLC . . . " (the 2013-2014 Regulatory Proceedings). (Receivers' Mem. Ex. 9 at 1-2.) AP&S also represented the Oldco Entities in obtaining CEC and HCA regulatory approval for the 2014 asset sale, whereby the Oldco Entities sold operating assets to the for-profit subsidiaries of PMH, and CCCB received a membership interest in Prospect CharterCARE, LLC (PCC) (the 2014 Asset Sale). See AP&S's Mem. at 3. With respect to the regulatory proceedings regarding the 2014 Asset Sale, the Oldco Entities and PMH entered into an agreement which recognized their common legal interest in obtaining regulatory approval in order to finalize the transaction. See id. at n.9. The Oldco Entities also retained Drinker Biddle & Reath LLP in connection with the 2014 Asset Sale. (Receivers' Mem. Ex. 17.)
Currently, AP&S represents the Prospect Entities in connection with the 2019 Regulatory Proceedings. These proceedings seek regulatory approval for a buy-out agreement whereby certain private equity investors and minority shareholders will be bought out, and PMH's originalfounders will obtain a 100 percent ownership interest (the 2019 Regulatory Proceedings). Pursuant to the 2019 Regulatory Proceedings, the organizational structure of the Prospect Entities will be altered at the highest levels. See AP&S's Mem. Ex. 1; AP&S's Ex. 2.
The Receivers filed the instant motion for injunctive relief on July 10, 2020 seeking to enjoin AP&S from representing the Prospect Entities in the 2019 Regulatory Proceedings. AP&S filed an objection and memoranda in opposition to the Receivers' motion for injunctive relief. On September 17, 2020, this Court heard oral arguments on the motion.
"The sine qua non of this four-part inquiry [for a preliminary injunction] is likelihood of success on the merits: if the moving party cannot demonstrate that he [or she] is likely to succeed in his [or her] quest, the remaining factors become matters of idle curiosity." New Comm Wireless Services, Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002). To show a reasonable likelihood of success on the merits, the moving party is not required "to establish 'a certainty of success'[;] rather, '[the Court] require[s] only that [it] make out a prima facie case.'" Id. (quoting Fund for Community Progress v. United Way of Southeastern New England, 695 A.2d 517, 521 (R.I. 1997)).
The decision to extend injunctive relief is within the sound discretion of the trial justice. See Hagenberg v. Avedisian, 879 A.2d 436, 441 (R.I. 2005).
The Receivers seek to enjoin AP&S from representing the Prospect Entities before the DOH and AG based on an alleged violation of Article V, Rules 1.9 and 1.10 of the Supreme Court Rules of Professional Conduct. See generally Receivers' Mem. Specifically, the Receivers argue that AP&S's representation of the Prospect Entities involves issues substantially related to AP&S's prior representation of the Oldco Entities, and that the Receivers did not consent to AP&S's representation of the Prospect Entities. Therefore, the Receivers argue that AP&S has violated Rules 1.9 and 1.10.
A threshold issue in this matter is whether the Receivers' motion for an injunction was timely. As this Court has previously recognized, in numerous jurisdictions, "failure to make a reasonably prompt motion to disqualify counsel can result in waiver." Quinn v. Yip, No. KC-2015-0272, 2018 WL 3613145, at *3 (R.I. Super. July 20, 2018) (citing Campbell v. Bank of America, N.A., 155 A.D.3d 820, 823 (N.Y. App. Div. 2017); Zelda Enterprises, LLLP v. Guarino, 806 S.E.2d 211, 214 (Ga. Ct. App. 2017); Thomas v. Cook, 170 So.3d 1254, 1261-62 (Miss. Ct. App. 2015)). "However, a mere delay in bringing a motion for disqualification for a potential breach of the attorney-client privilege with respect to a former client will not bar the motion." Id. (citing Kevlik v. Goldstein, 724 F.2d 844, 848 (1st Cir. 1984) ( ); R.I. Supreme Court Ethics Advisory Panel Opinion No. 1989-07 (citing Kevlik).
Here, AP&S asserts that the Receivers unjustifiably delayed in their filing of this motion. (AP&S's Mem. at 8.) AP&S argues that, because the Receivers first raised their claim of conflict of interest on April 9, 2020 at the CEC application hearing, then waited three months before filing the current motion, the motion is untimely. Id. Additionally, AP&S proffers that the Receivers knew for over a year that AP&S was representing the Prospect Entities in the 2019 Regulatory Review. Id.
Notwithstanding AP&S's argument, and regardless of whether delay alone can constitute a waiver of a party's disqualification motion, this Court finds that the Receivers did not delay in bringing their motion to disqualify. As AP&S concedes, on April 9, 2020, the Receivers brought their objection to AP&S's representation of the Prospect Entities in the objection to the CEC application. Then, three months later, and almost two weeks before the public meeting on the CEC application, the Receivers brought the current motion. Cf. In re Valencia v. Ripley, 128 A.D.3d 711, 713 (N.Y. App. Div. 2015) (). Further, there is no evidence that the Receivers unduly delayed in filing the motion or were acting for any improper purpose. For those reasons, this Court finds that the Receivers' motion was timely.
Moving on to the merits of the request for injunctive relief, first, the Receivers must show a likelihood of success on the merits that AP&S is disqualified from further representing the Prospect Entities before the DOH and the AG because such representation violates the Supreme Court Rules of Professional Conduct.
Though the Rhode Island Supreme Court has not expressly adopted a standard of review for a motion to disqualify an attorney from a case, it has expressed that the proponent of a motion to disqualify has a high burden to meet. In re Yashar, 713 A.2d 787, 790 (R.I. 1998) (); Olivier v. Town of Cumberland, 540 A.2d 23, 27 (R.I. 1988) (...
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