Jefferson Cmty. Health Care Ctrs., Inc. v. Jefferson Parish Gov't

Decision Date26 July 2016
Docket NumberCIVIL ACTION CASE NO. 16-12910 SECTION: "G"(2)
PartiesJEFFERSON COMMUNITY HEALTH CARE CENTERS, INC. v. JEFFERSON PARISH GOVERNMENT, et al.
CourtU.S. District Court — Eastern District of Louisiana
ORDER

Before the Court is Plaintiff Jefferson Community Health Care Centers, Inc.'s ("JCHCC") motion for a preliminary injunction, wherein it urges the Court to enjoin the enforcement of two resolutions passed by the Jefferson Parish Council ("Council") declining to renew lease agreements [or Cooperative Endeavor Agreements ("CEAs")] that Jefferson Parish ("the Parish") had with Plaintiff in two locations, Marrero and River Ridge, Louisiana, because the resolutions, they contend, violate the Medicaid Act, entitling them to relief pursuant to 42 U.S.C. § 1983, and that the actions taken by the Parish Council are preempted by federal law pursuant to Section 330 of the Public Health Service Act ("PHS Act").1 The requested preliminary injunction would permit JCHCC to continue to use and occupy the Marrero and River Ridge facilities pending a trial on the merits in this matter.2 Defendants' opposition fails to squarely address Plaintiff s stated claims pursuant to § 1983 or Section 330 of the PHS Act, but rather characterizes this matter as an untenable breach of contract claim.3 Having reviewed Plaintiff's motion for a preliminaryinjunction, the memoranda in support and in opposition, the evidence presented at the hearing on the preliminary injunction, and the applicable law, for the reasons that follow, the Court will grant in part and deny in part Plaintiff's motion for a preliminary injunction. Specifically, the Court will enjoin the eviction of JCHCC until the opportunities for health care services for the underserved citizens are specifically addressed by either providing an appropriate vendor in the current facilities, or by providing other means of maintaining medical services to these specific communities. The motion is denied to the extent that once the Court is satisfied that the medical needs of these communities are being met, whether or not the Court has reached the merits of the case, the injunction will be lifted.

I. Background
A. Factual Background4

Plaintiff JCHCC is a non-profit entity that receives federal funding under Section 330 of the PHS Act5 to serve residents in medically underserved communities, regardless of their ability to pay.6 In the aftermath of Hurricanes Katrina and Rita, the State of Louisiana and the federal government declared that a public health crisis exists in the Jefferson Parish metropolitan area, and Jefferson Parish determined that the public interest would be best served by enabling a local non-profit organization—JCHCC—to use facilities owned by the Parish to restore basic health servicesto an underserved area of the Parish.7

Accordingly, in August of 2006, JCHCC entered into a CEA with Jefferson Parish that would, for a ten-year period ending on July 31, 2016, provide rent-free facilities to JCHCC at 1855 Ames Boulevard for the purposes of serving the medically underserved population in Marrero, Louisiana ("Marrero Agreement").8 The CEA also stated that the "Lease shall be renewed under the same terms and conditions for an additional five year term, unless any of the parties notify the other parties in writing of its intent not to renew at least 60 days prior to the expiration of the term then in effect."9 In exchange for a ten-year occupancy of the Marrero facility, JCHCC pledged to provide or coordinate for its patients a full range of primary care and clinical preventive services throughout Jefferson Parish, as it was obligated to by federal funding it had received from the Health Resources and Service Administration ("HRSA") of the U.S. Department of Health and Human Services pursuant to its grant application as a Federally Qualified Health Center ("FQHC"). The history of the River Ridge facility, located at 11312 Jefferson Highway, is less clear, but it is undisputed that River Ridge was never subject to a ten-year lease, and has operated instead on a month-by-month basis pursuant to a CEA that could be terminated at any time with 30 days' written notice.10

JCHCC took occupancy of the Marrero facility on August 1, 2006 and renovated it forclinical purposes, investing nearly $1.5 million in federal Section 330 grant funds.11 The Marrero site serves approximately 8,000 patients annually and houses, in addition to medical and dental facilities, the primary administrative offices and information technology services for the JCHCC network.12 Although JCHCC serves a population of largely uninsured patients, the income generated from services rendered at the Marrero clinic now supports the cost of services that JCHCC provides at its other clinics in Avondale, Lafitte, and River Ridge.13

In 2009, an independent audit of JCHCC pursuant to 42 U.S.C. § 254b(q) led to several adverse findings and remedial actions, and the federally mandated audit precipitated two audits by the Louisiana Legislative Auditor ("LLA").14 In reports published in 2010 and 2012, the LLA found that the prior management of JCHCC had engaged in widespread misconduct, including commingling and misappropriation of funds, improper lending to employees, and overpayments to contractors.15 In the wake of the audits, JCHCC's then-CEO, Carol Smith, resigned and the former CFO, Ebony Williams, pled guilty to and was later convicted of embezzlement.16 JCHCC nearly lost its federal funding,17 and HRSA required a corrective action plan that included seeking recoupment of the previously misspent funds.18

In September 2012, Dr. Shondra Williams ("Dr. Williams") began serving as JCHCC's CEO.19 In that capacity, she has spearheaded JCHCC's effort to implement its corrective action plan, required by HRSA as a condition of its continued participation in the Section 330 federal program.20 Dr. Williams sent demand letters to individuals identified in the LLA audit reports as having received payments to which they were not entitled, including JCHCC's former CEO, Carol Smith, and its former attorney, Clarence Roby, who had allegedly received $140,000 for legal services that an LLA audit found to lack sufficient supporting documentation.21 Soon after sending the demand letters, Dr. Williams received a fax message from the office of Councilman Spears in November 2012 including a proposed resolution to terminate the Marrero CEA.22 Dr. Williams perceived the message as a threat precipitated by JCHCC's corrective action plan, given the political and personal relationships between the individuals who were sent demand letters and both Councilman Spears and his predecessor, former Councilman Byron Lee.23

After receiving the message, Dr. Williams contacted Councilman Spears but did not receive a response.24 However, when Dr. Williams attended a Parish Council meeting on November 7, 2012, she learned that the proposal to terminate JCHCC's cooperative endeavor agreement was not on the meeting agenda, and following the meeting, Councilman Spears told Dr.Williams that the Council had canceled the resolution.25 Afterward, Dr. Williams arranged to meet with Councilman Spears at his office on November 19, 2012.26 At that meeting, the councilman expressed to Dr. Williams that no one from JCHCC had reached out to him in the eleven months since he took office, and he commented that "several" entities were interested in occupying the Marrero space.27 Councilman Spears allegedly then requested that Dr. Williams appoint an acquaintance of his to the governing board and terminate the CFO, who had participated in the LLA audit that resulted in negative findings.28 On another occasion, Councilman Spears suggested that JCHCC should hire an attorney whom he recommended.29 Later, Councilman Spears told Dr. Williams that he would only be interested in modifying JCHCC's CEAs to allow continued use of the Marrero facility if JCHCC satisfied his requests.30

In April 2014, Dr. Williams finally met with Councilman Spears, who during the meeting requested information regarding the percentage of minority-owned vendors utilized by JCHCC.31 Dr. Williams indicated that JCHCC has followed procurement policies regarding vendor selection and utilization, and currently utilizes more than 50% minority vendors.32 However, following the meeting, Dr. Williams learned that Councilman Spears approached two of JCHCC's boardmembers to request information about JCHCC's vendors.33 One year later, in April 2015, Dr. Williams became aware that Councilman Spears attempted to persuade several JCHCC board members to terminate her employment as JCHCC's CEO, without giving a reason.34

Another year later, on April 5, 2016, former JCHCC CEO Carol Smith sent Dr. Williams a demand letter requesting $184,000 in severance pay.35 After reviewing the demand, JCHCC denied it.36 Shortly afterward, JCHCC received a letter dated April 14, 2016 from the Office of the Parish Attorney, indicating that the Parish desired "alternative lease terms" and attaching two resolutions that would, respectively, terminate the Marrero CEA and replace it with a month-to-month arrangement.37 The Marrero Agreement was otherwise set to renew automatically for a five-year term after July 31, 2016.38

The proposed resolutions were included on the Jefferson Parish Council's agenda for April 20, 2016.39 At the meeting, representatives of JCHCC, along with dozens of its patients and community supporters, voiced their concerns about the two resolutions.40 No individual spoke out against JCHCC's position.41 Afterward, the Council engaged in an off-the-record, four-hourexecutive session, after which Councilman Spears did not return.42 The Council therefore deferred the vote on the two resolutions to May 11, 2016.43

On May 10, 2016, Dr. Williams, several board members, and JCHCC's counsel met privately with Councilman Spears to attempt to find a workable solution.44 Councilman Spears insisted on taping the meeting and...

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