ST. JOSEPH Hosp. v. HEALTH Mgmt. Assoc.S INC.
| Decision Date | 30 March 2011 |
| Docket Number | CV 107-104 |
| Parties | ST. JOSEPH HOSPITAL, AUGUSTA, GEORGIA, INC.; ST. JOSEPH VENTURES, INC., ST JOSEPH M.O.B., L.P., a Georgia Limited Partnership; and ASCENSION HEALTH, Plaintiffs, v. HEALTH MANAGEMENT ASSOCIATES, INC., Defendant. |
| Court | U.S. District Court — Southern District of Georgia |
OPINION TEXT STARTS HERE
Presently before the Court are Defendant's motion for summary judgment (doc. no. 101) and Plaintiffs' motion for partial summary judgment (doc. no. 106). The Clerk gave the parties appropriate notice of the summary judgment motions and informed them of the summary judgment rules, the right to file affidavits or other materials in opposition, and the consequences of default. (Doc. nos. 104 & 109.) Therefore, the notice requirements of Griffith v. Wainwright, 772 F.2d 822, 825 (11th Cir. 1985) (per curiam), are satisfied. The time for filing materials in opposition has expired, and the motions are now ripe for consideration.
Until November 2006, Plaintiffs St. Joseph Hospital, Augusta, Georgia, Inc., St. Joseph Ventures, Inc., and St. Joseph M.O.B., L.P. (collectively "St. Joseph") owned and operated a non-profit institution ("St. Joseph Hospital" or "the Hospital") that provided, among other services, general acute care in Augusta, Georgia. (Doc. no. 108, Ex. 11 at 33.) Several years prior to this date, the Hospital began experiencing economic and operational problems. (Id. , Ex. 3 at 8; Owings Dep. at 24.) Consequently, in 2005, St. Joseph's parent company, Plaintiff Ascension Health ("Ascension"), engaged an advisory firm to solicit bids to purchase the Hospital's assets. (Doc. no. 108, Ex. 3 at 9.) Eighteen companies expressed interest, and ten companies submitted formal bids. (Id.)
The highest bidder was Defendant Health Management Associates, Inc. ("HMA" or "Defendant"), offering to pay Ascension $87 million. (Id. , Ex. 12 at 1.) The three closest offers, from highest to lowest, were as follows: $60 million, $50 million, and $37 million. (Doc. no. 103, Ex. 26.) Ultimately, Ascension chose to negotiate with HMA regarding the sale of the Hospital. (Id. , Ex. 14 at 1012.) The parties signed a confidentiality agreement on July 14, 2005. This agreement prohibits public comments regarding the terms of any future transaction and further prohibits "any actual or implicit disparagement or denigration" of Plaintiffs. It also granted HMA access to Plaintiffs' financial information for the purpose of conducting its due diligence. (Doc. no. 108, Ex. 3 at 27; Doc. no. 103, Ex. 15.) With the assistance of counsel on both sides, the parties began a tedious negotiation process. (Bell Dep. at 34-36.) As a result of this process, by December 21, 2005, HMA's offer had been reduced to approximately $75 million. (Doc. no. 108, Ex. 15 at 18, 20.)
Georgia's Hospital Acquisition Act, O.C.G.A. § 31-7-400 et seq. , applies to transactions in which a non-profit hospital is selling its assets to a for-profit entity. Under the Act, parties must provide the Attorney General with at least 9 0 days notice of a proposed transaction prior to its consummation. O.C.G.A. § 31-7401. Within 60 days of receiving notice, the Attorney General is required to hold a public hearing to ensure that the terms of the transaction protect the public's interests. O.C.G.A. § 31-7-405.
In accordance with the Act, on December 22, 2005, the parties submitted their Notice to Attorney General of Intent to Acquire or Dispose of Assets of a Hospital ("AG Notice").1 (Doc. no. 108, Ex. 3 at 1.) They attached an unsigned Asset Sales Agreement ("ASA") as an exhibit to the AG Notice.2 (Doc. no. 103, Ex. 14 at 5.) The AG Notice explains that 3 (Id. at 3. ) As described by the AG Notice, the attached ASA was "substantially" completed, but was unexecuted and did not contain the final schedules and exhibits. (Doc. 103, Ex. 14 at 12-13.) The Attorney General scheduled a public hearing to review the transaction for Monday, February 13, 2006, in Augusta, Georgia. (Hilton Dep. at 18.)
After submission of the AG Notice, in a December 27, 2 005 press release, HMA stated that it had "negotiated an agreement to acquire St. Joseph" and "[t]he execution and closing of the purchase agreement [were] subject to the review and approval of the Georgia Attorney General's Office."4 (Doc. no. 108, Ex. 3 at 29.) Two days later, HMA reiterated this in a Form 10-K filed with the United States Securities and Exchange Commission (SEC).5 HMA declared that it had "announced the negotiation of an agreement to acquire St. Joseph Hospital," and "[p]ursuant to applicable state law, the execution of a definitive purchase agreement and closing of the transaction [were] subject to review and approval by the Georgia Attorney General's office."6 (Doc. no. 108, Ex. 4 at 4.) On January 3, 2006, HMA issued another press release providing that it had "signed or finalized negotiations on definitive agreements regarding four acquisition opportunities." (Doc. no. 108, Ex. 6 at 1.) HMA further stated that, "upon completion of the previously announced transactions to acquire the 231-bed St. Joseph Hospital, . . . HMA will operate 61 hospitals in 16 states with 8,912 licensed beds."7 (Id.) In addition to issuing press releases, HMA began transitional activities in preparation for the proposed acquisition, which included, applying to change over certain licenses, installing HMA's computer systems, and training the Hospital's employees on HMA protocol. (Doc. no. 108, Ex. 8 at 17; Doc. no. 108, Ex. 10 at 2; Owings Dep. at 44-45; Whitman Dep. at 67; Cherry Dep. at 65.) HMA representatives attended meetings with St. Joseph Hospital's staff and requested that the Hospital maintain the status quo. (Comeau Dep. at 91; Kreager Dep. at 8990 .)
On January 25, 2006, the parties executed a letter of intent ("LOI") that was submitted in conjunction with their Premerger Notification and Report to the Department of Justice and the Federal Trade Commission.8 (Doc. no. 108, Ex. 16.) Under the heading "Description of Acquisition," the filing states that pursuant to the LOI, Defendant intends to acquire St. Joseph Hospital and that the transaction is conditioned upon, among other things, the execution of a definitive agreement. (Id. at 6.) The LOI is one of the only documents signed by HMA, St. Joseph, and Ascension. Its stated purpose is to "set forth the mutual understanding" and "present intentions" of the parties with respect to the sale of the Hospital. (Id., Ex. 12 at 7, 9.)
The LOI provides that it "reflects the parties' intention to finalize and execute a binding Asset Purchase Agreement" and expressly acknowledges that specific changes may occur prior to the ASA's final execution. (Id.) According to the LOI, "the definitive Asset Sale Agreement, at such time as it is fully executed by Seller and Purchaser, will supersede [the] Letter of Intent, and thereafter, [the] Letter of Intent will be of no further force or effect." (Id.)
The parties explicitly state in the LOI that it is "intended as an expression of mutual intent only and does not constitute an obligation binding in any way on the parties," except for the provisions of the third, fourth, and fifth paragraphs. (Id. at 89.) The third paragraph contains an exclusivity clause providing that until the earlier of the execution of the ASA or March 31, 2006, Plaintiffs could not negotiate with or solicit offers from parties other than HMA with respect to the sale of the Hospital; the fourth paragraph states that the parties were still bound by the aforementioned Confidentiality Agreement, with the exception of necessary filings or notifications; and the fifth paragraph provides for the allocation of fees and expenses related to the proposed transaction "in the event that a definitive Asset Sales Agreement is not executed." (Id. at 7-8.)
On Friday, February 10, 2006, HMA's newly hired President and Chief Operating Officer visited the Hospital for the first time. (Whitman Dep. at 13 9, 141.) Based upon this visit and an early February 2 0 06 financial analysis, he concluded that St. Joseph Hospital's financial condition was rapidly deteriorating. (Id. at 108-12, 120-21.) Upon returning to HMA's headquarters in Florida, he held a meeting at which he recommended that HMA withdraw from the proposed transaction. (Doc. no. 108, Ex. 8 at 1.) The recommendation was affirmed and, that afternoon, Ascension's CFO was informed of the decision. (Parry Dep. at 187; Bell Dep. at 131.) That Monday, February 13, 2006, the day of the scheduled Attorney General hearing, HMA sent a follow-up letter confirming that it was "withdrawing its non-binding offer to acquire St. Joseph's Hospital from Ascension." (Doc. no. 108, Ex. 7 at 4.) HMA likewise informed the Attorney General's office that it was "withdrawing its non-binding offer to acquire St. Joseph Hospital and other related assets" because "the hospital has experienced significant deterioration in its operating performance including adverse changes in physician referral practices since the submission of the [AG Notice]."9 (Id. , Ex. 8 at 4.)
The Attorney General's Office acknowledged that the proposed transaction would not proceed, cancelled the hearing, issued no report, and closed the public record in the matter. (Doc. no. 103, Ex. 24 at 1; Ex. 41 at 1; Parry Dep. at 193, 238.) St. Joseph and Ascension began the bidding and negotiation process anew and ultimately sold the Hospital to a third party...
To continue reading
Request your trial