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Issues still pending in case between Summa and Western Reserve Hospital

by PHIL KEREN Editor Published: December 28, 2016 12:00 AM
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The dispute between Summa Health System and Western Reserve Hospital Partners and Western Reserve Hospital, over the operation and ownership of the hospital at 1900 23rd St. in Cuyahoga Falls, continues.

Back in February 2015, Summa filed a legal complaint in Summit County Common Pleas Court seeking to maintain its 40 percent ownership of Western Reserve Hospital. Western Reserve Hospital Partners, the management company for the hospital, had voted in November 2014 to terminate a partnership which had been established in 2009, alleging Summa had violated their operating agreement.

After a trial, a jury in July rendered verdicts on three claims in favor of Summa and two each in favor of the hospital and the partners. The next month, Summit County Common Pleas Court Judge Lynne Callahan reversed the jury's decision on one claim each for the hospital and the partners. She made the other verdicts, as well as a few other rulings, part of her court order Aug. 15.

On Nov. 18, the court awarded $117,030.98 in prejudgment interest to Summa against Western Reserve Hospital Partners. In the trial, the jury found in favor of Summa on its claim of Breach of the Management Services agreement and awarded it it $906,464 in compensatory damages. The court determined that Summa was owed $117,030.98 in prejudgment interest in connection with the judgment against the Partners.

On Nov. 18, the court granted Summa's motion for a stay order that required the parties to abide by the operating agreement's non-compete provision until the court ruled on all post-trial motions. The stay order came after the court denied Summa's request to prevent the Partners from acting on the amended operating agreement, as well as to nullify the amended deal and prohibit the Partners from taking action "inconsistent" with the existing operating agreement. This month, Summa requested that the stay order be dissolved along with withdrawing an earlier motion for a new trial.

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Mark Bosko, vice president of marketing and public relations for Western Reserve Hospital, told the Falls News-Press on Dec. 14 that the hospital "is, and always has been, fully committed to purchasing the facility in which we operate."

Mike Bernstein, system director of corporate communications for Summa Health, told the Falls News-Press on Dec. 15 that "We will continue to respect the legal process throughout this matter."

Many other motions are still pending before the court

One of the major issues that is still being disputed is the court's order requiring Summa to allow for the selection of a third appraiser who will assist Richard Racek (Summa's appraiser) and John Emig (the hospital's appraiser) in determining the fair market value of the hospital.

On Dec. 13, Western Reserve Hospital asked the court to enforce its ruling earlier this year requiring the selection of the third appraiser. According to the hospital's motion, the parties have not been able to come to an agreement on how to proceed with a purchase process. Summa favored determining the purchase price through an arbitration process including an evidentiary hearing. But in its Dec. 13 motion, the hospital said it is concerned that following Summa's proposal "would arguably render moot the hospital's pending post-verdict motion and appeal rights relating to its claim for $2.5 million in damages on the same breach of contract claim."

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However, on Dec. 20, Summa stated that it agreed "that the hospital could proceed with its appeal even after completing the purchase option as ordered," according to court records. Summa also asked the court to sanction the hospital for "its refusal to follow the court's specific performance order" to allow the selection of a third appraiser.

The hospital on Sept. 12 argued it was entitled to $2.5 million on its breach of lease counterclaim against Summa. The hospital's attorneys noted the jury ordered Summa to comply with the terms of the lease amendment and allow the hospital to complete its purchase of the building. However, the hospital also asserted it was entitled to $2.5 million in damages in connection with paying that amount of money in "holdover rent to Summa from the time of the original closing date through the date of trial," according to its court filing. This motion is still pending before the court.

Meanwhile on Dec. 12, Summa told the court it was withdrawing its Sept. 12 motion for a new trial and asked the court to dissolve the stay order from Nov. 18 requiring the parties to comply with the non-compete provision in their operating agreement. In its Dec. 19 response Western Reserve Hospital Partners asserted that Summa hired two physicians "in violation of the non-compete agreement." On Dec. 19, Summa clarified it was withdrawing its motion for a new trial in response to the court's ruling that Western Reserve Hospital "breached the Operating Agreement by removing the non-compete, thus giving Summa the right to pursue damages in a separate action," according to court records.

On Nov. 23, the Partners accused Summa of violating the Nov. 18 stay order by hiring two physicians in violation of the non-compete provision of the operating agreement. Summa on Dec. 9 said it did not violate the non-compete provision and claimed both parties understood the provision only applied to primary care physicians and the doctors in question are specialists. Also the non-compete provision allows Summa to replace physicians from within a proscribed 8-mile radius. Additionally, Summa noted the doctors were hired prior to the court's Nov. 18 stay order.

Meanwhile, on Sept. 12, Western Reserve Hospital Partners argued it was entitled to judgment or a new trial on Summa's claim of breach of the Management Services agreement. Both the jury and Judge Callahan found in favor of Summa on that issue. That motion is still pending before the court.

"Judge Callahan cannot respond until the briefing time that is permitted by the Ohio Rules of Civil Procedure has expired," said Jenna Bouhall, a judicial attorney for Judge Callahan. She added the briefing period will not expire until sometime after the first of the new year. "After the briefing period is closed, the court will research the parties' respective positions and issue its rulings."

Email: pkeren@recordpub.com

Phone: 330-541-9421

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