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Ruston Louisiana Hospital Company LLC v. Lincoln Health Foundation Inc.

United States District Court, W.D. Louisiana, Monroe Division

December 30, 2019





         Pending before the Court are two motions for summary judgment, to-wit, the Motion for Summary [Doc. No. 24] filed by Plaintiff Ruston Louisiana Hospital Company, LLC, (“Ruston”), and the Motion for Summary Judgment [Doc. No. 26] filed by Defendant Lincoln Health Foundation, Inc., (“the Foundation”). The motions are, in effect, cross motions for summary judgment, both parties seeking judgment on all claims in this case. Both motions are opposed [Doc. Nos. 30, 31], and each party has filed a reply brief in response to the other's opposition brief [Doc. Nos. 32, 33]. For the following reasons, Ruston's motion [Doc. No. 24] is DENIED and the Foundation's motion [Doc. No. 26] is GRANTED.


         Prior to February 1, 2007, Lincoln Health System, Inc., (“System”) was the owner and operator of Lincoln General Hospital and certain related health care facilities located in Ruston, Louisiana (“the Hospital”). On February 1, 2007, System entered into an Asset Purchase Agreement (“the Agreement”) with Ruston whereby Ruston purchased certain assets utilized by System in its operation of the Hospital. [See Asset Purchase Agreement, Doc. Nos. 25-2, 3]. As part of the Agreement, Ruston purchased most, but not all, of System's assets. System took on certain indemnification obligations through the Agreement, including indemnification for “any claim made by a third party with respect to the operation of the Hospital prior to the Closing Date.” [Id.]. The Closing Date was April 1, 2017. Ruston and System further agreed that the Agreement inured to the benefit of and was binding upon the parties and their respective legal representatives, successors, and assigns. [Id.]

         On July 25, 2017, more than ten years after the sale of the Hospital, Ruston received a notification from Centers for Medicare & Medicaid Services (“CMS”) that an outlier reconciliation had been performed by CMS regarding charges submitted by System to Medicare from October 1, 2006 through March 31, 2007, a time period prior to the purchase by Ruston, as a result of which $703, 562.00 was being assessed by CMS against Ruston. [Doc. No. 24-8]. This amount was then withheld by CMS from its ongoing payments to Ruston.

         Ruston subsequently made demand on both System and the Foundation for reimbursement of the amount assessed to Ruston by CMS for System's pre-closing obligation. Ruston contends that the Foundation is liable on the basis that it is the “successor” of System. Neither System nor the Foundation have tendered any payment to Ruston to reimburse it for this assessment levied by CMS against System prior to the Agreement Closing Date.

         Ruston then initiated this lawsuit against the Foundation. Ruston now seeks judgment as a matter of law in the amount of $703, 562.00, plus reasonable attorney's fees and costs.

         The Foundation, on the other hand, denies that it is the successor of System. The Foundation contends that it was merely a stockholder of a 60% interest in System, with the other stockholders being Willis-Knighton Health System, Inc., and Franciscan Missionaries of Our Lady, who have not been made parties to this suit; that it was not a party to the Agreement; and that it did not execute any written assumption of System's obligations. The Foundation concludes that, as a stockholder, it is not personally liable for the obligations of System. The Foundation, therefore, seeks summary judgment dismissing Ruston's claims against it. The matter is fully briefed, and the Court is prepared to rule.


         A. Summary Judgment Standard

         Summary judgment “shall [be] grant[ed] ... if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A fact is “material” if proof of its existence or nonexistence would affect the outcome of the lawsuit under applicable law in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is “genuine” if the evidence is such that a reasonable fact finder could render a verdict for the nonmoving party. Id.

         If the moving party can meet the initial burden, the burden then shifts to the nonmoving party to establish the existence of a genuine issue of material fact for trial. Norman v. Apache Corp., 19 F.3d 1017, 1023 (5th Cir. 1994). The nonmoving party must show more than “some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In evaluating the evidence tendered by the parties, the Court must accept the evidence of the nonmovant as credible and draw all justifiable inferences in its favor. Anderson, 477 U.S. at 255.

         In a bench trial, “a district court has somewhat greater discretion to consider what weight it will accord the evidence.” In re Placid Oil Co., 932 F.2d 394, 397 (5th Cir. 1991). A court “has the limited discretion to decide that the same evidence, presented to him or her as a trier of fact in a plenary trial, could not possibly lead to a different result.” Id.

         B. Analysis

         Under Louisiana law, when a company acquires the assets of another company, it is not obligated for the liability of the company from which the assets are acquired. Russell v. SunAmerica Securities, Inc., 962 F.2d 1169, 1175 (5th Cir. 1992) citing Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir. 1985). There are four exceptions to this rule:

1) When the successor expressly or impliedly agrees to assume the liabilities of the predecessor;
2) When the transaction may be considered a de facto merger;
3) When the successor may be considered a ‘mere continuation' of the predecessor; or
4) When the transaction was fraudulent.

Id. Ruston argues that the Foundation is liable as a successor of System under two separate theories of liability: (1) assumption of liability, and (2) continuation.

         1. Assumption of Liability

         Under Louisiana law, a person can assume the liability of another person by doing so in writing by agreement. La. Civ. Code. art. 1821. Ruston contends that the Foundation expressly assumed the liability of System through two (2) separate series of acts. First, the Foundation assumed liability of System by writing to the Louisiana Attorney General in order to obtain approval from the Attorney General for the sale of the Hospital and subsequently amending its Articles of Organization. Secondly, it did so again in writing in its effort to secure the assignment of a bequest which was made to System.

         a. Assumption by ...

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