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Documents from Good Samaritan-St. Mary's CaseThe Law Suit
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IN THE CIRCUIT COURT OF THE FIFTEENTH JUDICIAL CIRCUIT, IN AND FOR PALM BEACH COUNTY, FLORIDA
CASE NO. CL0100068AB
COMPLAINT FOR DECLARATORY RELIEF
STATE OF FLORIDA, DEPARTMENT
OF LEGAL AFFAIRS, ex rel. ROBERT
A. BUTTERWORTH, Attorney General of
the State of Florida, on behalf of the Citizens
of the State of Florida,Plaintiff,
INTRACOASTAL HEALTH SYSTEMS, INC.,
a Florida not-for-profit corporation, CATHOLIC
HEALTH EAST, INC., a Pennsylvania not-for-profit corporation. ST. MARY'S HOSPITAL,
INC., a Florida not-for-profit corporation and, GOOD
SAMARITAN HOSPITAL, INC., a Florida not-for-profit corporation. and WILLIAM SNED, JON C. MOYLE, LEWIS M. SCHOTT;
MARVIN H. SCHUR; DAVID B. RINKER; THOMAS B. WALKER; SISTER
MARY MCNALLY, DR. JORDAN C. GRABEL; DR.
DENIS M. MURPHY AND SISTER GLADYS
SHARKEY, along with other members unknown
as members of the Board of Trustees of Intracoastal Health Systems, Inc.,Defendants
Plaintiff, STATE OF FLORIDA, DEPARTMENT OF LEGAL AFFAIRS sues Defendants, CATHOLIC HEALTH EAST, INC., a Pennsylvania not-for-profit corporation; INTRACOASTAL HEALTH SYSTEMS, INC., a Florida not-for-profit corporation; ST. MARY'S HOSPITAL, a Florida not-for-profit corporation; GOOD SAMARITAN HOSPITAL, a Florida not-for-profit corporation; MEMBERS OF THE BOARD OF TRUSTEES of Intracoastal Health Systems, Inc. and alleges as follows:
Parties
- This is an action for declaratory judgment pursuant to Chapter 86, Florida Statutes; Chapter 737.303, Florida Statutes, Chapter 737.403, Florida Statutes and pursuant to the court's equitable powers under the common law doctrine of cy pres, for temporary injunctive relief, for declaration of a constructive charitable trust, for an accounting to beneficiaries of a charitable trust and other equitable relief or, in the alternative, for dissolution pursuant to Florida Statute 617.1430, or the revocation of articles of incorporation pursuant to Florida Statute 617.2003.
- The Plaintiff is the State of Florida. This action is brought by Robert A. Butterworth, Attorney General of Florida, head of the Department of Legal Affairs, in the name of the state and on behalf of the citizens of Florida. The Attorney General brings this action under his power, among others, to enforce charitable trusts, in order to represent the beneficial interests of the citizens of the State of Florida and, particularly, of Palm Beach County. The Attorney General further maintains this action pursuant to Art. IV, Section 4(c), Fla. Const. (1968), and Sections 16.01, 617.1430 and 617.2003, Florida Statutes. The Attorney General seeks to enforce a charitable trust arising out of the creation and maintenance of St. Mary's and Good Samaritan Hospitals.
- Defendant CATHOLIC HEALTH EAST, INC.(CHE) and its' lawfully Board of Directors. CHE is a Pennsylvania not-for-profit corporation, a member of Intracoastal Health Systems, Inc. and manages the operations of St. Mary's and Good Samaritan Hospitals.
- Defendant INTRACOASTAL HEALTH SYSTEMS, INC. (Intracoastal), is a Florida not-for-profit corporation, formed in 1994 as the result of a transaction between Good Samaritan and St. Mary's hospitals. Intracoastal operates primarily in Palm Beach County, Florida and has, among others, a corporate purpose. "To perform, foster and support acts of charity among the sick and ailing and provide resources for the restoration of health and the prevention of disease." Intracoastal has two corporate members, CHE and Good Samaritan Health Systems, Inc. Defendant Directors and Trustees of Intracoastal, as named in the caption to the present Complaint, are named in their official capacity as members of the Board of Trustees of Intracoastal.
- Defendant ST. Mary's HOSPITAL, Inc.(St. Mary's), and its' lawfully appointed Board of Directors or Trustees. St. Mary's is a Florida not-for-profit corporation chartered for charitable purposes operating primarily in Palm Beach County, Florida. The purpose of St. Mary's, as stated within its' Amended and Restated Articles of Incorporation, is "...to perform, foster and support acts of Christian charity among the sick and ailing and provide resources for the restoration of health and the prevention of disease" and, further, "...to promote the health and welfare of the communities served and humankind through scientific research, education and treatment."
- Defendant GOOD SAMARITAN HOSPITAL, INC. and its' lawfully appointed Board of Directors or Trustees (Good Samaritan). Good Samaritan is a Florida not-for-profit corporation chartered for charitable purposes operating primarily in Palm Beach County, Florida. The Amended and Restated Articles of incorporation of Good Samaritan represent, as one the corporations Purposes: "...to establish, acquire, own and act as a member or partner of entities which provide diagnostic, medical, surgical and hospital care, out-patient care and home care to sick, injured or disabled persons in compliance with the Ethical and Religious Directives for Catholic Health Care Services as a non-sectarian, community based health care system, without regard to race, creed, color, sex, age, or national origin...."
- Defendant GOOD SAMARITAN HEALTH SYSTEMS, INC. and its lawfully appointed Board of Directors or Trustees (OSHS) is a Florida not-for-profit corporation chartered for charitable purposes operating primarily in Palm Beach County, Florida.
Jurisdiction and Venue
- This Court has jurisdiction to render relief with respect to charitable trusts pursuant to Chapter 737, Florida Statutes and has the power to enforce all orders and decrees made in the exercise of the authority conferred by Chapter 737. This Court further has jurisdiction pursuant to Art V., Section 5, Fla. Const. (1968), Section 86.011 and Sections 26.012(2)(a) and (c), Fla. Stat. (1985).
- This court has jurisdiction of the parties pursuant to Section 48.193 F.S.
- Venue lies properly in this Court because the health care organizations which are parties to this complaint have their principle place of business in Palm Beach County, Florida. Venue is also proper pursuant to Sections 47.01 1 and 737.202, Florida Statutes.
Introduction and Factual Background
- Good Samaritan and St. Mary's are Palm Beach County's oldest community hospitals. Owing their existence to the generosity of generations of local residents who have donated countless millions to build, equip and expand the two institutions, they are charitable organizations as defined under Chapter 737, Florida Statutes and Section 501(c)(3) of the Federal Internal Revenue Tax Code. These not-for-profit corporations were organized and operated exclusively for charitable purposes. They have never had any capital stock, nor have they ever been operated for profit. They have been institutions of purely public charity. Any profits arising from revenues derived from these institutions are to be returned into the channels of the original charitable purpose. No part of their, funds should be diverted for private gain or benefit. There are no stockholders to receive such funds as are collected from patients, as these funds are to be used in the maintenance of the hospitals and the furtherance of the announced purposes of the entities.
- Good Samaritan and St. Mary's offer separate and distinct health care services to discernibly different population communities. St. Mary's, since the early days of the civil rights movement, has dedicated itself to the care of the poor and of low income minorities in particular. Good Samaritan draws a significant portion of its' patients from the county's wealthiest community. As but one example of the disparity in patient services offered by the two institutions, St. Mary's offers extensive services in the area of pediatric trauma care. Good Samaritan does not.
- After having operated successfully and independently for more than fifty years, Good Samaritan and St. Mary's, in 1994, entered into a joint operating agreement under a single corporate management group (Intracoastal). Under the joint management of Intracoastal, an ambitious multi-million dollar expansion program at St. Mary's ground to a halt, and in the five years of operation under Intracoastal's management, St. Mary's has been crippled with huge losses in operating revenues. Good Samaritan, on the other hand, continued to expand and, in 1999, showed a modest surplus.
- By the end of 1999, the joint operating agreement resulted in combined losses at the hospitals of nearly $2 million per month. Though management was "consolidated" almost exclusively at Good Samaritan, both institutions operated and acted as separate acute health care facilities with differing employee pay scales, managed care contracts, nursing staffs, patient admission and discharge procedures, laboratory and clinical services. Furthermore, St. Mary's operated under guidelines established by the Catholic Church, while Good Samaritan was not bound by the same operational guidelines.
- The Intracoastal Board of Trustees hired Cambia Health Systems of Tennessee (Caribou) to study the failing joint operating agreements At the time of their final report, the two hospitals were saddled by more than $1 70 million in outstanding medical bills resulting from a problem-plagued patient billing program. Cambio's proposed solution was two-fold close the hospital which had cared for a portion of the area's low income minority population (St. Mary's) and seek additional funds for the expansion of acute health care facilities at Good Samaritan.
- In September of 2000, Intracoastal and CHE presented to the Attorney General a summary description of transactions involving Intracoastal and its' affiliates. A proposal was tendered which would involve an agreement between CHE, Good Samaritan and St. Mary's, said agreement (hereinafter referred to as the "Definitive Agreement") calling for "the consolidation of substantially all of the acute care services presently offered at the St. Mary's campus onto the Good Samaritan campus." This Agreement would further occasion the loss of other, non-acute care health services to the St. Mary's community. See: Definitive Agreement, attached and incorporated as Plaintiff's Exhibit A to the present Complaint.
- On December 19, 2000, the Attorney General issued a report on Intracoastal Health Systems, Inc., which raised questions regarding the ability of CHE and Intracoastal to proceed with the closing of St. Mary's Hospital as anticipated in the Definitive Agreement. See Attorney General's Report on Intracoastal Health Systems, Inc., attached and incorporated as Plaintiff s Exhibit B to the present Complaint.
COUNT I
Request for Designation of St. Mary's and Good Samaritan Hospitals as Charitable Organizations
- Plaintiff would adopt and re-allege Paragraphs 1 through 17 as set forth above and would further allege as follows:
- Florida Statute 737.501 (2) defines a charitable organization as one described in s.501(c)(3) (of the Internal Revenue Code of 1954) and exempt from tax under s.501(a).
- St. Mary's is a not-for-profit corporation organized exclusively for charitable purposes and whose net earnings in no part inure to the benefit of any private shareholder or individual. St. Mary's is a charitable organization as defined by Florida Statute 737.501 (2). St. Mary's is an organization described in Section 501 (c)(3 of the Internal Revenue Code.
- Good Samaritan is a not-for-profit corporation organized exclusively for charitable purposes and whose net earnings in no part inure to the benefit of any private shareholder or individuals Good Samaritan is a charitable organization as defined by Florida Statute 737.501 (2). Good Samaritan is an organization described in Section 501 (C)(3) of the Internal Revenue Code. 22. By reason Of the aforesaid, it is requested that both St. Mary's and Good Samaritan be declared and designated charitable organizations under Florida law.
COUNT 2
Request For Declaration Of A Charitable Trust, For An Accounting To Beneficiaries Of A Charitable And Other Equitable Relief
- Plaintiff would adopt and re-allege Paragraphs I through 21 as set forth above aid would further allege as follows:
- The assets and property of St. Mary's have been accumulated through the charitable donations and bequests of generations of community residents. These donors, known and unknown, have contributed funds for purposes related to the provision of free medical care to the community. The gifts themselves reflect both specific and general charitable intent. The existence and historical viability of St. Mary's reflects not only the financial commitment of the citizens of Palm Beach County to their community health care facility, but the time sweat and effort of countless community volunteers without whom the vision, of St. Mary's would never have been a reality. Thousands upon thousands of volunteer hours were the foundation upon which the hospital was built, and that which makes this facility a community asset in the truest sense.
- Throughout it's history, St. Mary's has, in the solicitation of donations and gifts, presented itself to the community as a charitable acute care general hospital, dedicated to the care and medical treatment of the poor. In Federal Income Tax filings, St. Mary's in support of requests for tax exempt status consistently presented itself as an inpatient charitable hospital.
- Any and all assets and property of St. Mary's are impressed with a public trust. They exist solely for the public benefit and are to be used in accordance with St. Mary's stated charitable purpose.
- St. Mary's primary charitable purpose is that of an inpatient acute care hospital.
- The closure of St. Mary's Hospital by the Defendants, or the modification of St. Mary's into an outpatient community health care clinic would constitute a fundamental change in its' corporate and charitable purpose,
- The Definitive Agreement between St. Mary's, Good Samaritan and Intracoastal and its affiliates is fundamentally inconsistent with the articles of incorporation and the historical charitable mission of Intracoastal and the affected hospitals. The Definitive Agreement is further in conflict with the Ethical and Religious Directives for Catholic Health Care Services, directives to which both St. Mary's and Good Samaritan are bound via their Articles of Incorporation. The proposal to discontinue acute care services at St. Mary's is in direct contravention to the directive that "...particular attention should be given to the health care needs of the poor, the uninsured and the under insured."
The loss of St. Mary's as an acute care inpatient facility, along with the loss of other services anticipated in the Definitive Agreement, would be such a fundamental deviation from its' charitable purpose as to require judicial intervention pursuant to the doctrine of "cy pres."
- The Attorney General maintains that there is substantial uncertainty as to whether the intended actions proposed within the Definitive Agreement are authorized by the terms and conditions of the various grants, gifts and devises under which St. Mary's and Good Samaritan received this property. The Attorney General further maintains that a court decision is necessary in order to protect the rights of those unknown beneficiaries whom it is his duty to represent.
- Pursuant to the doctrine of cy pres, this court has the authority to direct the disposition of charitable trust assets in such a manner as would most closely accomplish the mission or purpose of the original trust. The Attorney General seeks the preservation of the charitable assets of St. Mary's and the subsequent return of those assets to the community in a manner which would preserve St. Mary's as an acute care community hospital facility. The Attorney General will seek the assistance of the Health Care District, along with other public and private entities, to ensure that the community does not lose the benefit of an essential medical health care resource which it has, for so long, contributed to and supported. The continued operation of St. Mary's as an inpatient, acute care hospital facility, with the assistance of the Hospital District and with the assistance of community public and private entities, would in every substantial manner, preserve the charitable purpose of the hospital and ensure the continued use of donated funds for the purposes for which they were intended,
- By reason of the aforesaid, a judicial determination as to the right and power of the Defendants to adopt and implement the Definitive Agreement is necessary so that the intent of the donors could be fulfilled and that the charitable purposes of the hospitals in question might be carried out.
COUNT 3
Request For Temporary Injunction
- Plaintiff would adopt and reallege Paragraphs I through 32 as set forth above and would further allege as follows:
- The implementation of the Definitive Agreement would result in the closure of St. Mary's as an acute care full service hospital and irreparable harm to the community. Persons seeking medical care would be denied treatment or otherwise find medical services unavailable. Closure of the facility would further result in the loss of educational and health maintenance services, as well as literally hundreds of jobs directly and indirectly related to the hospital, it's programs and its' services.
- The implementation of the Definitive Agreement would constitute a fundamental change in the corporate and charitable purposes of both St. Mary's and Good Samaritan Hospitals and would make impossible the fulfillment of those charitable purposes.
- The implementation of the Definitive Agreement would result in the loss of medical and health care services to the community traditionally served by St. Mary's.
- The implementation of the Definitive Agreement would result in the loss by the community traditionally served by St. Mary's of substantial assets, bequests and donations to which it is lawfully and equitably entitled as beneficiaries of a public trust.
- For the foregoing reasons, the implementation of the Definitive Agreement would result in irreparable injury to the citizens of Palm Beach and to those particularly served by St. Mary's Hospital.
- Defendants Intracoastal, CHE and GSHS intend to proceed with the implementation of the Definitive Agreement or, in the alternative, to sell St. Mary's and Good Samaritan, absent judicial intervention. Other than the present request for injunctive relief, there is no adequate legal remedy to prevent the injuries alleged.
- For the foregoing reasons, the Plaintiff would request this Court issue a temporary injunction prohibiting the implementation of the Definitive Agreement, prohibiting the closure of St. Mary's as an acute care hospital facility, prohibiting the Defendants from transferring, selling or otherwise disposing of those assets currently attributed to St. Mary's and requiring the Defendant's to continue to maintain the current day-to-day operations, actions and activities necessary for St. Mary's and Good Samaritan Hospitals and their subsidiary entities to fulfill their respective mission statements until further order of this court, and to grant such other relief as the court deems just and proper.
COUNT 4
Petition to Revoke Articles of Incorporation Or Charter of Intracoastal Health Systems, Inc. Pursuant To Florida Statute 617.2003
- Plaintiff would adopt and re-allege Paragraphs I through 40 as set forth above and would further allege as follows:
- Intracoastal Health Systems, Inc. was incorporated as a Florida not-for-profit corporation on or about September 19, 1994. Amended and Restated were filed by the aforesaid corporation on or about November 30, 1994 and January 16, 1998.
- Intracoastal Health Systems, Inc. has, in its bylaws and articles of incorporation, expressed a mission and purpose to "..further, promote and support the benevolent, charitable, scientific, religious and educational activities of St. Mary's Hospital, Inc., St. Mary's Ancillary Services, Inc., St. Mary's ASC, Inc., Women's Health Services, Inc., St. Mary's Pain Center, Inc., Mid-County Medical Center, Inc., St. Mary's Imaging Center, Inc. ...(and) St. Mary's Care Services, Inc."
- Intracoastal Health Systems, Inc. is being used for purposes inconsistent with those stated in its' bylaws and articles of incorporation, in that the proposed actions described in the Definitive Agreement adversely effect, in a direct and substantial manner, the benevolent, charitable, scientific, religious and educational activities of St. Mary's Hospital and of the aforesaid enumerated entities.
- In support of this count, the Attorney General would submit as prima facie evidence the Definitive Agreement, attached and incorporated as Plaintiff's Exhibit A to the present Complaint and the Attorney General's Report on Intracoastal Health Systems, Inc., attached and incorporated as Plaintiff's Exhibit B to the present Complaint.
COUNT 5
Complaint for the Dissolution of Intracoastal Health Systems, Inc. Pursuant to Florida Statute 617.1430
- Plaintiff would adopt and re-allege Paragraphs 1 through 45 as set forth above and would further allege as follows:
- Defendant Trustees, named within the caption of the present complaint, were, at all times material, the members of the Board of Trustees of Intracoastal. Said Trustees accepted such positions and obligated themselves to exercise honest judgment, good faith and ordinary business care in the performance by each of them, of all acts done and powers exercised as officers and directors of Intracoastal.
- Defendant Trustees, in their capacity as trustees of Intracoastal, owed Intracoastal the duty to exercise good faith in a manner he or she reasonable believed to be in the best interests of Intracoastal, and to use such care as an ordinarily prudent person in like position would use under similar circumstances, pursuant to Section 617.0830, Fla. Stat.
- At all times material, Defendant Trustees have been in full control of all the affairs of the corporate defendants. During the period of their service and control, they have caused the assets of the defendant corporations to be dissipated, lost, alienated, misapplied, and wasted. To wit:
- The Trustees did not adequately educate themselves about the financial operations of St. Mary's and Good Samaritan Hospitals.
- The Trustees lost millions of dollars in Medicaid and Medicare receivables through their failure to correct blatantly ineffective billing and collections procedures.
- The Trustees failed to implement policies and procedures intended to ensure the preservation of the market shares of St. Mary's and Good Samaritan Hospitals.
- The Trustees failed to renegotiate managed care contracts with service providers to St. Mary's and Good Samaritan Hospitals.
- The Trustees, in 1994, improperly embarked upon a merger and restructuring plan without court approval and absent any showing that the charitable missions of St. Mary's and Good Samaritan Hospitals could not be met.
- As a result of the failure of the Trustees to use such care as an ordinarily prudent person in like positions would use under similar circumstances, and within a period of approximately four years, Good Samaritan and St. Mary's Hospitals devolved from charitable entities which had, historically, operated in the black to ones with combined losses in the area of $2,000,000.00 every month.
- The grave financial conditions of these entities now endanger their charitable missions and may, absent this court taking emergency action, result in the loss of these institutions to communities they have historically served.
- The implementation of the Definitive Agreement would be in violation of the Defendant's corporate and charitable purposes as alleged herein and would be an action for which the Defendants lack power and authority.
- The Department of Legal Affairs is empowered to bring, this action pursuant to the power of the Attorney General to enforce charitable trusts, pursuant to Section 617,0304 Florida Statutes; and in order to represent the beneficial interests of the citizens of the State of Florida and, particularly, of Palm Beach County. WHEREFORE, Robert A. Butterworth, in the name of the State and on behalf of citizens of the State of Florida, prays that this Court:
- Take jurisdiction of the Parties and subject matter;
- Designate St. Mary's and Good Samaritan Hospitals to be charitable organizations.
- Order an accounting to Intracoastal Health Systems, Inc., and the State of Florida, of the current assets of Intracoastal Health Systems, Inc., differentiating the assets of St. Mary's and Good Samaritan Hospitals.
- Temporarily enjoin and restrain the Defendants from closing St. Mary's Hospital and/or Good Samaritan Hospital or otherwise transferring, selling or otherwise disposing or dissipating their assets, except as required to conduct the current day to day operation of the respective hospitals, until further order of this court.
- Order the Chief Operating Officer and or the Defendants to continue to fulfill their duties and responsibilities to maintain all day-to-day operations, actions and activities necessary for St. Mary's and Good Samaritan Hospitals and their subsidiary entities to fulfill their respective mission statements until further order of this Court. This would include the continued operation of St. Mary's as an acute care, inpatient facility.
- Declare that the assets and property of St. Mary's Hospital constitute a charitable public trust, pursuant to which the Court should:
- Issue a permanent injunction prohibiting the closure of the acute care facilities of St. Mary's.
- Issue a permanent injunction prohibiting the dissipation or waste of the charitable assets of St. Mary's and prohibiting any other deviation from its' historical corporate and charitable purposes.
- Appoint a new Board of Trustees for St. Mary's Hospital.
- Provide any other equitable relief (including but not limited to the appointment of a Receiver) as the Court might deem just and appropriated
- In the alternative dissolve the Board of Trustees of Intracoastal Health Systems Inc, and distribute those assets associated or attributed to St. Mary's it a Receiver or to a new Board of Trustees with an injunction for their use in the operation of an acute care facility at St. Mary's.
- Revoke the corporate charter of Intracoastal Health Systems, Inc.
- Declare the respective rights of the parties and grant such other relief as justice and equity required.
Respectfully submitted,
ROBERT A. BUTTERWORTH
ATTORNEY GENERAL
Florida Bar No. 114422
Cecil Dykas
Deputy Attorney General
Florida Bar No. 995077
Robert R. Julian
Assistant Attorney General
Florida Bar No. 262706
Daniel Hyndman
Assistant Attorney General
Florida Bar No. 084113
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