United States District Court, E.D. Washington
EMPIRE HEALTH FOUNDATION, a Washington nonprofit corporation, Plaintiff,
CHS/COMMUNITY HEALTH SYSTEMS INC., a Delaware corporation; SPOKANE WASHINGTON HOSPITAL COMPANY LLC, a Delaware limited liability company; and SPOKANE VALLEY WASHINGTON HOSPITAL COMPANY LLC, a Delaware limited liability company, Defendants.
ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL
SUMMARY JUDGMENT ON DEFENSES AND AFFIRMATIVE
Salvador Mendoza, Jr. United States District Judge.
Empire Health Foundation sues Defendants CHS/Community Health
Systems Inc., Spokane Washington Hospital Company LLC, and
Spokane Valley Washington Hospital Company LLC (collectively
“CHS”) for breach of contract, alleging it failed
to fulfill the charity care commitments it made in its 2008
acquisition of two Spokane area hospitals. ECF No. 1. Before
the Court is the Foundation's Motion for Partial Summary
Judgment Dismissing CHS's Affirmative Defenses, ECF No.
99. The Foundation seeks partial summary judgment that CHS
lacks evidence required to prove all elements of laches,
waiver, and equitable estoppel, as well as contributory fault
and failure to mitigate damages. Id. CHS opposes the
motion, arguing sufficient facts support its defenses and
affirmative defenses. ECF No. 135. After reviewing the record
and relevant legal authorities, the Court grants the motion
because no genuine dispute exists as to any material fact
and, as a matter of law, the Foundation is entitled to the
ruling it seeks.
case is scheduled for a bench trial on August 12, 2019. ECF
No. 190. The underlying facts are set forth in the
Court's February 27, 2019 Order Ruling on Cross-Motions
for Summary Judgment, ECF No. 82, and will not be repeated
Certificates of Need, issued by the Washington State
Department of Health in 2008, provide, “[Each hospital]
will use reasonable efforts to provide charity care in an
amount comparable to or exceeding the average amount of
charity care provided by hospitals in the Eastern Washington
Region. . . . [Each hospital] will maintain records
documenting the amount of charity care it provides and
demonstrating its compliance with its charity care
policies.” ECF No. 61-1 at 2; ECF No. 61-2 at 2.
Court previously ruled this charity care condition is
enforceable under the parties' 2007 Asset Purchase
Agreement. ECF Nos. 22, 36, 50, 82. Regarding records, the
contract provides that “[f]or a period of at least ten
(10) years following the Closing Date, Buyers will provide
the Board of Trustees with an annual report of their
compliance with this [provision setting forth charity care
requirements].” ECF No. 100-10 at 3; ECF No. 136-1 at
3. Regarding waiver, the contract provides that “[t]he
waiver by any party of a breach or violation of any provision
of this Agreement shall not operate as, or be construed to
constitute, a waiver of any subsequent breach of the same or
any other provision hereof.” ECF No. 100-9 at 3; ECF
No. 136-1 at 5.
regularly reported the hospitals' charity care levels to
their respective boards of trustees. ECF No. 136-3 at 5-8;
ECF No. 137 at 2. Those figures appeared in financial reports
to the boards of trustees concerning many aspects of the
hospitals' operations. ECF No. 136-3 at 8. CHS discussed
those figures, and its compliance with its charity care
obligations, at the boards of trustees' meetings. ECF No.
136-3 at 7; ECF No. 137 at 2.
boards of trustees were “never given the data that
showed what the regional average of charity care was in the
Eastern Washington region, ” even though CHS “did
look at that data.” ECF No. 136-3 at 10. Thus, CHS did
not disclose to the boards of trustees how the hospitals'
charity care levels compared to the regional average. See
Id. at 10-12; see also ECF No. 100-2 at 4; ECF
No. 100-3 at 4-5. “The emphasis in the discussion was
on the reasonable efforts throughout the process not on the
regional averages.” ECF No. 136-3 at 12. How the
hospitals' charity care levels compared to the regional
average was publicly available on an official state
government website. See ECF No. 105-12 at 3-4; ECF
No. 105-13 at 15; ECF No. 138 at 3; ECF No. 150 at 4.
Foundation's executives met with CHS's executives
regularly in hopes of forming community partnerships to
“co-invest in initiatives to try to . . . address
homeless or high utilizers.” ECF No. 136-2 at 6. These
meetings were unsuccessful, and no community partnerships
formed. Id. at 6-8. During these meetings, the
Foundation never expressed concern over whether CHS was
fulfilling its charity care obligations. See ECF No.
106 at 2; ECF No. 136-2 at 12.
November 2016, a guest lecturer for a graduate class on
health administration performed a “rough initial
analysis” of the hospitals' charity care levels.
ECF No. 136-2 at 10. When he shared the numbers with the
Foundation, it soon engaged legal counsel and obtained
“a more in-depth expert analysis” because it was
“extremely disappointed with the charity care
Foundation did not analyze the hospitals' charity care
levels earlier because it understood CHS had an obligation to
report to the boards of trustees, and the boards of trustees
never notified the Foundation of any issues with the
hospitals' charity care levels. Id. at 11-12.
Ultimately, the Foundation did not scrutinize the
hospitals' charity care levels until it engaged legal
counsel. Id. at 13-15. Yet, the Foundation claims it
has a fiduciary duty to enforce CHS's charity care
obligations on behalf of the Spokane community. ECF No. 105-5
Foundation filed this action on June 12, 2017, claiming
breach of contract and breach of the implied duty of good
faith and fair dealing. ECF No. 1. On October 11, 2017, the
Court denied CHS's motion to dismiss the Foundation's
claims that are “based on CHS's alleged failure to
provide the required minimum level of charity-care.”
ECF No. 22 at 15. The Court declared “[t]hose claims
survive” while dismissing others. Id. The
Court also ruled “[t]he Foundation's claims are not
time-barred” under the applicable statute of
limitations, at least to the extent they are “based
upon conduct occurring within the limitations period.”
Id. at 14. On February 27, 2019, the Court
determined that, if the Foundation were to prevail at trial,
it “may not recover under a traditional damages
theory” but “may obtain equitable monetary
relief.” ECF No. 82 at 14, 17.
asserts the affirmative defenses of laches, waiver, and
equitable estoppel, and the defenses of contributory fault
and failure to mitigate damages. ECF No. 38 at 10-11; ECF No.
87 at 2-3.
argues it has “demonstrated profound prejudice caused
by [the Foundation]'s nearly ten-year delay in bringing
this action.” ECF No. 138 at 4-5. CHS claims the
Foundation's inaction led it to believe it was in
compliance with its charity care obligations. Id. at
5. CHS notes the Foundation did not complain about the
hospitals' charity care levels until after it announced
it was selling them. Id. CHS claims the
Foundation's inaction denied it any opportunity to
address concerns over the hospitals' charity care levels.
Foundation complained about the hospitals' charity care
levels earlier, CHS would have taken the complaint seriously,
escalated the issue to corporate leadership, and investigated
the complaint at a local level. ECF No. 106 at 2; ECF No. 107
at 2; ECF No. 108 at 2. Deaconess Medical Center's Chief
Executive Officer “would have . . . taken any
appropriate action following that investigation.” ECF
No. 106 at 2. Valley Hospital and Medical Center's Chief
Executive Officer “would have wanted to schedule a
meeting with [the Foundation] to discuss [its] concerns in
detail and to have an open and honest conversation about what
Valley could do to improve.” ECF No. 108 at 2. And,