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Hendricks Regional, Hall Render face $50M lawsuit over failed deal

March 21, 2018

A lawsuit against Hendricks Regional Health and an Indianapolis law firm representing the hospital group alleges they used “malicious, oppressive, willful, wanton, and/or reckless conduct,” conspiring to squelch a competitor’s deal to operate 23 Indiana care facilities after Hendricks’ contract was terminated.

The suit filed by Dycora Transitional Health-Indiana and related entities accuses Hall Render Killian Heath & Lyman and its attorney, James R. Willey, of legal malpractice among numerous claims against the firm and against Hendricks. The suit alleges Dycora’s deal to operate 23 Golden Living rehabilitation centers around the state was derailed by illegal or unethical acts by Hendricks Regional and Hall Render.

Spokespeople for Hall Render and Danville-based Hendricks Regional declined to comment on the suit filed last week before Judge P.J. Dietrick in Marion Superior Civil Division.

In addition to malpractice claims against Hall Render and Willey — who the suit says also serves as Hendricks’ general counsel — the complaint alleges they breached a fiduciary duty to Dycora, which they also represented. The firm and Willey provided “representation, counseling, encouragement, and/or advice to Hendricks that was materially adverse to the interests of Dycora with respect to Hendricks’ baseless and unlawful actions … to block the Dycora Transaction in order to retain control over the Facilities and impose financial damage upon Dycora,” the suit alleges.

“The transaction value to Dycora was approximately $50 million,” said McNeely Stephenson attorney Paul L. Jefferson, who represents Dycora in the suit against Hendricks and Hall Render. “It’s a fairly sizeable piece of litigation.”

While Hall Render and Willey provided representation to both Hendricks and Dycora, the complaint claims they “chose to assist one client — (whose) CEO was a former partner and friend of the firm — to the detriment of other clients,” the complaint claims, referring to Hendricks’ CEO and former Hall Render partner Kevin P. Speer.

Executive perjury? 

Hendricks had a management agreement to operate, under its license, nearly two dozen Golden Living comprehensive care facilities from Evansville to Merrillville. But in 2016, Golden Living negotiated an agreement with Dycora to acquire the leasehold and management responsibilities of the facilities, according to the suit.

After Dycora and Hendricks could not agree to terms for Hendricks to remain the license holder under the new arrangement, Dycora negotiated a deal with Daviess County Hospital to hold the licenses. Golden Living then terminated its relationship with Hendricks, the suit says.

“Hendricks intentionally interfered with those transactions by engaging in a strategy to block Golden Living from terminating Hendricks’ status as manager of the Facilities and prevent Dycora from taking over,” the suit says. “… On information and belief, the strategy to block the takeover was based on confidential information illegally obtained through Hall Render’s representation of Dycora.”

The suit says Hendricks asserted rights of first refusal in its agreement with Golden Living, including through litigation. “The strategy also included Isadore Rivas, Hendricks’ Chief Financial Officer, asserting under penalties of perjury that Dycora was an alter ego of Golden Living.”

Hendricks filed a complaint seeking an injunction to block the Dycora transaction, asserting Dycora had “no economic substance” and is “an alter ego” of Golden Living entities. Dycora in its suit against Hendricks alleges that in a deposition, Rivas admitted that Hendricks was aware of no facts supporting those claims, and that two days later, Hendricks withdrew its motion for an injunction.

Patients in the middle?

The suit says after Hendricks withdrew its bid for an injunction, it continued to interfere with Dycora’s business relationship with Golden Living. 

“Hendricks threatened to issue discharge notices to patients in the Facilities if Golden Living and Hendricks did not enter into an Operations Transfer Agreement … immediately,” the suit claims. “Shortly thereafter, despite having been provided with a draft OTA from Golden Living, Hendricks claimed, without any legal basis, that Hendricks was entitled to a new 90-day notice of termination under the Master Management Agreement before it was required to relinquish operational control of the Facilities to Dycora or issue licenses to Daviess. … Hendricks also demanded a full release of Hall Render from any potential claims related to the Injunction Proceedings.”

These delays and other actions by the defendants, the suit claims, caused Dycora to be unable to operate the facilities, putting an end to its transaction with Golden Living. This gave rise to Dycora’s of tortious interference with a business relationship against Hendricks, Hall Render and Willey.

The suit also alleges abuse of process by conspiracy against all defendants; abuse of process against Hendricks; malicious prosecution against Hall Render and Hendricks; and abuse of process against Hendricks.

According to its website, Dycora operates 19 locations in California and eight in Wisconsin.

Golden Living facilities that Dycora claims in this lawsuit that it lost the opportunity to operate include locations in Beech Grove, Bloomington, Danville, Elkhart, Evansville, Greenfield, Indianapolis, Knox, Kokomo, LaPorte, Merrillville, Mishawaka, Muncie, Newburgh, Petersburg, Portage, Richmond, Tell City and Valparaiso.

The suit is Dycora Transitional Health, et al. v. Hall Render Killian Heath & Lyman, et al., 49D12-1803-PL-010708.

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