Ex-California AG Ducks Spat Over Hospital Takeover

SAN DIEGO (CN) – A federal judge flip-flopped Wednesday and dismissed a case against California’s former attorney general Kamala Harris by a hospital which claimed its acquisition was blocked by Harris because it refused to allow workers to unionize.

U.S. District Judge Gonzalo Curiel found the single claim remaining in the case brought against Harris by Prime Healthcare Services should be dismissed, a 180-degree turn from a summary judgment hearing earlier this year where he said, “It seems almost inconceivable the court could grant a motion to dismiss.”

Prime sued Harris in 2015 in the Central District of California claiming constitutional violations related to what it said were unfair conditions placed on its proposed acquisition of the Daughters of Charity Health System. The case was transferred to San Diego federal court last year.

In her capacity as attorney general, Harris oversaw sales and acquisitions of nonprofits and charitable organizations in California.

Prime claimed Harris made the $843 million deal impossible to close by placing conditions on the transaction that required Prime to maintain the same level of health care services for 10 years – conditions the company said made the acquisition “financially unviable.” Prime said Harris did this as a favor to the Service Employee International Union in exchange for financially back Harris’ Senate campaign.

Harris won a U.S. Senate seat this past November.

SEIU and Prime have a contentions history stemming from the company’s refusal to let the labor group unionize its employees. The two groups have been embroiled in their own legal battles preceding the lawsuit Prime filed against Harris, according to Curiel’s summary of the history of the case.

Curiel found in his 43-page order it “is difficult, if not unrealistic, to effectively disentangle” other hospital purchasers from the transactions in determining if Prime was indeed treated differently than its counterparts.

“As Prime admits, each nonprofit hospital serves a ‘distinct community,’ and even slight differences in transaction terms can render transactions dissimilar at their core,” Curiel wrote.

The judge found Harris’ condition requiring Prime to continue the same level of hospital services for 10 years rather than five years “plausibly appears to support the purposes enumerated in the Nonprofit Hospital Transfer Statute and its implementing regulations.”

Curiel noted Harris had “complete discretion” in determining conditions to be placed on the transaction and that she was not required to explain the reasons behind the decision.

“Do political motivations or considerations constitute a legally impermissible motive? Does acceding to union political pressure dislodge all of the rational reasons underlying Harris’s disparate treatment of Prime, rendering her acts malicious, irrational, or plainly arbitrary? The answer remains unclear,” Curiel wrote.

But he ultimately found Harris was entitled to qualified immunity in her capacity as former attorney general and warned singling out discretionary decision-making “state officials are entrusted to exercise” could lead to a slippery slope in court.

“Not only would the attorney general’s statutory discretion be undermined – federal courts would be assigned the daunting task of reviewing complex business transactions and state officials’ decisions spanning broad domains, from public health to antitrust regulation,” Curiel wrote.

The judge found Prime was not entitled to injunctive relief barring the current attorney general from enforcing the Nonprofit Hospital Transfer Statute, which Prime said would prevent it from acquiring other nonprofit hospitals in California due to its continued rejection of unionization demands.

Curiel found Prime’s claims are “inextricably intertwined” with Harris’ alleged actions and that Prime did not show how the underlying allegations apply to current California Attorney General Xavier Becerra.

Neither Prime attorney John Mills with the Los Angeles firm Nelson Hardiman nor Deputy Attorney General Michele Inan returned phone and email requests for comment.

 

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