Defending Ambulatory Surgery Center Against Lawsuit by Former Physician-Members


May 1, 2019

Ambulatory surgery centers (ASCs) have become a large and growing feature of the health care industry. (ASCs offer same-day surgical care, including diagnostic and preventive procedures, and can provide a more convenient and lower-cost alternative to hospital-based outpatient procedures.) ASC sale/acquisition activity has intensified over the past few years.

Epstein Becker Green has substantial experience representing ASCs in sales and acquisitions—and defending ASCs when their corporate transactions and decision-making are challenged. For example, in November 2018, Epstein Becker Green obtained a significant victory for an ASC client located on the East Coast of the United States. From the fall of 2017 through the spring of 2018, we represented our client in a transaction involving the sale of a controlling membership interest to a company that develops and operates ASCs and surgical hospitals nationwide (“Purchaser”). During the diligence phase of the transaction, five former physician-members, who had departed our client’s practice months before, asserted that they had been improperly forced out and sought a portion of the proceeds of the sale to the Purchaser. Those individuals then filed an action with the American Arbitration Association, asserting claims of breach of fiduciary duty, constructive fraud, negligence, and violation of the relevant state’s Blue Sky Law. The allegations asserted significant contentious issues regarding the ramifications of non-competition agreements between the parties. The claimants sought the return of their equity in our client, the value of their equity had they not departed our client, and other compensatory damages, totaling several million dollars.

Epstein Becker Green vigorously defended the lawsuit, which went to a five-day hearing only 90 days after the Statement of Claim was filed. The arbitrator’s lengthy decision resoundingly found in favor of our client on all counts. The arbitration clause in the parties’ agreement contained a “prevailing party’s provision,” enabling our client to seek repayment of its attorneys’ fees and costs from the claimants.

Frank C. Morris, Jr., and Nathaniel M. Glasser represented our client throughout the arbitration, with assistance from E. John Steren, Kathleen M. Williams, and Jonathan Hoerner.