Case Studies

Defending Ambulatory Surgery Center Against Lawsuit by Former Physician-Members

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.

Epstein Becker Green Wins Dismissal of Service Personnel’s Tip Pool Claims Against Restaurant

Epstein Becker Green obtained summary judgment, on behalf of a restaurant client ("Restaurant"), from Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia. See Arencibia v. 2401 Restaurant Corporation d/b/a Marcel's Restaurant, No 1:09-cv-00165-CKK-DAR (D.D.C. Dec. 21, 2011). The plaintiffs, several service personnel, had brought a multifaceted challenge under both the FLSA and District of Columbia law to the method by which the Restaurant operated a tip pool.

In a 31-page decision, Judge Kollar-Kotelly made several significant findings:

  • The maître d' was not a manager and, therefore, properly participated in the tip pool; what controlled was his actual authority, not what the employees may have perceived his authority to be. Accordingly, the Court found that two possible instances where the maître d' allegedly terminated or disciplined an employee were irrelevant.
  • The fact that a director of sales received a commission from part of a service charge, the rest of which went to a tip pool, did not make her a participant in the tip pool. Alternatively, the Court found that she had sufficient interaction with customers in arranging and planning private parties to be included in the tip pool, even though she did not serve food or perform hosting duties.
  • Allegations of improper notice of, and arbitrary modifications to, the operation of the tip pool were rejected by the Court. By doing so, the Court, in what appears to be a matter of first impression, held that the Department of Labor's tip pool regulations do not require any particular percentage method, or preclude adjustments based on good performance or customer-directed tips. Therefore, it was sufficient that the restaurant simply notified the employees that all their non-cash tips went into the tip pool and did not retain any of the tips for any other purpose. Neither federal nor District of Columbia law required disclosure of the formula underlying the dispersal of tips in the pool.
  • A claim that one of the plaintiffs was terminated for making complaints about the operation of the tip pool was rejected by the Court. In so doing, the Court held that a request for a meal break or on premises meal did not raise a compensation issue protected under the FLSA.

The Epstein Becker Green team representing the Restaurant included Frank C. Morris, Jr.; Brian Steinbach; and Kathleen M. Williams of the Washington, D.C., office.