The recent case of St. Joseph Hospital, Augusta, Georgia, Inc. v. Health Management Associates, Inc., Case No. 11-13069 (decided January 24, 2013), is a warning for transactional lawyers to be careful how they describe a transaction in pre-closing filings with government agencies. St. Joseph Hospital (now known as Trinity Hospital of Augusta) sued HMA for breach of contract and under the doctrine of promissory estoppel when HMA reneged on its “promise” to purchase the assets of the hospital. The hospital was seeking $38 million in damages, the difference between the price that HMA promised to pay and the price the hospital received when it sold the assets to a third party. Based on the documentation the parties filed with government agencies, the United States Court of Appeals for the Eleventh Circuit affirmed the decision of the district court to grant summary judgment in favor of HMA on both counts. In December 2005, the hospital and HMA drafted an Asset Sale Agreement that would be binding upon execution. Before executing the agreement, the parties had to notify the Attorney General of Georgia of the intended transaction so that the Attorney General could schedule a public hearing. After notifying the Attorney General, HMA made several public announcements about its intention to close the transaction. The parties also filed with the Federal Trade Commission and the U.S. Department of Justice a Premerger Notification and Report, pursuant to the Hart-Scott-Rodino law. Attached to the Premerger Notification was a Letter of Intent that the parties signed in January 2006 and the unsigned Asset Purchase Agreement. The Letter of Intent said it was “an expression of mutual intent only and does not constitute an obligation binding on the parties.” The day before the public hearing scheduled by the Georgia Attorney General, HMA notified the hospital and the Attorney General that it was withdrawing its offer due to a significant deterioration in the hospital’s operating performance after the Letter of Intent was signed. The hospital sold its assets to another purchaser for substantially less the price negotiated with HMA, and then sued HMA for abandoning the deal. The Eleventh Circuit stated that the hospital could not state a claim for breach of contract (either written or oral) nor for the application of promissory estoppel. The Court found “highly relevant” the Premerger Notifications filed by the parties. According to the Court, those written filings, which were certified under penalty of perjury, made clear that the terms of the Asset Sale Agreement would not be binding until signed by the parties and that the parties would close after the Georgia Attorney General held the public hearing and approved the transaction. While the Court’s approach is unique, this case is a good reminder to transactional attorneys to be sure that you say what you intend in all documents memorializing a deal.
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