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Direct Supply, Inc. v. Speciality Hosps. of Am., LLC

United States District Court, District of Columbia

March 27, 2013

DIRECT SUPPLY, INC., Plaintiff,
v.
SPECIALITY HOSPITALS OF AMERICA, LLC, et al., Defendants

Page 138

For DIRECT SUPPLY, INC., Plaintiff: Douglas S. Crosno, LEAD ATTORNEY, HOGAN LOVELLS U.S. LLP, Washington, DC.

For SPECIALTY HOSPITALS OF AMERICA, LLC, SPECIALTY HOSPITALS OF WASHINGTON, LLC, Defendants: Kenneth Hanson Rosenau, LEAD ATTORNEY, ROSENAU & ROSENAU, Washington, DC.

For NOT-FOR-PROFIT HOSPITAL CORPORATION, Defendant: Emil Hirsch, LEAD ATTORNEY, Steven Andrew Pozefsky, BRADLEY ARANT BOULT CUMMINGS LLP, Washington, DC.

OPINION

Page 139

JAMES S. GWIN, UNITED STATES DISTRICT JUDGE.

OPINION & ORDER

[Resolving Docs. Nos 15, 41, 42 & 47]

In this contract dispute, all parties agree that Plaintiff Direct Supply is owed money, but disagree as to who should pay. In 2007, Direct Supply entered into an agreement with Defendant Speciality Hospitals of America (Specialty Hospital) to supply products and services to Specialty Hospital's United Medical Center (UMC) in the District of Columbia (the District). Two years later, the District evicted Specialty Hospital and transferred ownership of UMC to a newly-created governmental corporation, Defendant Not-For-Profit Hospital Corporation (NFP). Throughout this ownership shuffle, Direct Supply remained unpaid. It now asks this Court to make Specialty Hospital pay up, or in the alternative, to find against NFP on equitable grounds. For the following reasons, this Court GRANTS Direct Supply's motion for summary judgment on its breach of contract claim against Specialty Hospital, and DENIES AS MOOT all of Direct Supply's alternative claims. Further, NFP's motions to dismiss, for summary judgment, and to strike the affidavit of Jim Rappaport are DENIED AS MOOT.

I. BACKGROUND

In November 2007, faced with a need to increase medical services east of Anacostia River, the District approved a public-private partnership with Specialty Hospital.[1] The District wanted Specialty Hospital to run the Greater Southeast Community Hospital (GSCH), which primarily served an underserved population.[2]

The partnership agreement recognized that Specialty Hospital would purchase GSCH pursuant to a previously approved asset purchase agreement.[3] Under the terms of the agreement, Specialty Hospital was a general partner with 1% of the partnership interests, while the District was a limited partner with 99% of the partnership interests.[4] The District agreed to contribute seventy-nine million dollars in capital.[5] Importantly for our purposes, Specialty Hospital lacked the authority to unilaterally " obligate, bind or commit [the District] in any way for any obligation." [6] The agreement made clear that the District would not be liable for " the debts, liabilities, contracts, or any other obligations of the Partnership." [7]

Specialty Hospital maintained and operated GSCH under its wholly owned subsidiary, Capitol Medical Center, LLC (CMC).[8] It began operation of GSCH under a new name, United Medical Center. In August 2008 and February 2009, Specialty Hospital entered into two " Product and Services Agreements" with Plaintiff Direct Supply. The total value of the goods and services rendered was over six hundred thousand dollars.[9] The contract provided that Direct Supply could charge Specialty Hospital " a one percent late charge per month for payments that are 30 or more ...


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