District Files Countersuit against Sutter

The Citizen

The Eden Township Healthcare District has filed a countersuit against Sutter Health’s claim the board’s attempt to block the purchase option of San Leandro Hospital violated the agreement signed in 2007. The legal action, filed Dec. 29, comes just a week after the District voted to sever its long-time relationship with its legal representation.

The counterclaim, obtained by The Citizen, alleges Sutter failed to convert the unused fourth floor of San Leandro Hospital to eventually support acute rehabilitation facilities. According to the often disputed 2007 Memorandum of Understanding (MOU) signed by the District and Sutter, a portion of the agreement calls for Sutter to remodel the top floor of the hospital at a cost no greater than $5 million. The countersuit also seeks declaration Sutter’s “default effectively voids it option to purchase San Leandro Hospital.”

Due to the late Saturday news of the countersuit, a spokesperson for both Sutter and the District could not be reached for comment.

The four-page legal document also disavows all claims made by Sutter’s lawsuit and alludes to the failure of the Sacramento-based conglomerate to “complete a financial audit to determine its purchase price.” Rumors of the District suing Sutter for breach of contract of the 2007 MOU have circulated for months with virtually no action until this past week. The countersuit amounts to the District’s first legal defense against Sutter since being sued Oct. 27 for failing to transfer title of San Leandro Hospital. The suit also asks for $5 million in damages from the District.

The long winding road pitting Sutter against the District and the community of San Leandro first became enmeshed in legal confrontation in late 2009 when Sutter announced its intention to purchase the hospital for what one county official flatly said was nothing, “It’s already paid for.”

The District board subsequently voted to block the option, which Sutter countered the next day announcing it had agreed to lease the yet-unpurchased facility to the Alameda County Medical Center for acute rehabilitation services. The simmering face-off led to Sutter’s lawsuit in late October for the transfer of the hospital and has now boiled over with Tuesday’s counterclaim by the District.

The claim was filed by the Walnut Creek-based law firm Archer Norris, which was named interim legal counsel Dec. 21. It replaced long-time legal representative Craig Cannizzo who was forced out for what some boardmembers deemed a lack of trust for a collection of allegedly dubious legal opinions. Archer Norris has previously acted as the District’s co-counsel and represented the Marin Healthcare District against Sutter in the past.

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6 thoughts on “District Files Countersuit against Sutter

  1. Dr. Rico:

    From the Daily Review's story this week: “….Sutter failed to meet several conditions of a 2008 memorandum of agreement, such as the requirement to create a separate parcel of land containing an office building, a requirement to convert the fourth floor of the hospital into an acute rehabilitation facility, and the completion of a financial audit.”

    Has Sutter fulfilled these conditions of the MOU?


  2. Mr. Terry: You misunderstood my point. The current Board believes that the previous lawyer, Mr. Cannizzo, was giving bad advice and that is why they dismissed him. Their new lawyer has filed the countersuit and “Anonymous” wondered if that meant that the previous lawyer (Mr. Cannizzo) was indeed giving bad advice after all. My point was that you could not tell that from current events and it may be the new lawyers who are giving the bad advice and that time would tell. We'll have to wait and see.

    As it happens, I have knowledge of the facts and issues and I believe that Mr. Cannizzo was correct in his advice to the Board. I believe that the countersuit and continued litigation are ill advised and will result in the district wasting a huge amount of public money with the result that they will lose in the end.


  3. Great work “Citizen,” the Daily Review just touched on this story today…out with the old, in with the new.

    I agree with Mr. Rico, the lawyer must have been giving bad advice.


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