LICH bidder drops lawsuit against SUNY, says ‘prepared to close’ on Brooklyn hospital deal

Judge wants to see money and paperwork

May 3, 2014 By Mary Frost Brooklyn Daily Eagle

BHP's Merrell Schexnydre, by Mary Frost

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The group negotiating to buy Brooklyn’s Long Island College Hospital (LICH) withdrew their lawsuit against SUNY late Friday after being told by state Supreme Court Justice Johnny Lee Baynes that they had filed for an injunction prematurely.

“Don’t jump the gun in my court,” Justice Baynes told attorneys for Brooklyn Health Partners Development Group (BHP), led by California developer Merrell Schexnydre. Justice Baynes allowed BHP to withdraw without prejudice.

Attorneys for BHP said they are confident that negotiations will continue with SUNY until Monday’s deadline, when a $25 million non-refundable deposit is due.

BHP spokesperson Donnette Dunbar, CEO of Dash Media, said in a statement, “Brooklyn Health Partners, per Judge Johhny Lee Baynes’ instruction, is prepared to close its transaction with the State University of New York on Monday, May 5.”

SUNY spokesperson David Doyle told the Brooklyn Eagle, “The judge requested that BHP withdraw the motion and it did. SUNY will continue to ‎act in good faith in accordance with the stipulation and order.”

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UPDATE: BHP, SUNY headed back to court

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BHP had complained when it filed for the injunction that SUNY was attempting to undermine the negotiations. “SUNY has repeatedly imposed one-sided and inequitable requirements and arbitrary deadlines on BHP, which BHP accepted, only to have SUNY then impose even harsher deadlines or more onerous burdens on BHP,” the complaint said.

Before Justice Baynes on Friday, BHP claimed that SUNY built a “poison pill” into the contract. “This agreement they drafted says we have to operate a hospital regardless of regulatory approval. We can’t open it without a license. If we can’t get a license, the game is over, and we have to forfeit our deposit and [other] money and property. They are setting us up for failure — it’s effectively a poison pill.”

SUNY countered that BHP’s affidavit was chock full of misrepresentations, and said that BHP was unable to fulfill promises made in their proposal, such as providing temporary “bridge” health services after SUNY walks away from the hospital on May 23.

SUNY also said the group couldn’t provide documentation proving they have access to $600 million worth of financing.

Proposal promised 150-bed “bridge facility”

BHP’s $250 million bid promises to keep LICH, a complex of roughly 20 buildings on desirable real estate in Cobble Hill, open as a full-service hospital while developing non-core properties as residential and commercial. BHP has partnered with Brooklyn real estate developer Chaim Miller, who has yet to provide letters of credit, SUNY says.

BHP won the bid after SUNY reissued its Request for Proposals after a long and passionate legal battle by community members, officials and unions to keep LICH open.

But many of these advocates say they are disturbed that so many members of a panel appointed by SUNY voted against hospital proposals, contrary to the terms of the reissued RFP. Of the top three bidders, only BHP proposed a hospital. Other hospital proposals were ranked lower.

On Friday, both sides told Justice Baynes that the other hadn’t given them necessary paperwork. Attorneys for SUNY told the judge, “SUNY pressed BHP time and time again for information to assess the offer and bona fides.”

BHP’s attorneys said they were still awaiting the revised purchase and sales agreement (PSA). “It’s becoming impossible to sign a contract on Monday when we don’t have a contract to sign.”

Justice Baynes told BHP to show him the money. “Now is the time. I want proof – a certified check, delivered to the clerk in the office.

“I’ll give you your chance. If you’re all in, you’re all in,” he said. However, “You could lose your $25 million if you waste my time.”

SUNY, however, said that the $25 million deposit was not enough. “We need to know they have the ability to finish in six months — $225 million, and an operator who can run the facility and obtain a license – and an additional $300 million to finance the cost of the new hospital.”

In their proposal, BHP promised a 150-bed bridge facility would remain in place until a new 300-400 bed hospital would be constructed using the Fuller and Othmer Pavilions, the Polhemus building and part of the Amity Pavilion.

Attorney Kenneth Fisher, representing the Downstate at LICH Holding Company (DLHC), said SUNY is only exercising due diligence by asking for proof that BHP could pay for the future hospital two years down the road.

If the real estate is worth more than $250 million, Fisher said, it would be worth it for BHP to lose the $250 million and let SUNY take back the hospital, “and they walk off with the rest of the real estate. Is that worth $250 million? As a real estate play, that makes sense.

“SUNY is acting in good faith,” Fisher said. “We could have said, ‘Sorry about the default.’”

SUNY says they had advised BHP to connect with a hospital that would be willing to extend its operating license to LICH, which could be done in as little as five weeks.

BHP lawyers told Justice Baynes, however, that when they did not receive SUNY’s cooperation in obtaining an operating license, they decided to focus on what they needed to do to close on the deal, and not on bridge services.

In a letter to Ruth Booher, SUNY’s Deputy Counsel for Health Affairs, BHP attorney Jill D. Block wrote that between May 5 and November 6, “Any number of things might happen. BHP might operate some limited interim services, through a physicians’ group or by working with a FQHC operator. BHP might simply prepare the premises for the Bridge Health Services to be offered upon closing” on November 6.

Attorney Richard Seltzer, representing the New York State Nurses Association (NYSNA), was outraged by the lack of a bridge health plan. He said that Block’s letter — which he labeled “Exhibit 7” — was a key indication that BHP felt they had no obligation to provide significant health services between now and November.

“We met with BHP. We have not received one detail about any health services,” he thundered. “They told us they will get to May 5, and then they’ll talk. My employees are going to be laid off in three weeks, and the patients will have no service in three weeks. This is not just a real estate deal, this is a health services agreement….. And what do we hear? They may put in some doctors’ offices.”

Attorney Fisher said that SUNY wanted to move on to the next bidder on the list, developer Don Peebles, who is not offering to build a hospital but has offered some ambulatory medical services. “SUNY needs to go to the next entity,” he said. “This involves the larger public; there needs to be closure and finality at the LICH site.”

The start of another lawsuit?

In the end, however, Justice Baynes assured BHP that SUNY could not legally move on to Peebles until Tuesday, and until then the groups needed to provide each other with the paperwork each side said it was lacking.

Justice Baynes also called Dr. Jon Berall to the bench. “Dr. Berall has filed an order to show cause,” he told the cluster of mystified attorneys gathered at the front of the court.

“Dr. Berall? I’m going to bring you in,” he said. He gave the doctor, who served as an ombudsman during the LICH litigation, two weeks to serve papers.

Dr. Berall told the Eagle he had started the legal action because “We need a new RFP. This is clearly bogus, manipulated, disenfranchises the community and is disrespectful to the court.”

Contrary to the intent of the reissued RFP, “The second place finisher is a Condo King, as is the third place finisher: The hospital will be destroyed and super-lux condos built,” he said.

He questioned SUNY’s scoring of the bids. “A credible bidder with a hospital and a residency program came in a distant eighth out of nine,” a “surprising outcome,” he said.