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Gulf Coast Hospice LLC v. LHC Group Inc.

Supreme Court of Mississippi, En Banc

June 6, 2019

GULF COAST HOSPICE LLC, A MISSISSIPPI LIMITED LIABILITY COMPANY, JYOTI DESAI, KRUPA DESAI AND IQBAL SAVANI
v.
LHC GROUP INC., A DELAWARE CORPORATION, MISSISSIPPI HEALTH CARE GROUP, LLC, A MISSISSIPPI LIMITED LIABILITY COMPANY AND LHCG XXVI, LLC, A MISSISSIPPI LIMITED LIABILITY COMPANY

          DATE OF JUDGMENT: 11/06/2017

          HARRISON COUNTY CIRCUIT COURT HON. CHRISTOPHER L. SCHMIDT TRIAL JUDGE.

          TRIAL COURT ATTORNEYS: MICHAEL B. HOLLEMAN TAYLOR B. McNEEL STEPHEN J. CARMODY

          ATTORNEYS FOR APPELLANTS: MICHAEL B. HOLLEMAN PATRICK WILLIAMS

          ATTORNEYS FOR APPELLEES: TAYLOR B. McNEEL STEPHEN J. CARMODY L. KYLE WILLIAMS

          COLEMAN, JUSTICE.

         ¶1. Louisiana Hospice Corporation, otherwise known as LHC, sought to acquire Gulf Coast Hospice LLC in D'Iberville, Mississippi. LHC and Gulf Coast Hospice executed a letter of intent outlining the basic terms of the proposed acquisition. Ultimately, the parties failed to consummate the transaction. Gulf Coast Hospice LLC and its members, Jyoti Desai, Krupa Desai, and Iqbal Savani[1] sued LHC Group Inc., LHCG XXVI LLC, and Mississippi Health Care Group LLC, [2] asserting several theories of liability stemming from the failed acquisition.

         ¶2. The trial court granted LHC's motion for summary judgment and dismissed Gulf Coast Hospice's claims. Gulf Coast Hospice appeals, arguing that genuine issues of material fact should have prevented summary judgment. Gulf Coast Hospice's chief argument is that LHC entered into an enforceable contract to acquire its hospice operations. Alternatively, Gulf Coast Hospice argues that if no enforceable contract to purchase exists, its claims for breach of contract and duty of good faith with respect to the letter of intent and tortious interference should have survived summary judgment.

         ¶3. We hold that no enforceable contract exists, that the doctrine of estoppel is inapplicable, and that no genuine issue of material fact exists regarding Gulf Coast Hospice's misrepresentation claims. We further hold no genuine issue of material fact exists regarding Gulf Coast Hospice's alternative claims. As such, we affirm.

         FACTS AND PROCEDURAL HISTORY

         ¶4. Between June 2007 and December 2008, Prasant Desai owned and operated Gulf Coast Hospice. Around December 2008, Prasant transferred his 100 percent ownership interest to his mother Jyoti Desai (50 percent ownership), his sister Krupa Desai (25 percent ownership), and Dr. Iqbal Savani[3] (25 percent ownership). Jyoti's husband Haresh Harry Desai, who is Prasant's and Krupa's father, was the "managing member of the board for the meetings[, ]" did "some paperwork[, ]" and "handl[ed] the checkbooks." Although the record is unclear about Harry's actual role with Gulf Coast Hospice, the parties do not dispute that he served in a representative capacity and handled negotiations.[4]

         ¶5. Around the time of the ownership transition within the family, Gulf Coast Hospice hired Linda Rogers to serve as director of nursing and administrator. Shortly after Rogers's hire, she became the primary decisionmaker in charge of daily operations. Neither the Gulf Coast Hospice members nor Harry had any role in daily operations. Under Rogers's leadership, profits and revenues grew by substantial amounts. Of importance, the patient census grew from six to fifty by the end of 2010. Harry considered Rogers to be the key employee running daily operations, as well as the most valuable employee.

         ¶6. In November 2010, independent broker Craig Kincannon contacted Harry, inquiring whether Gulf Coast Hospice would be interested in selling its hospice operations to LHC. Harry responded affirmatively. On December 27, 2010, LHC and Gulf Coast Hospice entered into a letter of intent with respect to the proposed acquisition of Gulf Coast Hospice's operations. The first paragraph provided as follows:

This letter sets forth our mutual understandings with respect to the basic terms of a proposed acquisition by LHC Group, Inc. ("LHCG") of the assets of the hospice operations of Gulf Coast Hospice ("Seller") that serve the Mississippi counties of George, Hancock, Harrison, Jackson, and Stone (the "Business"). As more fully described in this letter, it is our mutual intent to negotiate a satisfactory, definitive asset purchase agreement (the "Asset Purchase Agreement") and such other documents as may be necessary to consummate the proposed transaction (together with the Asset Purchase Agreement, the "Agreements"). The intention to consummate the transaction described herein (the "Transaction") is subject to the following terms and conditions:

         ¶7. The four page letter of intent continued by outlining terms and conditions of the proposed transaction and included the tentative proposed purchase price of $1.75 million, "[b]ased on the information made available thus far[.]" Paragraph five contained a non-exhaustive list of conditions to closing:

Conditions to Closing. The Closing of the Transaction shall be subject to the satisfaction of mutually agreeable terms and conditions, including, without limitation, the following:
(a) Negotiation, execution and delivery by the parties of the Agreements;
(b) The approval of the transactions contemplated herein and the Agreements by the Board of Directors or other governing body of each party, approval of which shall be obtained by each party prior to the execution of the Agreements;
(c) Satisfactory completion of due diligence by LHC[] and its affiliates;
(d) Receipt of all necessary consents and approvals of state and federal governmental authorities and other third parties, if any;
(e) Receipt of adequate assurances from the applicable state Department of Health Services and the federal Centers for Medicare and Medicaid Services that the home health agency licenses and provider agreements with the Medicare and Medicaid programs are in good standing and are transferable to [LHC]. LHC[] or one of its affiliates will be responsible for obtaining the foregoing assurances timely; and
(f) Satisfaction of such other conditions as may be reasonable and customary in acquisition agreements.

         ¶8. Paragraph fourteen provided, in pertinent part, as follows:

Non-Binding Effect. It is understood that this letter merely constitutes a statement of the mutual intentions of the parties with respect to the Transaction, does not contain all matters upon which agreement must be reach in order for the Transaction to be consummated and, except in respect to Paragraphs 6 through 13, inclusive, and this Paragraph 14, creates no binding rights in favor of any party. A binding commitment with respect to the Transaction will result only if the Agreements are executed and delivered, and are then subject only to the terms and conditions contained therein.

         ¶9. The letter of intent granted LHC the ability to "conduct, to the extent determined desirable or necessary by its own discretion, a review of the business, assets, liabilities, financial condition and results of operations, properties owned or operated by [Gulf Coast Hospice] and the books and records of [Gulf Coast Hospice]."

         ¶10. On January 4, 2011, LHC's project manager Dustin Delahoussaye for the Gulf Coast Hospice acquisition emailed Harry. Dustin explained the preliminary steps of the acquisition process, attached several documents to be either reviewed or completed, summarized the documents, and informed Harry that LHC's attorney would send draft documents in the weeks to come. An acquisition timeline attached to the email provided a target closing date of February 28, 2011, and the "Target Effective Date 3/1/2011." On January 7, 2011, LHC emailed Harry transaction documents, including a draft asset purchase agreement labeled "LHCG Draft" and "For Discussion Purposes Only." LHC also sent a change of ownership notification to the Mississippi State Department of Health's Health Facilities Licensure and Certification Division. LHC notified the Department that, effective March 1, 2011, LHC would be purchasing Gulf Coast Hospice.

         ¶11. On January 13, 2011, Dustin emailed LHC employees Lori Stagg, vice president of LHC hospice operations, and Brach Myers, assistant director of acquisitions, informing them of Harry's concern that LHC attempt to retain all employees or, at minimum, try to find positions for them with LHC. Dustin explained that, although Rogers's salary is much higher than LHC's staffing model for administrators, "keeping Linda [Rogers] is key to this deal and we must keep her on board."

         ¶12. On January 28, 2011, Dustin emailed fellow LHC employees: "As you all are aware of at this point, we are set to acquire Gulf Coast Hospice in D'Iberville, MS effective on 3/1." Dustin generally briefed the LHC employees about Gulf Coast Hospice and described Rogers's role with Gulf Coast Hospice. On January 31, 2011, Rogers had a dinner meeting with LHC employees Stagg and Shelly Denton, LHC's hospice regional manager. The three discussed compensation, and Rogers told them about her success. Following the dinner, Stagg emailed Dustin explaining that Rogers seemed capable but that she had refused to accept a salary of $85, 000 with a 12 percent bonus. Rogers told Lori and Denton that she would accept a salary of $102, 000. Stagg explained that LHC "cannot pay her this salary for a Hospice this size especially since she would make 30K more than the other Administrators and more than her supervisor, Shelley [Denton]." Stagg also explained that Rogers had told them that Gulf Coast Hospice staff were worried about the mandatory staff meeting scheduled for the next day. Stagg mentioned that "the broker [had] 'promised' them that LHC would not cut anyone's salary."

         ¶13. On February 1, 2011, a team of LHC representatives arrived at Gulf Coast Hospice and met with employees. With Gulf Coast Hospice's permission, LHC announced to employees that it was to acquire Gulf Coast Hospice, effective March 1, 2011. LHC showed a presentation about its company and provided additional written materials, including employee benefits. Gulf Coast Hospice employees became disgruntled when they were advised about proposed changes to their pay structure.

         ¶14. LHC and Rogers collaborated to address staff changes to fit LHC's staffing model in anticipation of the effective date. At the time, Gulf Coast Hospice had fourteen full time employees, but LHC's models provided for ten and a half. LHC did not choose what remaining employees would be subject to staff reductions. Harry confirmed that no employee "was ever fired at the direction of LHC."

         ¶15. Rogers chose the three individuals with the most write-ups to be advised that they would not be extended offer letters to remain with LHC-Rhonda Schwan, Jamie Schonewitz, and Jennifer Morris. It was also decided that part time social workers Tim Jones and Kimberly Fayard would not be retained by LHC because they were full time employees of Amedisys, a competitor of LHC's home health business and a referral source to Gulf Coast Hospice. Rogers informed LHC that Jones and Fayard would rather keep their full time jobs with Amedisys than work part time for LHC. Gulf Coast Hospice employed two full time marketing employees, Crystal Miller and Leslie Hensarling. Because LHC's staffing model provided for one full time marketing employee, Rogers proposed a solution to keep one marketing employee full time; the other would remain a marketing employee and would absorb Schwan's duties. LHC agreed.

         ¶16. During February, LHC undertook several tasks onsite in preparation of the effective date of March 1, 2011, so that no interruption in operations would occur after closing. LHC installed a new telephone system, changed telephone providers, installed a new computer system connected to the LHC nationwide network, set up employees with LHC email accounts, and changed the pest control contract for the building, all set to take effect March 1, 2011. LHC also transferred utility services to its name, effective March 1, 2011.

         ¶17. On February 8, 2011, Dustin emailed Rogers, informing her that LHC's HR team would arrive at Gulf Coast Hospice on February 10 and February 11 to present offer letters, compensation reviews, and benefits enrollments.[5] Rogers responded, "Great" and confirmed that she would inform the employees who would not be retained. Rogers did not advise Schwan, Schonewitz, and Morris that they would be not be retained. Rogers had informed Harry about the proposed layoffs, but he told her, "you don't fire nobody until they have taken over."

         ¶18. On February 10 and 11, LHC's HR team arrived onsite as scheduled and conducted individual meetings. Gulf Coast Hospice employees completed new hire information sheets, provided driver license information, provided information for direct deposit purposes, photographed for LHC identification badges, submitted to background checks, and underwent drug screening. During the individual meetings, Schwan, Schonewitz, and Morris were informed that they would not be retained by LHC.

         ¶19. Gulf Coast Hospice employee RN Gail Wisgoski presented to the HR team for her individual meeting, but she was not on the list of current employees. Consequently, LHC informed her that it did not have an offer letter for her. Rogers recently had recruited and hired Wisgoski from another hospice company. Rogers became upset about the situation with Wisgoski and complained to LHC. Rogers felt that LHC's proposed solution to offer Wisgoski a part time position was not sufficient. Dustin and Rogers disagreed about why Wisgoski did not have an offer letter. Ultimately, Dustin told Rogers that the situation had been a result of "really bad miscommunication." Rogers testified that "at that point is when I decided [LHC] would never make me mad again, that I would not work for them." Rogers did not disclose her decision to LHC.

         ¶20. On February 10, 2011, Dustin sent an email to Harry explaining the reasons why certain employees would not be retained. Dustin also apologized for the situation regarding Wisgoski. Dustin assured Harry, "We remain confident in you, Linda [Rogers], and all of our team members' ability to work through these problems, and we remain committed to you, the staff, and Gulf Coast Hospice."

         ¶21. On February 11, 2011, Harry told the broker to send "the final agreement with the new purchase price that takes into account the money for Linda [Rogers's bonus] and the severance for the volunteer coordinator." LHC's in-house counsel emailed Dustin, "if we expect to close 2/28, we need [Gulf Coast Hospice's] comments to the documents and schedules NOW!"

         ¶22. On February 12, 2011, Rogers told Harry she would not work for LHC. Rogers testified that Harry and Dr. Savani told her not to say anything about her intention. Dr. Savani did not recall the conversation. Harry denied telling Rogers not to say anything to LHC but claimed that Rogers had already informed LHC that she would not work for LHC. Harry also claimed that "She's not supposed to tell anybody what she's doing." Rogers testified that she never told LHC her intention; instead, she told LHC, "I'm not sure, but I will let you know[.]" Rogers testified that when Harry and Dr. Savani heard about Rogers's statement, they confronted her. Rogers described the meeting:

Harry saw [Gulf Coast Hospice employee] Crystal Miller outside of the building somewhere, and he told Crystal Miller that I made a mistake, that I shouldn't have said that. And then he and Dr. Savani came. I don't know if it was the same day or a couple of days later in my office and said, you shouldn't have said that. You made a mistake. And they were very upset with me. And I said, you guys have put me in a bad situation, where you are asking me to lie, and I'm not comfortable with it, so I did the best that I could for the situation. You told me not to tell. You are my employer. I still work for you. But when this [LHC employee] asked me a direct question, you wanted me to lie. And when I just said, I don't know, I will let you know when I decide, you all are angry. Well, you should haven't told. I said, well, you guys put me in a bad situation. That was the extent of the conversation.

         ¶23. On February 15, 2011, five employees resigned, including Crystal Miller and Rhonda Smith. Meanwhile, Gulf Coast Hospice had previously contracted with two medical directors. One medical director had provided Gulf Coast Hospice notice that he would no longer serve as a medical director, and the other refused to speak with LHC.

         ¶24. On February 21, 2011, Dustin sent Harry a wire transfer request form and seller's W-9 form in anticipation of closing. On February 22, 2011, Dustin sent a draft of the closing statement to Harry. On February 22, 2011, Wisgoski and a part time employee resigned. On February 23, 2011, Ingrid Miscavage of Gulf Title Company sent Harry a redlined asset purchase agreement dated "12/723/2011." Again, the top of the document read "LHCG Draft" and disclaimed that it was "For Discussion Purposes Only." The draft agreement included a purchase price of $1.75 million.

         ¶25. Around February 24, 2011, Rogers accepted a job with a competing hospice company. Rogers did not disclose her acceptance to LHC until after the scheduled closing date. On February 24, 2011, Denton emailed Stagg expressing concerns that Rogers might quit due to her problems with LHC. Denton stated that she would do her best to retain her and the remaining staff. On February 25, 2011, Denton emailed LHC employees, informing them that Gulf Coast Hospice RN Gracie Flurry had called to tell her that Rogers and most of the staff planned to walk out on March 1, 2011, and would attempt to take patients with them. Denton relayed the information provided by Flurry:

Linda has been giving everyone a very negative image about LHC[], not only within the agency, but in the community and with the doctors as well. Gracie thinks that the real issue is that Linda is unable to "give up control of her agency[."] She wants to make sure that the agency falls apart when she leaves.

         ¶26. Denton explained Gulf Coast Hospice staff's negative perception of LHC. Cynthia Wells then emailed Denton, "I know . . . a lot of it is our fault!" Denton responded to Wells, writing that she "needs to be there frequently following the announcement. Everyone is screwing up." Denton also expressed concerns that a medical director had not been contracted, a requirement for a hospice to operate.

         ¶27. LHC became concerned whether, if Rogers were to leave, any patients would remain. Michael Freeman, vice president of acquisitions, emailed Lori, Brach, and Dustin noting the uncertainty surrounding the staff and asked, "Do we push the deal back a month to see what happens and get a better grasp on things?" Stagg responded, "[t]hat might be the best alternative - - - Will Harry hold off for a month?" Dustin responded to Brach, "This is just great. . . Now that all this is going on. . . Of course I just get an email from Nathan saying that he is now confident we can close on Monday!!"

         ¶28. At LHC's request, on February 28, 2011, Gulf Coast took a poll of employees who would be willing to work for LHC. Patrick Williams, Gulf Coast Hospice's attorney, emailed Dustin a list of ten employees and the chaplain who had stated their intention of remaining with LHC. A new offer was extended to two employees-Schonewitz and Morris-who had been previously advised that they would be laid off following the acquisition. Williams informed Dustin to contact him to discuss the list and wrote that he "[l]ooked forward to working with [Dustin] to resolve this matter."

         ¶29. LHC refused to close the transaction. LHC maintained that conditions in the letter of intent had not been met. Nonetheless, discussions continued, and LHC hoped to "find a way to press forward without Linda Rogers in the picture." On March 4, 2011, LHC sent to Williams a revised draft asset purchase agreement, containing a noncompetition provision for Rogers. LHC advised that the revised draft purchase agreement "incorporat[ed] those changes discussed amongst the parties earlier today." The draft included a purchase price of $1.75 million, reflecting the additional $25, 000 that had been discussed to cover the cost of a bonus payable to Rogers to offset her salary reduction. LHC also advised Williams, "We are still working on the non-compete agreement for Linda Rogers and will get that to you as quickly as possible." The top of the draft asset purchase agreement again read "LHCG Draft" and disclaimed that it was "For Discussion Purposes Only."

         ¶30. Williams forwarded the revised purchase agreement to Harry and Prasant. The March 4, 2011, draft contained conditions for a noncompetition agreement for Rogers and a patient census minimum. The draft provided a new closing date of March 9, 2011. Williams advised Harry and Prasant that the noncompetition agreement for Rogers did not provide a required time limit. Williams presented a noncompetition agreement to Rogers, but she refused to sign it. On March 21, 2011, acquisition discussions ended. In August 2011, Gulf Coast Hospice was sold for $500, 000 to another purchaser. The new purchaser had offered $1.2 million, but ultimately the deal closed for $500, 000 because the purchase price had been based on the patient census. At the time of the sale, Gulf Coast Hospice had eleven patients.

         ¶31. Gulf Coast Hospice sued LHC, asserting the following claims arising out of the unconsummated acquisition: breach of contract; breach and tortious breach of contract; breach and tortious breach of the letter of intent; tortious interference with contracts and business relations; fraud, misrepresentation, and fraudulent inducement; negligent misrepresentation; conspiracy; declaratory judgment; promissory estoppel; detrimental reliance; and unjust enrichment and quantum meruit.[6]

         ¶32. LHC filed a motion for summary judgment on each claim asserted by Gulf Coast Hospice. The trial court granted LHC's motion for summary judgment. The trial court found that the letter of intent clearly provided that before any closing could occur, the parties first had to mutually execute a final asset purchase agreement. The trial court continued, "[i]t is undisputed that no such agreement was executed." The trial court also found that the letter of intent provided that the closing of the transaction was expressly conditioned upon "satisfactory completion of due diligence by LHC[] and its affiliates." The trial court rejected Gulf Coast's argument that due diligence had been completed before LHC's announcement to Gulf Coast Hospice employees, because the letter of intent expressly authorized LHC to "assess the staffing levels" and to identify employees that it wished to hire "[p]rior to [c]losing and as part of the due diligence process." As such, the trial court found that the undisputed terms of the letter of intent contradicted Gulf Coast Hospice's position regarding due diligence.

         ¶33. Gulf Coast Hospice filed notice of appeal, [7] raising five assignments of error:

1. There was sufficient evidence to support a jury question that LHC and [Gulf Coast Hospice] formed an enforceable contract through words, actions[, ] and performance of the parties manifesting intent to do so, even though they previously expressed an intent to be bound only by a written agreement. A written agreement to be bound by a written agreement can be amended by an oral agreement[] if it satisfies the statute of frauds.
2. There was sufficient evidence to support a jury question that even in the absence of a written contract, LHC is estopped from denying the existence of a contract based upon through [sic] words, actions, reliance[, ] and performance of the parties.
3. There was sufficient evidence to support a jury question that LHC made intentional and/or negligent misrepresentations or fraudulent inducement for which it may be liable to [Gulf Coast Hospice] for damages.
4. There was sufficient evidence to support a jury question that LHC breached the letter of intent and its duty of good faith.
5. There was sufficient evidence to support a jury question that LHC tortious[ly] interfered with contracts of ...

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