Dugas v. Breard

50 So. 3d 201, 2010 La. App. LEXIS 1342, 2010 WL 3895381
CourtLouisiana Court of Appeal
DecidedOctober 6, 2010
Docket45,666-CA
StatusPublished
Cited by1 cases

This text of 50 So. 3d 201 (Dugas v. Breard) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dugas v. Breard, 50 So. 3d 201, 2010 La. App. LEXIS 1342, 2010 WL 3895381 (La. Ct. App. 2010).

Opinions

DREW, J.

11 Plaintiffs, six former members1 of the Board of Managers of Monroe Surgical Hospital, LLC (“the hospital”), have brought this quo wamnto2 proceeding against three defendants3 who now serve on the hospital’s Board of Managers. The trial court properly limited testimony to only the issues relevant to this extraordinary writ, and denied any relief to the plaintiffs. We agree with the ruling of the trial court, and annex its “Ruling on Motion Remaining Issue” as Appendix “A” to [203]*203this opinion, adopting the excellent reasoning reflected therein.

FACTS

The hospital provided medical services in the Monroe area, being established as a limited liability corporation (“LLC”). The juridical entity has three classes of stock:

• Class “A” — Shareholders from the medical field;
• Class “B” — Nonmedical shareholders; and
• Class “C” — Shares reserved for other hospitals.4

This chronology may help put the facts into context:

• April 1, 2006. The hospital, in order to secure needed funding, approves a Consent Resolution, which, among other things, approves the granting to Vantage Health Plan, Inc., an irrevocable right to assume voting control of the hospital, and is signed by seven of the eight managers, including three of the current plaintiffs/appellees. The resolution was also signed by 34 of the 44 | ?Class “A” (77%) member/physicians, including all six current plaintiffs/appellees.5
• April 1, 2006. Pursuant to the Consent Resolution, the hospital grants a three-year Irrevocable Membership Interest Option to Vantage,6 in exchange for, among other things, $900,000, subject to a credit for any case management fees paid to the hospital.
• April 1, 2006 — August 20, 2008. Under management of the former board, the hospital operates for 28 months, with the business entity receiving far more than the total $900,000 from Vantage.7
• August 20, 2008. Within the three-year option period, Vantage forwards written notice to the hospital, advising that it was triggering its rights to obtain voting control of the hospital.
• August 25, 2008. At a special meeting of the former board, attended by seven of the eight former board members, various actions are taken, without a dissenting vote,8 in furtherance of an orderly transition of hospital control to Vantage, immediately after which meeting all board members, except one,9 resign.
• August 28, 2008. Vantage hires Dr. Garland McCarty as the new CEO of the hospital.
September 10, 2008. At a subsequent meeting of the board,10 Dr. McCarty is selected/appointed to the board by Dr. Yarbrough, and then five other members of the board are selected by Dr. Yarbrough and Dr. McCarty — Dr. Robert Raulerson, Keith McRee, and the three defendants/appellees herein,
1. Dr. P. Gary Jones,
[204]*2042. Mike Breard, and
3. Rhonda Haygood.
|3* May 16, 2009. Eight months later, the litigation commences, including this quo warranto suit.

DISCUSSION

A. Did the trial court lawfully grant the motion in limine, allowing only evidence germane to the propriety of the election process itself?11

Plaintiffs argue that this matter must be reversed either because the trial court refused to consider the Consent Resolution, or because the trial court assumed it to be binding. We disagree either way.

We find that the trial court sagely granted the limitation sought by defendants. We concur in this ruling, relying upon the consistent reasoning of two of our cases, wherein we also approved the limitation of the inquiry to the narrow issue allowed by quo warranto. See Smith v. Cannon, 43,964 (La.App.2d Cir.12/28/09), 2 So.3d 1227; and Morris v. Thomason, 28,-238 (La.App.2d Cir.4/8/96), 672 So.2d 433.

Plaintiffs are sophisticated individuals, with various educational and professional achievements. In response to the Vantage takeover, the former board cooperated in the transition, resigned as managers, decided against or did not consider a derivative action, and then, much later, three of the former board members12 filed this quo warranto proceeding.

Hindsight is, of course, 20/20, but had the plaintiffs desired to protest the adoption of the Consent Resolution,13 an earlier derivative action may have been appropriate for a more generalized and expansive inquiry into |4any contested actions. Instead, the plaintiffs each acquiesced in and to the terms of the Consent Resolution. Now the plaintiffs complain about the very eventuality they each specifically approved, as a board member or a Class “A” stockholder, or both.

In reliance upon the Consent Resolution, Vantage has paid millions of dollars, and we are hesitant to deal with more than is on our plate now, viz., the narrow quo warranto inquiry. We find that the trial court properly found that the defendants were lawfully elected as board members by majority vote of the remaining board member(s), as per Section 6.02(f) of the Operating Agreement, which specifically calls for filling any vacancies on the Board of Managers by a majority vote of the managers.

B. Did the terms of the Operating Agreement prohibit the adoption of the April 2006 Consent Resolution, which resolution facilitated the replacement of the former membership of the Board of Managers?

Three years after Vantage’s initial $500,000 monetary investment, in April of 2006, and long after Vantage had poured another $2 million into the hospital, plaintiffs filed this suit, eight months after participating in their last hospital board meeting. The actual goal here is apparently to seek to undo the Vantage takeover, in effect claiming that their own acquiescence in the terms of the Consent Resolution, and indeed their own actions at their last board meeting, were unlawful. They can’t [205]*205have it both ways. All told, Vantage had the legal right to control of the hospital14 through its Option, which was approved by the hospital. A deal is a deal.

IfiOn August 25, 2008, the former board, which included three of these plaintiffs, specifically approved the right of Vantage to exercise special voting rights of the Class “C” members, in order to appoint a new board.15 When the smoke cleared that day, only one board member was left, Dr. David Yarbrough, who had a hospital to run. The board positions urgently needed filling, and the remaining manager did so, pursuant to the Operating Agreement.16

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Related

Dugas v. Breard
50 So. 3d 201 (Louisiana Court of Appeal, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
50 So. 3d 201, 2010 La. App. LEXIS 1342, 2010 WL 3895381, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dugas-v-breard-lactapp-2010.