HUMC Holdco, LLC v. MPT of Hoboken TRS, LLC

• Court: Court of Chancery of Delaware
• Decided: September 12, 2022
• Docket: C.A, No. 2019-0972-KSJM
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

HUMC HOLDCO, LLC, HUMC PROPCO, ) LLC, HUMC OPCO, LLC, HUDSON ) HOSPITAL HOLDCO, LLC, CH HUDSON ) HOLDCO, LLC, HUDSON HOSPITAL ) PROPCO, LLC, HUDSON HOSPITAL ) OPCO, LLC, and IJKG OPCO, LLC, ) ) Plaintiffs, ) ) v. ) C.A. No. 2019-0972-KSJM ) MPT OF HOBOKEN TRS, LLC, MPT OF ) HOBOKEN HOSPITAL, LLC, MPT OF ) HOBOKEN REAL ESTATE, LLC, MPT OF ) BAYONNE, LLC, AVERY EISENREICH, ) WTFK BAYONNE PROPCO, LLC, SB ) HOBOKEN PROPCO, LLC, ALARIS ) HEALTH, LLC, and J.C. OPCO, LLC, ) ) Defendants. ) ) ) HUMC OPCO, LLC, ) ) Nominal Party, ) ) and ) ) J.C. OPCO, LLC, on behalf of itself and ) derivatively on behalf of Nominal Defendants ) HUDSON HOSPITAL OPCO, LLC d/b/a ) CHRIST HOSPITAL and CH HUDSON ) HOLDCO, LLC, MPT OF HOBOKEN TRS, ) LLC, and MPT OF HOBOKEN HOSPITAL, ) LLC, ) ) Counterclaim-Plaintiffs, ) ) v. ) ) ) HUDSON HOSPITAL HOLDCO, LLC, and ) HUMC HOLDCO, LLC, ) ) Counterclaim-Defendants, ) ) and ) ) VIVEK GARIPALLI, JAMES LAWLER, ) JEFFREY MANDLER, SEQUOIA HEALTH ) MANAGEMENT, LLC, and CAREPOINT ) HEALTH MANAGEMENT ASSOCIATES, ) ) Third-Party Defendants, ) ) and ) ) HUDSON HOSPITAL OPCO, LLC d/b/a ) CHRIST HOSPITAL and CH HUDSON ) HOLDCO, LLC, ) ) Nominal Defendants. )

ORDER DENYING LEAVE TO APPLY UNTIMELY FOR CERTIFICATION OF INTERLOCUTORY APPEAL

1. This litigation involves a dispute between corporate entities that own and

operate three hospitals in New Jersey. By a Memorandum Opinion dated July 29, 2022

(the “Opinion”), this court dismissed fourteen counterclaims and third-party claims filed

by J.C. Opco, LLC (“J.C.”) on the grounds that they were either time-barred or failed to

state a claim.1 After the court issued the Opinion, J.C. retained new counsel, who moved

1 C.A. No. 2019-0972-KSJM, Docket (“Dkt.”) 458 (HUMC Holdco, LLC v. MPT of Hoboken TRS, LLC, 2022 WL 3010640 (Del. Ch. July 29, 2022)).

2 for leave to apply for certification of interlocutory appeal although the default deadline for

such an application had expired (the “Motion”).2

2. Delaware Supreme Court Rule 42 establishes the procedure for interlocutory

appeals.3 Under Rule 42, an application for certification of an interlocutory appeal must

be “served and filed within 10 days of the entry of the order from which the appeal is sought

or such longer time as the trial court, in its discretion, may order for good cause shown.”4

3. J.C. did not apply for certification within ten days. In brief, the timeline of

this case is as follows. The plaintiffs filed a tortious interference claim against J.C. and

others in December 2019.5 J.C. asserted counterclaims and third-party claims in January

2020, amending its pleadings for a final time in May 2021.6 The counterclaim and third-

party defendants moved to dismiss on May 21, 2021.7 The court heard oral argument on

January 18, 2022.8 In March 2022, the court requested supplemental briefing, which the

parties completed by April 25, 2022.9 The court issued the Opinion on July 29, 2022. J.C.

engaged new counsel on August 18, 2022, who wrote to the court requesting leave to file

2 See Dkt. 460. 3 Del. Supr. Ct. R. 42. 4 Id. at 42(c)(i). 5 HUMC Holdco, 2022 WL 3010640, at *9. 6 Id. 7 Id. 8 Id. 9 Id.

3 an application for certification of interlocutory appeal from the Opinion on August 1910—

21 days after the Opinion was filed.

4. J.C. has not demonstrated good cause for extending the Rule 42 deadline. As

its Motion, J.C. submitted a one-page letter attaching the application for certification of

interlocutory appeal as an exhibit. In relevant part, the letter stated that new counsel had

“just been brought on and engaged.”11

5. Aside from referencing “good cause,” the letter did not provide any legal

authorities discussing the “good cause” standard of Rule 42. The court conducted

independent research. Although that research uncovered no cases discussing the “good

cause” standard of Rule 42 specifically, authorities discussing “good cause” for scheduling

modifications generally are instructive. In multiple cases involving requests to extend case

deadlines, the Delaware Supreme Court has applied the following standard:

[T]o assess good cause . . . the court examines whether [1] the moving party has been generally diligent, [2] “the need for more time was neither foreseeable nor its fault, and [3] refusing to grant the [application] would create a substantial risk of unfairness to that party.”12

6. J.C. has not demonstrated good cause under this standard. While J.C. appears

to have been generally diligent in other aspects of this case, the possibility of seeking

10 Dkt. 460. 11 Id. 12 In re Asbestos Litig., 228 A.3d 676, 681–82 (Del. 2020) (quoting Moses v. Drake, 109 A.3d 562, 566 (Del. 2015)) (applying a good cause standard to a request to delay trial); see also Coleman v. PricewaterhouseCoopers, LLC, 902 A.2d 1102, 1107 (Del. 2006) (applying a good cause standard to a motion to extend a discovery deadline).

4 interlocutory appeal was entirely foreseeable. Engaging new counsel after the deadline for

doing so does not constitute good cause, particularly where J.C. was continuously

represented throughout the relevant period.

7. Moreover, refusing to grant leave to apply untimely for certification of

interlocutory appeal would not create a substantial risk of unfairness to J.C. in light of

J.C.’s arguments for certification of interlocutory appeal. Even assuming that J.C.’s

application could meet the threshold “substantial issue” requirement of Rule 42,13 J.C.

would not be able to demonstrate that the costs of interlocutory appeal would outweigh its

benefits.14 Of the eight Rule 42 factors, J.C. relies on one, arguing under factor (H) that

prompt appellate review would serve the interest of justice. This is so, according to J.C.,

because the court erred in resolving a fact-intensive inquiry at the pleading stage. J.C. then

cites to cases standing for the uncontroversial proposition that whether a party is on inquiry

notice of a claim is often a fact-intensive inquiry. J.C. had raised a similar argument in

briefing,15 and the court rejected it in the Opinion.16 Allowing J.C. to make these

arguments again on an interlocutory basis neither serves justice nor creates efficiency.

8. Recall that “[i]nterlocutory appeals should be exceptional, not routine,

because they disrupt the normal procession of litigation, cause delay, and can threaten to

13 Supr. Ct. R. 42(b)(i). 14 Id. at 42(b)(ii); see also id. at 42(b)(iii)(A)–(H). 15 Dkt. 408 at 23. 16 See 2022 WL 3010640, at *12–15 (holding that dismissal is warranted for some of J.C.’s claims due to laches, even though affirmative defenses are often ill-suited for decision at the pleading stage).

5 exhaust scarce party and judicial resources.”17 There is nothing exceptional warranting

certification of interlocutory appeal here. For these reasons, the Motion is denied.

/s/ Kathaleen St. J. McCormick Chancellor Kathaleen St. J. McCormick Dated: September 13, 2022

17 Supr. Ct. R. 42(b)(ii).