Settlement removes legal hurdle for D.C.’s United Medical Center

A D.C. Superior Court judge has dismissed a $100 million lawsuit brought by Capital Behavioral Health (CBH) against the District of Columbia and the not-for-profit operator of United Medical Center, thereby clearing one of the major roadblocks toward either finding a new operating partner or replacing the aging institution.

The lawsuit was sparked in 2010 when the District of Columbia foreclosed on United Medical Center. Capital Behavioral Health claimed the foreclosure was wrongful and interfered with an alleged 25-year lease the company said it had negotiated with United Medical Center’s former owner, Specialty Hospitals of America LLC. In addition, the foreclosure prevented Capital Behavioral Health from recovering a $10 million judgment it had won against Specialty Hospitals of America prior to the foreclosure.

However, Judge Frederick H. Weisberg found that the emails, half completed draft leases and co-signed Certificate of Need application Capital Behavioral Health presented as proof of a lease agreement did not equate a valid enforceable lease under the law. Therefore, the foreclosure could not have caused any injury to Capital Behavioral Health’s “leasehold interests” and it had no standing to assert its lease-based claims. In addition, he found that a previous legal settlement between Specialty Hospitals of America and the District for $6 million had resolved all disputes regarding the foreclosure and the District’s seizure of the hospital’s accounts receivable.

What is next for United Medical Center is uncertain. If a new operating partner can be found, the hospital may stay open. However, in late March, D.C. Mayor Vincent Gray also announced plans to invest approximately $300 million to replace United Medical Center with a new hospital on the nearby St. Elizabeth’s East Campus.

“It has been difficult for the District to own and operate United Medical Center in a way that is fiscally responsible,” Mayor Gray said in a statement. “Frankly, unless we take decisive action, the hospital will continue to be a ‘money pit’ for District taxpayers.”

According to Mayor Gray, District taxpayers have already spent more than $160 million to subsidize the operating costs of United Medical Center and the District is unable to operate the facility in a way that is self-sustaining.

The lawfirm of Bradley Arant Boult Cummings represented UMC in the case.