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Monday, March 30, 2020

Kim Foxx reenters legal fight over Westlake Hospital, says hospital closure broke state law

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By Jonathan Bilyk | Mar 25, 2020

Westlakehospital
Westlake Hospital | Youtube screenshot

Cook County State’s Attorney Kim Foxx has lent the authority of her office to the effort to punish the owners of the now shuttered Westlake Hospital for closing the financially struggling hospital, joining with Melrose Park to accuse the hospital’s owners of violating state hospital law for closing the hospital.

The state’s attorney’s reentry into the proceedings comes as Westlake’s owners, Pipeline Health System, seek to transfer the proceedings to a different Cook County judge.

On March 18, in an amended complaint signed by Cook County Assistant State’s Attorney Paul Castiglione, Foxx asked Cook County Judge Eve M. Reilly to declare Pipeline had violated the Illinois Health Facilities Planning Act in closing the hospital.


Cook County State's Attorney Kim Foxx | Youtube screenshot

Pipeline and Melrose Park have been embroiled in a legal battle over Westlake for more than a year, since Pipeline first indicated its intent to close the hospital in Melrose Park.

Melrose Park, through its lawyers with the Chicago class action firm of Edelson P.C., sued Pipeline in early March 2019, claiming the hospital owners committed fraud and violated Illinois law by moving to close the hospital in February 2019, just weeks after buying Westlake, in a deal that included two other Chicago area hospitals.

Specifically, Melrose Park claimed Pipeline had misled state regulators and the village about its plans for Westlake as it sought a state permit to complete the purchase of the hospitals.

Melrose Park has argued the hospital was essential to the village, particularly as it provided care for low-income individuals living in and around Melrose Park.

Amid those initial court skirmishes, state judges had ruled the village could not legally bring suit, because it could not speak for the state. However, that shortfall was quickly remedied, when Foxx’s office intervened as a co-plaintiff, giving new life to the lawsuit.

A Cook County judge eventually ordered Pipeline to keep the hospital open while the lawsuit played out in court, even though Pipeline secured permission from the Illinois Health Facilities and Services Review Board to close Westlake.

Pipeline had repeatedly asserted that court order would eventually run into economic reality, as the owners claimed the hospital was losing millions of dollars each month.

After three months of operating under Judge Reilly’s order, Pipeline took the hospital into bankruptcy, and secured an order from a federal bankruptcy judge to close the hospital.

However, that judge also allowed the village to resume its legal pursuit of Pipeline. The bankruptcy judge forbade the village from attempting to obtain a court order forcing the hospital to reopen. However, the village can still pursue judgments ordering Pipeline to pay Melrose Park money.

Melrose Park filed an amended complaint in Cook County court in January, asserting fraud claims and claiming Pipeline created a “public nuisance” by closing the hospital. The lawsuit asks the judge to order Pipeline to cough up unspecified damages, including punitive damages, and fines to be assessed under Melrose Park village ordinances.

The village’s lawyers from the Edelson firm would be paid from any award or settlement the village may receive from Pipeline, or from a share of property taxes paid by the formerly for-profit hospital, should it have remained open, according to an agreement with the village.

Pipeline in February asked Judge Reilly to dismiss the renewed lawsuit, asserting Melrose Park’s case was “fantasy” with “no basis in reality.”

Pipeline also asserted the village’s attempt to collect from Pipeline rests on illegal ordinances and exceeds its powers, by trespassing on the state’s power.

Foxx’s office then stepped back into the fight about three weeks later, arguing it has standing the village lacks to “bring enforcement actions” under the state’s Health Facilities Planning Act, which governs the state’s hospital permit approval process.

In the amended complaint, Foxx’s office argues Pipeline violated state law by moving to wind down operations at the hospital as early as February 2019, two months before it won permission from state regulators to close the hospital.

While Pipeline used bankruptcy to close the hospital, Foxx asserts the bankruptcy only involved a “sham entity” that was “grossly undercapitalized and never intended to be the entity operating Westlake Hospital.”

The state’s attorney’s complaint does not request any specific damages, but a declaration from the judge that Pipeline broke state law, and other unspecified relief the judge “deems appropriate.”

Meanwhile, an executive with Pipeline has asked the court to transfer the case in its entirety to a different judge.

As it amended its lawsuit, the village of Melrose Park also added Pipeline CEO James Edwards as a defendant, as an individual, apart from his role as chief executive of the Pipeline corporation.

Attorneys for Edwards then filed a motion to substitute a new judge. The motion does not identify any problems with Judge Reilly, who has presided over the case to this point. Rather, Edwards argued it is his right under state law, as a newly-named individual defendant, to get a new judge to hear the case, if he requests it.

The village has opposed that request, arguing it is too late for Edwards to swap judges, as Edwards has been present in court throughout the proceedings.

Lawyers for Edwards and Pipeline, however, said the village has no power under the law to prevent the request, as the village cannot both name Edwards as an individual defendant, and then attempt to “conflate” him with the corporation he leads.

“Edwards does not deny that he has been present in court or otherwise participated in this action,” they wrote. “But his participation was … in his capacity as CEO of Pipeline Health…

“Contrary to the Village’s assertions, having a ‘front-row seat to the proceedings’ does not transform Edwards into a defendant in this case.”

The judge has not yet ruled on that request.

Pipeline is represented by attorney Sondra A. Hemeryck and others from the firm of Riley Safer Holmes & Cancila, of Chicago.

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Organizations in this Story

Edelson, PCRiley Safer Holmes & CancilaCook County State's Attorney's OfficeCircuit Court of Cook CountyPipeline Health SystemsVillage of Melrose Park

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