Judge Murphy Dismisses Walker County Counterclaim Against Erlanger; Warns Attorney James Of Rule 11 Sanctions

Tuesday, June 7, 2016

Federal Judge Harold Murphy has dismissed a counterclaim filed by Walker County against Erlanger Health System in the case in which Erlanger is seeking to obtain a $10 million commitment made by the county on $20 million that Erlanger supplied while it was managing Hutcheson Medical Center. The Fort Oglethorpe hospital later went into bankruptcy.

Judge Murphy called the amended counterclaim "a rambling document that essentially consists of a collection of legal arguments.

" He added, "It contains few, if any, factual allegations, and it is replete with conclusory allegations and legal conclusions."

He also brought up the issue of possible Rule 11 sanctions in the case against Stuart James, special counsel for Walker County.

The judge said in his 40-page ruling, "Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct."

The judge said Rule 11 "incorporates an objective standard," and "courts determine whether a reasonable attorney in like circumstances could believe his actions were factually and legally justified."

Judge Murphy earlier upheld Erlanger's suit against Walker County seeking payment of the commitment.

Attorney James last week said Walker County was offering a $1.3 million "global settlement" of the case. Gregg Gentry, Erlanger chief administrative officer, responded, "We are committed to pursuing what is rightfully owed to Erlanger on behalf of our community. If Walker County is serious about an outcome that best serves everyone, it should start by offering Erlanger more than 15 cents on the dollar.”


Judge Murphy said, "The Amended Counterclaim does not provide 'a short and plain statement of the claim showing that the pleader is entitled to relief,' and dismissal is warranted on this ground alone. Even if Erianger somehow breached the Management Agreement or the Intergovernmental Agreement, those breaches would not affect Walker County's liability under the Intergovernmental Agreement.


"The Intergovernmental Agreement expressly states that Walker County's financial obligation is 'absolute and unconditional and such payments shall not be abated or reduced because of (i) damage to or destruction of the Hospital, (ii) any failure or default on the part of the [Hospital] Authority under this Agreement, the Lease or any other document, (iii) any lack of notice of amounts due from Walker [County] under this Agreement, or (iv) for any reason whatsoever.'"


Judge Murphy also declined to make Catoosa County, Dade County and the Hospital Authority parties to the Erlanger.Walker County case. He said, "The Court further notes that, given that it denied a request to join Walker County and Catoosa County in the 40 Case, Walker County's attempt to add Catoosa County, Dade County, and the Hospital Authority to this action and to incorporate wholesale the Counterclaim in the 40 Case is especially inappropriate.


"The Court finds that the Amended Counterclaim fails to state a claim for relief and that Walker County has improperly attempted to add Dade County, Catoosa County, and the Hospital Authority to this action."

Click here to read the order.




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