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Letter of Intent With “Out” Clause Allows Hospital Purchaser a Way Out

Although parties announced agreed-upon terms of sale, termination clause in LOI prevails to stop deal
When St. Joseph Hospital in Augusta, GA, and Health Management Associates came to terms on a $75 million sale of the hospital to HMA in December 2005, they agreed on the form of an Asset Sale Agreement and announced the deal to the public. They said the terms were set, subject to regulatory approvals. They did not sign the agreement because it had to be approved by the state Attorney General under the terms of the state’s Hospital Acquisition Act and the Federal Trade Commission under the Hart-Scott-Rodino antitrust rules, but they submitted a copy of the agreement as part of the approval packages.

Members Can’t Remove Directors of Board-Only Nonprofit

Court holds improperly ousted directors in contempt for failing to turn over documents pursuant to Order
The members of a Michigan nonprofit corporation have no authority to remove directors when the corporation’s articles of incorporation provide that it will be governed by the board alone, the Michigan Court of Appeals has held. It has nevertheless upheld a trial court’s contempt citation against directors who refused to turn over corporate records after they were improperly ousted. ( Michigan Military Moms v. VanHooser, Ct. of App., MI, No. 306553, 1/24/13 .) The controversy arose out of a governance dispute in the Michigan Military Moms, a 501(c)(3) organization providing support for military families. At a meeting of members in January 2011, where 21 members were present, the members...

Jury Finds Officers and Directors Liable for $5.75 Million in Damages

Court upholds verdicts for breach of fiduciary duty in bankruptcy case involving “deepening insolvency”
A federal District Court in Pittsburgh has refused to disturb jury verdicts imposing personal liability for $5.75 million in compensatory and punitive damages against 15 officers and directors of a bankrupt nursing home. The Court found that there was sufficient evidence in the trial record to justify the verdicts. ( Official Committee of Unsecured Creditors v. Baldwin, W.D. PA, No. 10cv800, 5/17/13 .)

Court Approves Indemnification For Trustees of Private Foundation

Directors may be protected despite having started suit that prompted counter charges of breach of duties
Former trustees of a private foundation are entitled to indemnification for their legal fees in defending a suit for breach of fiduciary duty, the federal District Court in the District of Columbia has held, despite the fact that the suit was prompted as a type of counterclaim to their own lawsuit to protect their interest in foundation property. ( Armenian Assembly of America v. Cafesjian, D. D.C., No. 07-1259, 08-1254, 2/20/13 .)

New PA Attorney General Settles with Hershey Trust Trustees

Trustees absolved of breach of fiduciary duty claims but agree to changes in practice for future
Pennsylvania’s newly inaugurated Attorney General, less than five months after taking office, has entered into a “reform agreement” with the trustees of the Hershey School Trust, absolving them of charges of breach of fiduciary duty but requiring a range of different practices in the future. Attorney General Kathleen Kane has issued a statement in connection with filing a notice of no objection to confirmation of the trust account in the Dauphin County Orphans’ Court. (Re: Trust under deed of Milton and Catherine S. Hershey , No. 712 of 1963.) The Hershey School Trust holds an endowment of about $10 billion, making the Milton S. Hershey School the best endowed secondary school in the nation...

Sandusky Not Entitled to Insurance To Defend Sex Abuse Claims

Court leaves open whether provision of defense costs for such claims would be against public policy
When convicted sex offender Gerald Sandusky was first charged with sexually abusing several young men he met through the activities of his Second Mile youth services organization, he asked the nonprofit’s D & O insurer to cover his expenses. A federal District Court in Pennsylvania had previously ruled that it would be against Pennsylvania public policy to provide an indemnification for any liability. It had withheld a ruling on whether it would be against public policy to provide a defense.

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