18cv237answer Counterclaims

Case 1:18-cv-00237-LG-RHW Document 3 Filed 07/23/18 Page 1 of 17
IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
JACKSON COUNTY, )
MISSISSIPPI, )
)
Plaintiff, ) CIVIL ACTION NO.: 1:18-cv-00237
)
v. )
)
SINGING RIVER HEALTH )
SYSTEM AND SINGING RIVER )
MOB, LLC, an Alabama Limited )
Liability Company, )
)
Defendants. )
SINGING RIVER MOB, LLC’S ANSWER AND COUNTERCLAIM
Defendant Singing River MOB, LLC (“Singing River MOB”), hereby
submits its Answer and Counterclaim to the Complaint filed by Jackson County,
Mississippi (“Jackson County”) in this action.
ANSWER
As and for its Answer in this civil action, Singing River submits:
1
FIRST DEFENSE
Signing River MOB responds to the corresponding numbered paragraphs and
unnumbered allegations of the Complaint as follows:
1. Admitted.
2. On information and belief, this paragraph is admitted.
3. Admitted.
4. Singing River MOB denies the allegations of this paragraph as stated and
demands strict proof thereof.
5. Admitted.
6. Singing River MOB admits that the matter involves a lease transaction as
described or referenced in resolutions of the Jackson County Board of
Supervisors, as set out below, and certain additional leases and subleases
contemplated thereby as referenced in written documents attached to the
Complaint. Except as stated, Singing River MOB denies the allegations
of this paragraph and demands strict proof thereof.
7. The March 16, 2009 resolution speaks for itself. Except as admitted by
the foregoing, Singing River MOB denies the allegations of the
paragraph and demands strict proof thereof.
2
8. Admitted.
9. Admitted.
10. Singing River MOB denies the allegations of this paragraph and demands
strict proof thereof.
11. The April 6, 2009 resolution speaks for itself. Singing River MOB denies
that any such substitution was necessary. Except as otherwise admitted,
Singing River MOB denies the remaining allegations of this paragraph
and demands strict proof thereof.
13. Admitted.
14. Admitted.
15. Admitted.
16. Admitted.
3
18. The March 16, 2009 and April 6, 2009 resolutions speak for themselves.
To the extent not admitted by the foregoing, Singing River MOB denies
the allegations of this paragraph and demands strict proof thereof.
the remaining allegations of this paragraph and demands strict proof
thereof.
Singing River Health System (“SRHS”) entered into subleases with
Singing River MOB, an affiliate of Johnson Development Company. To
the extent not admitted by the foregoing, Singing River MOB denies the
allegations of this paragraph and demands strict proof thereof.
the allegations of this paragraph and demands strict proof thereof.
4
23. Singing River MOB is without information sufficient to admit or deny
the material allegations of this paragraph and therefore demands strict
proof thereof.
30. Under the March 16, 2009 and April 6, 2009 resolutions, the Jackson
County Board of Supervisors agreed to the duration of the term of the JC-
SRHS Lease. To the extent not admitted by the foregoing and the terms
5
of the resolutions, Singing River MOB denies the allegations of this
paragraph and demands strict proof thereof.
Singing River MOB denies that Jackson County is entitled to any of the
relief requested in the prayer for relief, items 1-5 and demands strict proof thereof.
SECOND DEFENSE
Jackson County’s claims herein are barred by estoppel.
THIRD DEFENSE
Jackson County’s claims are barred by waiver.
FOURTH DEFENSE
Jackson County’s claims are barred by laches.
FIFTH DEFENSE
The Complaint fails to state a claim for which relief may be granted.
SIXTH DEFENSE
Jackson County’s claims are barred by a ratification.
6
SEVENTH DEFENSE
Jackson County’s claims are barred by the failure to do equity.
EIGHTH DEFENSE
Each and every contract at issue in the complaint was duly authorized by
Jackson County or by SRHS under statutory and other authority.
NINTH DEFENSE
Defendant Singing River MOB reasonably relied upon representations by
SRHS and/or Jackson County in making improvements on the subject property and
undertaking obligations related to the office building project.
TENTH DEFENSE
Jackson County’s claims are barred by the doctrine of unjust enrichment.
ELEVENTH DEFENSE
Defendant Singing River MOB adopts and incorporates each and every
provision of its lease agreements entered into with SRHS to the extent those
provisions are defenses to the claims here.
TWELFTH DEFENSE
Jackson County’s claims are barred as an unconstitutional interference with
contract rights.
7
THIRTEENTH DEFENSE
Defendant Singing River MOB reserves any and all rights under the
applicable contracts with SRHS for indemnity and attorneys’ fees.
FOURTEENTH DEFENSE
Defendant Singing River MOB reserves any and all rights to seek sanctions
and/or attorneys’ fees in this matter for claims not asserted in good faith and/or
without substantial justification, including without limitation rights under
Mississippi Code §11-55-5(1).
COUNTERCLAIM
Now, having answered the Complaint in this action, Singing River MOB
submits its counterclaim against Jackson County, Mississippi in this action, as
follows:
THE PARTIES
1. Singing River MOB is an Alabama limited liability company doing
business in Jackson County, Mississippi through its ownership of a
medical office building built pursuant to agreements with SRHS, a
community hospital owned by Jackson County, Mississippi, and which is
8
a political subdivision of the State of Mississippi. Singing River MOB’s
members are citizens of the State of Alabama.
2. Jackson County is a political subdivision of the State of Mississippi.
JURISDICTION AND VENUE
3. This Court has subject matter jurisdiction in this action pursuant to 28
U.S.C. § 1332. Complete diversity exists between the parties because
Counterclaim Plaintiff Singing River MOB is an Alabama limited
liability company whose members are citizens of Alabama, and
Counterclaim Defendant Jackson County is a citizen of the state of
Mississippi. The amount in controversy, being the object of declaratory
relief sought herein, exceeds $75,000. Further, the Court has
supplemental jurisdiction over this matter pursuant to 28 U.S.C. § 1367
based upon the original claim in this action.
4. Venue is proper in the United States District Court for the Southern
District of Mississippi, Southern Division, because the leasehold interest
at issue is located in Jackson County, Mississippi.
9
FACTS
5. In or about 2008, SRHS invited Johnson Development, LLC (“Johnson
Development”) to make a proposal to assist SRHS in connection with the
development of a medical office building. In connection therewith,
Johnson Development presented SRHS with proposals that would allow
for the development of the medical office building using advantageous
financing through the use of GoZone tax exempt bond financing and the
use of new market tax credits.
6. Singing River MOB was formed as an affiliate of Johnson Development
in reliance upon representations of SRHS regarding its verified authority
to enter into a series of transactions that included an initial ground lease
from Jackson County and a sub-ground lease to Singing River MOB,
followed by leasebacks of improved property to SRHS (the “SRHS Lease
Transactions”).
7. As an integral part of the SRHS Lease Transactions, on March 26, 2009
Jackson County and SRHS entered into that certain ground lease (the
“Ground Lease”) in which Jackson County leased unimproved real
10
property to SRHS for the leasehold improvements contemplated by the
SRHS Lease Transactions.
8. On March 16, 2009, Jackson County gave its initial approval to the
SRHS Lease Transactions at a meeting of its Board of Supervisors.
9. On March 26, 2009, SRHS entered into the Ground Lease with Jackson
County that contained, among other terms, a 50 year term, a limited
termination provision, and an express provision allowing for SRHS to
enter into multiple subleases for medically related purposes. The Ground
Lease contained no restriction that any sublease would necessarily be
made with Johnson Development as opposed to an affiliate, or for that
matter with any other entity. A true and correct copy of the Ground Lease
is attached hereto as Exhibit A. See letter dated March 26, 2009 from
Jackson County Board Attorney Paula Yancey to Roy Williams, a true
and correct copy of which is attached as Exhibit B.
10. The Jackson County Board of Supervisors ratified and approved the
Ground Lease in its final form and spread it upon the minutes of the
Board on April 6, 2009. A true and correct copy of the April 6, 2009
Board Resolution is attached hereto as Exhibit C.
11
11. SRHS proceeded to enter into subleases with Singing River MOB under
its express authority granted by Jackson County.
12. Singing River MOB, in reliance upon the agreements and express
representations made by SRHS and Jackson County, proceeded to enter
into binding financing agreements and proceeded with construction of the
medical office building for the benefit of SRHS and Jackson County.
13. In furtherance of the extensively documented financing transaction that
supported the development of the medical office building and the SRHS
Lease Transactions, Manley Barton, as President of the Jackson County
Board of Supervisors, executed that certain Estoppel Certificate
acknowledging the validity of the Ground Lease, a true and correct copy
of which is attached hereto as Exhibit D.
14. SRHS has experienced well-documented financial difficulties, beginning
at least as early as 2014.
15. In the fall of 2016, Jackson County first raised allegations that the
Ground Lease suffered from purported defects either for failing to
comply with a Board resolution of Jackson County or generally under
Mississippi law.
12
16. In the fall of 2016, Jackson County’s attorney, William Guice, met with
counsel for Singing River MOB to discuss the allegations raised by
Jackson County. At that time, Singing River MOB’s attorneys responded
to the claims of alleged defects in authority for leases under the SRHS
Lease Transactions and confirmed Singing River MOB’s positions in a
letter dated December 1, 2016. The letter to Mr. Guice is attached hereto
as Exhibit E and incorporated herein by reference.
17. In sum, the allegations of defects in the Ground Lease or the SRHS Lease
Transaction generally were baseless and imposed to vex and harass
Singing River MOB, with a goal of depriving it of the benefit of the
bargain it had reached with SRHS and Jackson County and to interfere
with Singing River MOB’s business and contractual relations by, among
other things, placing its leasehold interest and financing at risk and
interfering with a potential sale of that leasehold interest.
18. Despite having received a rebuttal of each and every challenge to the
soundness and authority of the SRHS Lease Transaction, Jackson County
has brought the current action which seeks to impose further harm upon
13
Singing River MOB without a good faith basis to challenge the SRHS
Lease Transaction and without substantial justification.
PRAYER FOR RELIEF
WHEREFORE, Singing River MOB prays that the Court will declare the rights
of the parties, including the following:
1. The Ground Lease complies with Miss. Code § 41-13-15(7)(a), which
authorizes leases of real property by a board of supervisors related to a
community hospital for a period of up to 50 years.
2. The Ground Lease, as ratified and approved the Jackson County Board of
Supervisors, expressly limits the right of Lessor to terminate the Lease.
3. The Ground Lease as ratified and approved by the Jackson County Board
of Supervisors specifically permitted multiple subleases “as is deemed
necessary by the Board of Trustees [of SRHS] for the Lessee for the term
of this Lease.” See Exhibit C at 3.
4. Jackson County is estopped from challenging the authorization for and
validity of the Ground Lease and the SRHS Lease Transactions by virtue
of its actions on which Singing River MOB relied to its detriment,
14
including without limitation, by providing that certain Estoppel
Certificate attached as Exhibit D.
5. Jackson County has waived its right to challenge the authorization for
and validity of the Ground Lease and the SRHS Lease Transactions by
virtue of its actions on which Singing River MOB relied to its detriment,
including without limitation, by providing that certain Estoppel
Certificate attached as Exhibit D.
6. Jackson County’s April 6, 2009 Board action constituted a ratification
and approval of the Ground Lease, which had a fifty (50) year term and
contained language which allows termination of the Ground Lease by the
County in very limited circumstances, abrogating any requirement for a
broader termination right by the County.
7. Such other and further relief in favor of Singing River MOB as may be
warranted under the existing facts.
15
Respectfully submitted this 23rd day of July, 2018.
/s/ John N. Bolus

John N. Bolus (MSB100585)
Maynard Cooper & Gale, P.C.
1901 Sixth Avenue North
Suite 2400 Regions/Harbert Plaza
Birmingham, AL 35203
Telephone: (205) 254-1000
Facsimile: (205) 254-1999
Peter C. Abide (MSB1026)

Currie Johnson & Myers, P.A.
925 Tommy Munro Drive
Suite H
Biloxi, MS 39532
Telephone: (228) 385-1010
Facsimile: (228) 385-1011
Attorneys for Defendant Singing River

MOB, LLC
16
CERTIFICATE OF SERVICE
I hereby certify that I have served a copy of the foregoing document by
Notice of Electronic Filing, or, if the party served does not participate in Notice of
Electronic Filing, by U.S. First Class Mail, hand delivery, fax or email on this the
23rd day of July, 2018.
William Lee Guice

Maria Martinez
Rushing & Guice, P.L.L.C.
P.O. Box 1925
Biloxi, MS 39533
Telephone: (228) 374-2313
Fax: (228) 875-5987
bguice@rushingguice.com
mmartinez@rushingguice.com
/s/ John N. Bolus

OF COUNSEL
17
Case 1:18-cv-00237-LG-RHW Document 3-1 Filed 07/23/18 Page 1 of 8
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E

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Case 1:18-cv-00237-LG-RHW Document 3 Filed 07/23/18 Page 1 of 17

IN THE UNITED STATES DISTRICT COURT

SINGING RIVER MOB, LLC’S ANSWER AND COUNTERCLAIM

Defendant Singing River MOB, LLC (“Singing River MOB”), hereby

Mississippi (“Jackson County”) in this action.

Signing River MOB responds to the corresponding numbered paragraphs and

unnumbered allegations of the Complaint as follows:

2. On information and belief, this paragraph is admitted.

demands strict proof thereof.

described or referenced in resolutions of the Jackson County Board of

contemplated thereby as referenced in written documents attached to the

Complaint. Except as stated, Singing River MOB denies the allegations

of this paragraph and demands strict proof thereof.

the foregoing, Singing River MOB denies the allegations of the

paragraph and demands strict proof thereof.

strict proof thereof.

that any such substitution was necessary. Except as otherwise admitted,

Singing River MOB denies the remaining allegations of this paragraph

and demands strict proof thereof.

strict proof thereof.

strict proof thereof.

the allegations of this paragraph and demands strict proof thereof.

strict proof thereof.

the remaining allegations of this paragraph and demands strict proof

Singing River Health System (“SRHS”) entered into subleases with

Singing River MOB, an affiliate of Johnson Development Company. To

allegations of this paragraph and demands strict proof thereof.

the allegations of this paragraph and demands strict proof thereof.

23. Singing River MOB is without information sufficient to admit or deny

the material allegations of this paragraph and therefore demands strict

strict proof thereof.

strict proof thereof.

strict proof thereof.

strict proof thereof.

strict proof thereof.

strict proof thereof.

of the resolutions, Singing River MOB denies the allegations of this

paragraph and demands strict proof thereof.

strict proof thereof.

strict proof thereof.

Jackson County’s claims herein are barred by estoppel.

Jackson County’s claims are barred by waiver.

Jackson County’s claims are barred by laches.

Jackson County’s claims are barred by a ratification.

Jackson County’s claims are barred by the failure to do equity.

Jackson County or by SRHS under statutory and other authority.

Defendant Singing River MOB reasonably relied upon representations by

undertaking obligations related to the office building project.

Jackson County’s claims are barred by the doctrine of unjust enrichment.

provisions are defenses to the claims here.

Jackson County’s claims are barred as an unconstitutional interference with

applicable contracts with SRHS for indemnity and attorneys’ fees.

without substantial justification, including without limitation rights under

Mississippi Code §11-55-5(1).

submits its counterclaim against Jackson County, Mississippi in this action, as

1. Singing River MOB is an Alabama limited liability company doing

business in Jackson County, Mississippi through its ownership of a

medical office building built pursuant to agreements with SRHS, a

community hospital owned by Jackson County, Mississippi, and which is

a political subdivision of the State of Mississippi. Singing River MOB’s

members are citizens of the State of Alabama.

2. Jackson County is a political subdivision of the State of Mississippi.

JURISDICTION AND VENUE