In March 2011, Hutcheson Medical Center's officials received an email from their attorney.
"The hospital will be out of funds in a matter of days," wrote Ward Nelson, of Miller & Martin, the prominent Chattanooga law firm.
"We are obviously running out of time."
"Erlanger will likely not welcome any substantial deal changes."
Hutcheson was millions in debt and bleeding more each month. It needed help. Its leaders sought a partnership with another hospital that could shore it up.
When Nelson sent the email, Hutcheson was negotiating with Erlanger Health System about a management agreement. Ultimately, despite bitter negotiations, the Chattanooga hospital began managing Hutcheson in April 2011.
But throughout the process, Hutcheson's attorneys now say, Nelson betrayed the struggling North Georgia hospital. He forwarded confidential emails to Erlanger's officials and blind carbon copied them on other messages, supposedly to help Erlanger "obtain incredibly favorable terms" in its management agreement.
That is according to a U.S. District Court filing that Hutcheson's new attorneys entered on Friday afternoon.
Two years after Erlanger began managing Hutcheson, Hutcheson kicked Erlanger out. Erlanger then filed a lawsuit, demanding Hutcheson pay back the $20 million that Erlanger loaned Hutcheson as part of the management agreement in 2011.
In turn, Hutcheson filed its own lawsuit, saying Erlanger intentionally mismanaged the North Georgia hospital to hurt the hospital's finances and force it to go bankrupt so Erlanger could buy the buildings cheap and expand into a multi-state health care empire.
Hutcheson amended its lawsuit Friday. Its officials are asking for a judge to void the management agreement, and for an undefined amount of money, though they want it to exceed $20 million.
According to the lawsuit, Hutcheson officials only realized within the last two months that Nelson shared confidential information. They apparently figured it out when they got access to all of Erlanger's emails through the discovery process. They say they found 18 emails like the one between Nelson and Hutcheson in March 2011.
When asked for comment Friday, Nelson referred the Times Free Press to Billy Eiselstein, general counsel for Miller & Martin. Eiselstein provided a written statement through email but did not respond to follow-up questions Friday evening.
"We stand by the work that our attorneys did for Hutcheson Medical Center," he wrote. "When Hutcheson now complains that we shared information with Erlanger, it relies on emails that also included [Catoosa, Dade and Walker counties], which we did not represent, and those emails were not privileged."
The North Georgia counties were involved because their commissioners appoint board members to govern Hutcheson.
Erlanger Chief Administrative Officer Gregg Gentry declined to detail specifics of the lawsuit Friday: "It would be premature for us to comment since we just received the document and have not had time to review it."
Officials for Walker County, which is one of three counties that governs the hospital, were also mum on the issue. Attorney Don Oliver did not return multiple calls seeking comment, and Commissioner Bebe Heiskell said she was not allowed to discuss the case.
"I'm dying to tell you, but I can't," she said. "I don't want to hurt this case. It's a good case."
According to the lawsuit, Nelson's law firm represented Erlanger in unrelated cases before representing Hutcheson. It has represented Erlanger since then, too.
Hutcheson officials now say Erlanger received a competitive advantage during the April 2011 negotiations because the Chattanooga hospital's leaders knew that Hutcheson was desperate. Now believing that Nelson wanted to help Erlanger, Hutcheson officials think they put up too much collateral in exchange for that $20 million loan they got.
Depending on how a judge eventually rules, Erlanger could foreclose on Hutcheson's main campus and nursing building.
Roger Forgey, who was Erlanger's chief administrative officer during the negotiations and then became Erlanger's appointed CEO of Hutcheson, said Nelson worked hard to bring both sides to the table at the time of the emails in question.
"I always felt he did the best he could to bring the parties together in a very contentious negotiation," Forgey said Friday. "I thought Ward was really professional."
Staff writer Kate Belz contributed to this report.
Contact staff writer Tyler Jett at tjett@timesfreepress.com or 423-757-6476.