Walker County leaders are hoping to avoid paying about $9 million by arguing a promise they made five years ago never actually held weight — at least not the way the people on the other end of that promise thought.
In April 2011, Erlanger Health System loaned Hutcheson Medical Center $20 million. Hutcheson's board promised to pay the money back. But if they couldn't, according to a management agreement, the board gave Erlanger permission to pursue that money from Catoosa and Walker counties.
The elected officials for those counties, meanwhile, signed an intergovernmental agreement, promising to pay that $20 million if Hutcheson didn't have the funds.
On Dec. 28, after Hutcheson filed for bankruptcy and a physician's group from Atlanta pledged to buy the hospital, Erlanger filed a complaint against Walker County in U.S. District Court, demanding that the county's leaders pay them.
On Tuesday, Walker County asked a judge to dismiss the case. The county's argument relies on a few slight technicalities.
Citing "sovereign immunity," attorney Stuart James argued Walker County can't be sued for failing to honor the management agreement because the county was not a part of that deal. The agreement was only between representatives of Erlanger and Hutcheson.
And while Walker County pledged in an intergovernmental agreement to pay half of that $20 million loan, James argued, Erlanger can't enforce that agreement because the Chattanooga hospital was not part of that deal. The agreement was between Catoosa County, Walker County, Dade County and Hutcheson's governing body.facebook
So, James contended, only representatives of those four groups can enforce Walker County's 2011 promise to pay the money.
The lawsuit does not mention the fact county officials appointed people to Hutcheson's board. It likewise does not mention Don Oliver, Walker County's full-time attorney, also served as the Hutcheson board's lawyer at the time of the management agreement.
When Walker County pledged to guarantee half of the loan in 2011, according to Times Free Press archives, Oliver said the county would never actually have to pay the money.
"The counties are not putting out one dime," Oliver said. "They won't need to. They're just pledging."
The total amount Erlanger will pursue from the counties is slightly lower than it would have been because of Hutcheson's pending purchase. ApolloMD, a physician's group from Atlanta, has pledged to buy Hutcheson for $4.3 million, though for legal reasons the process of officially taking over the hospital won't be completed for months.
As part of the purchase, Erlanger is in line to receive about $2 million, which Walker and Catoosa county leaders believe will go toward paying back that $20 million loan.
Erlanger has only filed a court action against Walker County, writing in its Dec. 28 complaint that "Catoosa County appears willing to honor its obligations."
On Tuesday, in addition to his other arguments, James wrote that Erlanger's legal action against Walker County is premature.
Erlanger and Hutcheson have also sued each other in U.S. District Court, and both those cases remain pending. In 2014, attorneys for Hutcheson argued Erlanger actually owes them money, saying the leaders of the Chattanooga hospital intentionally mismanaged Hutcheson while they were operating it from 2011-13.
"It is beyond me why Erlanger sued when it is facing serious claims," James said in a statement Tuesday. "It is beyond me why Erlanger sued Walker but not Catoosa threatening Catoosa with a suit if it did not continue to cooperate. It sounds to us like the giant in the room wants to beat up on the citizens of North Georgia while sweeping serious allegations about its conduct under the rug."
Walker County Commissioner Bebe Heiskell, meanwhile, said in a statement that Erlanger's lawsuit against Hutcheson caused Hutcheson to go bankrupt.
"Now that Goliath has slayed Hutcheson," she said, "I guess it needs a new diversion for the press and the taxpaying public, so it has filed this frivolous lawsuit against Walker County."
Contact staff writer Tyler Jett at firstname.lastname@example.org or at 423-757-6476.
Updated Jan. 19 at 11 p.m.