Walker County tries again to get out of $10 million debt

Walker County tries again to get out of $10 million debt

March 3rd, 2016 by Tyler Jett in Local Regional News

Hutcheson Medical Center is seen on Friday, Dec. 18, 2015, in Fort Oglethorpe, Ga. The medical center has not yet reopened, but its reopening is tentatively set for next week.

Photo by Doug Strickland /Times Free Press.

POLL: Will Erlanger get its money back from Walker County?

An attorney for Walker County, Ga., asked U.S. District Court Judge Harold Murphy to reconsider his ruling that Erlanger Health System can sue the county government for $10 million.

Stuart James, the lawyer representing Walker County, filed the motion to amend on Tuesday. James has argued several times that Erlanger cannot legally pursue this money because the Georgia Constitution grants sovereign immunity to local governments.

On Feb. 19, Murphy rejected Walker County's motion to dismiss the pending lawsuit. The judge said sovereign immunity does not protect governments from breach of contract lawsuits. Walker County signed an intergovernmental agreement in 2011 guaranteeing Erlanger up to $10 million if Hutcheson Medical Center could not repay a loan from the Chattanooga hospital.

"Walker County's obligation to make payments under the Intergovernmental Agreement is absolute and unconditional," Murphy wrote.

On Tuesday, James argued again that sovereign immunity protects Walker County. He said he filed his motion to amend Murphy's order because that area of the law is open to interpretation with "substantial ground for difference of opinion."

In April 2011, when Erlanger and Hutcheson entered a management agreement, Erlanger issued the Fort Oglethorpe hospital a $20 million line of credit. The elected officials of Catoosa and Walker counties promised their governments each would guarantee half of that line of credit should Hutcheson not be able to repay Erlanger.

The agreement ended in 2013. Hutcheson filed for bankruptcy in 2014. And Erlanger began asking the counties for its money and filed the lawsuit against Walker County in December.

But James argues that Walker County and Erlanger never signed a contract together, meaning Walker County isn't in breach and is protected by sovereign immunity.

In fact, the two sides signed two contracts, which are linked. The question becomes: How strong is that link?

First, Erlanger signed a management agreement with Hutcheson in April 2011. As part of that agreement, Hutcheson's board gave Erlanger permission to pursue that $20 million from Catoosa and Walker counties if they needed to.

Next, Catoosa and Walker county leaders signed an intergovernmental agreement. In that agreement, Walker County pledged to pay half of that loan.

But, James argues, that promise never held any weight because Erlanger was not actually one of the groups signing the intergovernmental agreement.

"There is no written contract between the County and Erlanger," James wrote. "As no written contract exists there is no waiver of sovereign immunity by the County."

He added: "With the utmost respect to this Court, Walker County believes that Sovereign Immunity prevents Erlanger from enforcing the Intergovernmental Agreement at any stage of the litigation."

Contact staff writer Tyler Jett at tjett@timesfreepress.com or at 423-757-6476.