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The Baynes of LICH's existence

State judge's request upends bid process, just as he predicted.

In a Brooklyn courtroom on Feb. 21, lawyers debating a possible buyer for a Cobble Hill hospital slated for closure heard Justice Johnny Lee Baynes issue a warning.

"If you do not have ... a bona fide purchaser by the 22nd of May of the year 2014, Long Island College Hospital is going to close," he said, according to the court transcript. A bidder with the "greatest amount of healthcare" would most likely win "as long as they meet the minimum criteria."

And then Justice Baynes issued these prescient words: "But there is always a chance, and I want everybody going into this with their eyes wide open, that the reverse could happen, that things could go bad."

Very bad, indeed.

Ignoring his own settlment

Justice Baynes has been involved in the LICH case for more than a year, presiding over several litigants: the State University of New York, which owns the hospital; the state Department of Health; unions 1199 SEIU Healthcare Workers East and the New York State Nurses Association; and a coalition of community groups.

Last Thursday, in a move that sparked shock and elation in a courtroom typically packed for LICH hearings, Justice Baynes ignored the settlement he approved in February. That deal paved the way for bidders to propose redeveloping the hospital site, with special preference given to entities that promised to build a full-service facility.

In a twist that caught the litigants off guard, Justice Baynes asked three different bidders for LICH to negotiate the formation of a new alliance that could run a hospital at the site.

Some observers say Justice Baynes was simply acting in character: He is seen as results-oriented, and seems to believe that a hospital should continue to operate at the LICH campus, even though the healthcare marketplace does not appear to support that view.

Justice Baynes urged the Peebles Corp., the Fortis Property Group and Prime Healthcare to start talks. But he strategically did not issue an order for them to do so. If he had, there is no question that one litigant or another in the long-running LICH dispute would have then appealed.

There are several reasons why his move was controversial and possible fodder for more legal quarrels. Prime is not a litigant, and despite the company's lack of legal standing, the judge propelled Prime into these new settlement talks because the community groups believe the firm is the rightful bid winner. The judge asked Fortis and Peebles to negotiate, but they are leading contenders in a bidding process that is under dispute. By some interpretations—given that the bid result itself is contested—the judge should have invited all bidders to the table.

Heated tempers

Jim Walden, the attorney at Gibson Dunn & Crutcher who represents the community groups that want to keep a hospital at the site, won a settlement in February to create the bidding process that gave preference to proposals for full-service hospitals. But after a full-service hospital was not selected, he sued again, asserting that six of the bid scores should have been disqualified.

The hearing on his motion that was to take place last week was adjourned at Mr. Walden's request over the objections of SUNY, the Health Department and 1199 SEIU. The LICH litigants will be back in court May 20. Meanwhile, LICH is set to close May 22, having lost hundreds of millions of dollars in recent years.

Already-heated tempers have escalated. SUNY, DOH and 1199 SEIU criticized Mr. Walden's position in their documents for the May 20 hearing.

"Masquerading as an application to 'enforce' the February settlement agreed to by the litigants, [Mr. Walden] in fact asks this Court to discard the parties' negotiated settlement, bypass the procedural mechanisms" included largely at his request, "and simply anoint their hand-picked candidate," wrote SUNY attorney Frank Carone, of law firm Abrams Fensterman.

The union 1199 SEIU, once hopeful a hospital was possible, has become less optimistic as the process has worn on. In court papers, it argued that Mr. Walden and his clients were suing simply because they were not happy with the outcome.

Union lawyer Susan Cameron at Levy Ratner wrote that Mr. Walden's "dissatisfaction notwithstanding, there is absolutely no legal basis ... upon which to discard selected evaluators' scores, and thus to upset the entire carefully negotiated RFP process."

The community groups will -argue this week that once the scores it believes should be disqualified are removed, Prime will be the winning bidder.

If Justice Baynes accepts that argument, litigation is bound to continue. Prime, a for-profit hospital operator, has been in a bitter legal battle with unions in its home base of California. The fight in court this week is about scoring, but the selection of Prime could launch a battle that the powerful 1199 SEIU is willing to take on.

No matter what happens with LICH this week, another hospital will get a taste of Justice Baynes' courtroom next month. New York Methodist Hospital in Park Slope, Brooklyn, whose expansion has been contested by a group of residents who formed the Preserve Park Slope coalition, will go before the judge June 4.

"The Baynes of LICH's existence" originally appeared in Crain's New York Business.
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