Daughters of Charity Health System is suing one of the most vocal critics of its high-profile and controversial sale to Prime Healthcare Services, which entered the homestretch last week.
The six-hospital system based in Los Altos Hills, Calif., filed suit Monday against the Service Employees International Union-United Healthcare Workers West and private equity firm Blue Wolf Capital Partners for “conspiring to hold hostage” its proposed sale to Prime.
“By using extortionist threats and bid-chilling tactics to frustrate this sale as leverage for other commercial gains they seek, the defendants have cost DCHS at a minimum tens of millions of dollars in continuing operational losses and professional fees,” Daughters wrote in the suit filed in Superior Court in Santa Clara County. “DCHS continues to face the possibility that the sale will not close, with potentially catastrophic consequences for DCHS' six California hospitals, thousands of employees and retirees of those hospitals, and the patients and communities whom the hospitals serve.”
Daughters also alleged that the SEIU invited Blue Wolf to participate in the sales process. The union, the suit alleges, agreed to back Blue Wolf's bid if the private equity firm agreed to renegotiate Daughters' collective bargaining agreements after the deal closed.
In an e-mailed response, Dave Regan, president of the SEIU-UHW, called the suit a “nothing more than a legal hissy fit.”
“Daughters of Charity is losing $10 million a month and threatening bankruptcy, yet CEO Robert Issai decided it would be a good idea to spend the company's precious and dwindling resources on a frivolous lawsuit designed to punish workers for speaking out against selling the system to Prime Healthcare.”
A spokeswoman for Daughters emphasized in an e-mail that the SEIU and Blue Wolf have caused "real and substantial harm" to the system.
The fate of the $843 million takeover is now in Prime's hands. Attorney General Kamala Harris last week approved the deal if Prime agrees to a number of conditions, some of which go beyond the original terms of the deal.
For instance, the conditions require Prime to continue operating four of Daughters' hospitals as full-service facilities for at least 10 years—twice as long as specified in the original agreement.
If Prime chooses not to accept the attorney general's conditions, then Daughters will receive a $5 million termination fee.
Prime and Daughters won't be able to challenge any of the conditions, according to the spokeswoman for Daughters. Instead the parties "have agreed to take the necessary time a decision of this magnitude deserves before determining the best path forward for our hospitals," she said.
Prime also has sued the SEIU-UHW in the past six months, arguing that the union chapter has engaged in a smear campaign designed to strong arm it into unionizing its employees. The Daughters' suit echoes those allegations.
Follow Beth Kutscher on Twitter: @MHbkutscher
