Opinion issued November 7, 2013
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00273-CV
———————————
SHATISH PATEL, M.D., HEMALATHA VIJAYAN, M.D., SUBODH
SONWALKAR, M.D., WOLLEY OLADUT, M.D., Appellants
V.
ST. LUKE’S SUGAR LAND PARTNERSHIP, L.L.P. AND ST. LUKE’S
COMMUNITY DEVELOPMENT CORPORATION-SUGAR LAND,
Appellees
On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Case No. 2011-24016
OPINION
Appellants Dr. Shatish Patel, Dr. Hemalatha Vijayan, Dr. Subodh
Sonwalkar, and Dr. Wolley Oladut bring this interlocutory appeal from the trial
court’s denial of their renewed application for a temporary injunction relating to St.
Luke’s Sugar Land Hospital. The physicians sought to enjoin St. Luke’s Sugar
Land Partnership, L.L.P. and its managing partner, St. Luke’s Community
Development Corporation—Sugar Land (collectively, “St. Luke’s”) from taking
certain actions that would prevent their participation in the management and
control of a partnership formed to own and operate the hospital. We reverse the
trial court’s order denying the application on the grounds of mootness.
Background
This is the second interlocutory appeal from denials of requests for a
temporary injunction in a lawsuit between several physicians and a hospital
management partnership. The appellants are physicians who purchased
partnership interests in St. Luke’s Sugar Land Partnership, L.L.P., which was
created to own and operate a hospital in Sugar Land. Ownership of the Partnership
was divided into two classes of partnership units: Class A units, which were
reserved for physicians, and Class B units, which were reserved for the
Partnership’s managing partner, St. Luke’s Community Development
Corporation—Sugar Land, which in turn is a wholly-owned subsidiary of the St.
Luke’s Episcopal Health System Corporation.
In 2007, the Partnership adopted an Amended Partnership Agreement that
established a Governing Board to manage several aspects of the Partnership.
2
Although certain decisions could be made by the holders of an outright majority of
the Partnership units, an affirmative vote of board members controlling greater
than 50% of the “Voting Interest” was required for all decisions of the Governing
Board. The physician representatives on the board who held Class A units were to
“collectively control forty-nine (49%) of the Voting Interest.” A vote of
Governing Board members representing a supermajority of at least 75% of the
Voting Interest was required to take several major actions, including making a
capital call.
In April 2011, Shatish Patel, a physician partner who had served on the
Governing Board, sued the Partnership. Patel alleged that he was promised healthy
returns when he purchased his Class A units, but instead the Partnership was
operating at a net loss. He further alleged that after an unsuccessful attempt to
obtain financial information from the Partnership, he was forced to resign his
hospital privileges and also to resign as a member of the Governing Board. He
asserted various causes of action including breach of fiduciary duty, fraud,
misrepresentation, and theft. A few weeks later, the Partnership made a rescission
offer to each physician owner of Class A units. The letter noted that:
[I]t is possible that the Partnership may (1) adopt a mandatory capital
call strategy to address future funding of the Partnership and its
operation; and/or (2) dissolve, and transfer the hospital to a wholly
owned nonprofit affiliate of [St. Luke’s Episcopal Hospital System]
due to capital constraints.
3
All but four of the physician owners of Class A units accepted the Partnership’s
rescission offer. The four who refused the offer are the appellants in this case.
After the other physicians’ acceptance of the rescission offer, the appellant
physicians owned 12 partnership units, and the managing partner owned the rest.
The Partnership interpreted the Amended Partnership Agreement to allow the
managing partner to control the actions of the Governing Board by virtue of its
post-rescission claim to ownership of 95.5% of the partnership units.
On September 2, 2011, the Partnership’s Governing Board initiated a capital
call without the participation of any board members appointed by the physician
partners. Notice of the capital call was sent to Patel, Vijayan, Sonwalkar, and
Oladut. The capital call required a contribution of $487,037 each from Patel and
Vijayan and $243,518.50 each from Sonwalkar and Oladut, based on the number
of units owned by each. The notice of capital call stated that the failure to make
the capital contribution by September 30 would amount to a default, allowing the
Partnership to terminate the physician’s partnership interest. In response,
Sonwalkar and Oladut joined Patel and Vijayan in their lawsuit.
The physician partners did not make any contribution in response to the
capital call, and the Partnership sent written notice of their purported default. In
response, the physicians’ attorneys sent the Partnership a letter asserting that the
capital call was an ultra vires act under the terms of the Amended Partnership
4
Agreement. On October 3, 2011, the physicians applied for a temporary
injunction. They sought to enjoin St. Luke’s from taking various actions with
respect to the Partnership.
In mid-October, the Partnership sent a notice to the physicians, contending
that their partnership interests had been terminated, and a request was later sent for
the physician partners to assign their interests to the Partnership. On November 8,
2011, the trial court denied the application for temporary injunction. The
physicians appealed the denial, but they did not request temporary relief to prevent
the Partnership from undertaking any further actions pending the interlocutory
appeal. See TEX. R. APP. P. 29.3.
After denial of the temporary injunction and while the interlocutory appeal
was pending, St. Luke’s considered the physicians’ interests in the Partnership to
have been terminated. Based on this understanding, the managing partner treated
the Partnership as a defunct entity, and beginning in late 2011 it began the process
of assuming direct responsibility for operation of the hospital by transferring
essential licenses and other paperwork into its own name.
The physician partners ultimately prevailed in their interlocutory appeal of
the trial court’s denial of their October 2011 application for a temporary injunction.
See Sonwalkar v. St. Luke’s Sugar Land P’ship, L.L.P., 394 S.W.3d 186 (Tex.
App.—Houston [1st Dist.] 2012, no pet.). This court concluded that as of the time
5
of the denial of their application for temporary injunction, the physician partners
were entitled to enjoin actions intended to effect the termination of their
partnership interests. Because the capital call was disallowed under the Amended
Partnership Agreement, the physicians’ partnership interests could not be
terminated for failure to pay. Therefore, absent an injunction, they faced the
possibility of the irreparable injury of the loss of their management rights. Id. at
201–03. Specifically, this court determined that the physician partners collectively
controlled 49% of the Partnership’s Voting Interest as the remaining Class A unit
holders, allowing them to block certain actions of the Governing Board that
required a supermajority vote. Id. at 201. We remanded for further proceedings in
the trial court. Id. at 203. St. Luke’s did not file a petition for review of our
decision.
After our mandate issued, the physicians renewed their October 2011
application for temporary injunction. A temporary injunction hearing was set for
December 21, 2012. Two days before the hearing, St. Luke’s filed a motion to
dismiss the application for temporary injunction on the basis of mootness. Despite
having never suggested mootness during the course of the interlocutory appeal, and
despite our opinion which explained that the capital call had been ineffective to
terminate the physicians’ partnership interests, St. Luke’s argued to the trial court
that the request for a temporary injunction was moot because there had been
6
“Changed Circumstances Since the Filing of the Application.” In its written
response filed in the trial court, St. Luke’s argued as follows:
Plaintiffs made no attempt to preserve their rights pending
appeal. So the Partnership went forward with the previously planned
and noticed capital call. The Managing Partner contributed capital in
excess of $24,000,000. Plaintiffs did not contribute any additional
capital. When notified and provided the opportunity to cure, they
failed to do so. Therefore, the Partnership sent Plaintiffs a notice
stating that their partnership interests had been terminated. As a result
of the termination, only the Managing Partner remained a unit holder.
Because there were no longer at least two partners, the Hospital
ceased to operate as a partnership. It was owned solely by the
Managing Partner, a non-profit entity.
In order to carry out its status as a non-profit corporation and in
order to comply with regulatory guidelines applicable to the operation
of a non-profit Hospital, the Managing Partner undertook certain
actions. Specifically, the Managing Partner:
(i) Withdrew the registration of the Partnership as a limited
liability partnership with the Texas Secretary of State;
(ii) Filed an assumed name certificate for St. Luke’s to do
business as St. Luke’s Sugar Land Hospital;
(iii) Filed a final sales tax return for the Partnership with
Texas Comptroller;
(iv) Terminated the existing Management Agreement and
Purchased Services Agreements;
(v) Transferred its provider number though CMS [Centers
for Medicare and Medicaid Services];
(vi) Assigned equipment leases;
(vii) Advised and/or registered St. Luke’s as the provider of
services with several governmental entities and agencies,
7
including, Texas Medicaid, the Drug Enforcement
Agency, the Texas Board of Pharmacy, and the Texas
Department of Public Safety (for registration of narcotics
and radiation resources); and
(viii) Obtained, as required, new accreditation (or provided
notification of changes for accreditation) with numerous
agencies or entities, including with Det Norske Veritas,
the College of American Pathologists, and the American
College of Radiology.
In addition, as a result of the change in ownership of the
Hospital, the Managing Partner was required to change its insurance
coverage, utilities, supply and vendor contracts, and equipment and
services agreements. Finally, the property where the Hospital is
located (which was previously leased by the Partnership) was
purchased by an affiliated company of the Managing Partner at
significant expense.
Notably, St. Luke’s did not attach to its written response any evidence to support
the factual allegations recited in support of its mootness argument.
The hearing on the renewed application for temporary injunction focused on
the suggestion of mootness. St. Luke’s presented one witness to support its
argument, David Koontz, Senior Vice President of the St. Luke’s Health Care
System. Koontz had assumed numerous roles with respect to the operations of the
Partnership, including serving as “member of the Board, sometimes Interim CEO
and for a period the Chair of the Board of the Partnership.”
In his testimony, Koontz recounted the history of the Partnership’s attempted
capital call, including the refusal of the four physician partners to make the capital
contribution and the Partnership’s subsequent notification to them of the purported
8
termination of their partnership interests. He repeatedly testified that after the
purported termination of the remaining physician partners’ interests, the managing
partner considered the Partnership to have no other remaining partners.
Koontz then proceeded to describe the course of events upon which
St. Luke’s relied to demonstrate the mootness of the request for a temporary
injunction. In his capacity as Senior Vice President, it was Koontz’s job to
confirm completion of all action necessary for the managing partner to assume the
authority to operate St. Luke’s Sugar Land Hospital. One such action was to
“transfer” a “provider number” 1 through the Centers for Medicare and Medicaid
Services (CMS), which was necessary for the managing partner to receive payment
from the government for services covered by Medicare and Medicaid, as well as
payment from private insurers. Koontz testified that it took “six to nine months” to
transfer the provider number for St. Luke’s Sugar Land Hospital from the
Partnership to the managing partner. He explained that the “main challenge was
the unusual nature of the request we were making of CMS” because:
When they see a transfer of CMS number from one company to
another, they are used to some documents accompanying that. Some
– you know, some codifying documents. And one of the things that
they suggested would be a Bill of Sale. Instead we had to produce
1
The “provider number” was an apparent reference to the National Provider
Identifier, which is used by health care providers and other entities to
comply with federal health care regulations and to collect Medicare and
Medicaid payments. See generally 45 C.F.R. §§ 162.100–162.1902 (2012).
9
other documents. I think those related to the rescission and so on to
show that there was only one partner.
Koontz opined that if a court were to order the hospital to transfer the provider
number back to the Partnership, there is “no guarantee” that CMS would be able to
do that, and to “send it back” now would be “very confusing . . . not only to CMS
but a number of others.” Another “potential impediment” to transferring the
number back to the Partnership, according to Koontz, is an Affordable Care Act
provision which prohibits “the ownership of any new physician-owned hospital or
the increase in percentage ownership of physicians in general acute care hospitals.”
Koontz generally discussed the various licenses held by St. Luke’s Sugar
Land Hospital. He testified that the overall process of relicensing the hospital had
taken “more than a few months,” and involved “sending notification of a change of
a tax ID associated with the provider number” and “a re-inspection.” He also
testified that since the managing partner’s assumption of responsibility for
operating the hospital, it has been operated “as a not-for-profit entity,” which in the
first year resulted in tax savings of “$2- to $3 million as a combination of property
taxes, margin tax and sales tax.”
With respect to the Partnership’s debts, Koontz testified that the Partnership
had approximately $50 million in debt at the time the physicians’ interests were
purportedly terminated. Of that amount, $12 million was a working capital loan
owed to Chase, and $35 million was a seven-year loan also payable to Chase. The
10
balance of the debt was owed to St. Luke’s Episcopal Health System. On cross-
examination, Koontz conceded that approximately $10 million of the debt was due
to the rescission offer. He testified that St. Luke’s Episcopal Health System paid
off the working capital loan and extinguished its loan to the Partnership, all of
which he said would have to be repaid by the Partnership “if it were reformed.”
On cross-examination, Koontz also testified that it was his “understanding”
that the hospital “is currently owned” by the managing partner. However, he
agreed that there was no bill of sale documenting the transfer of hospital assets
from the Partnership to the managing partner, and no asset purchase agreement or
other document memorializing the transfer of the hospital. Notably, the
Partnership’s attorney objected to the cross-examination insofar as Koontz was
asked about the purported “transfer” of the hospital. The Partnership’s counsel
argued to the trial court: “I think ‘transfer’ is misleading and inappropriate. There
is no evidence there was a transfer. Once you get down to one person—I believe
the law is a partnership no longer exists if there is only one partner. So, there is no
transfer document necessary.” (Emphasis supplied.)
Koontz denied any knowledge of any agreement with the Partnership
concerning the payment of its debts by St. Luke’s Episcopal Health System. He
also denied knowledge of whether the Partnership currently owned any assets.
With respect to the current legal status of the Partnership, Koontz testified that his
11
understanding was that it “still needs to exist as a legal entity for the purposes of
this litigation.”
After the evidentiary hearing, the trial court denied the temporary injunction
as moot, explaining in its order: “Since the act sought to be enjoined has already
been performed, this court is no longer capable of granting the relief sought.” The
physicians then filed this interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE
ANN. § 51.014(a)(4) (West Supp. 2012). 2
Analysis
“In general, a temporary injunction is an extraordinary remedy and does not
issue as a matter of right.” Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex. 1993).
The purpose of a temporary injunction is to preserve the status quo of the
litigation’s subject matter pending a trial on the merits. Butnaru v. Ford Motor
Co., 84 S.W.3d 198, 204 (Tex. 2002). The status quo is “the last, actual,
peaceable, non-contested status which preceded the pending controversy.” In re
Newton, 146 S.W.3d 648, 651 (Tex. 2004) (quoting Janus Films, Inc. v. City of
Fort Worth, 163 Tex. 616, 617, 358 S.W.2d 589, 589 (1962) (per curiam)). To
2
The doctors also filed in this court a separate original proceeding requesting
the issuance of a writ of temporary injunction. In re Patel, No. 01-13-
00330-CV, 2013 WL 3422026 (Tex. App.—Houston [1st Dist.] July 2,
2013, orig. proceeding). We denied the request for equitable relief, noting
that “the interlocutory appeal already filed by the relators provides an
avenue of relief, including procedures to obtain temporary relief.” Id. at *1
(citing TEX. R. APP. P. 29.3).
12
obtain a temporary injunction, the applicant must ordinarily plead and prove three
specific elements: (1) a cause of action against the defendant; (2) a probable right
to the relief sought; and (3) a probable, imminent, and irreparable injury in the
interim. Butnaru, 84 S.W.3d at 204. The applicant is not required to establish that
he will prevail on final trial; rather, the only question before the trial court is
whether the applicant is entitled to preservation of the status quo pending trial on
the merits. Walling, 863 S.W.2d at 58.
The decision to grant or deny a temporary injunction lies in the discretion of
the trial court, and the court’s ruling is subject to reversal only for a clear abuse of
that discretion. Id. A trial court abuses its discretion in granting or denying a
temporary injunction when it misapplies the law to the established facts. INEOS
Grp. Ltd. v. Chevron Phillips Chem. Co., 312 S.W.3d 843, 848 (Tex. App.—
Houston [1st Dist.] 2009, no pet.) (citing State v. S.W. Bell Tel. Co., 526 S.W.2d
526, 528 (Tex. 1975)). We review the evidence submitted to the trial court in the
light most favorable to its ruling, drawing all legitimate inferences from the
evidence, and deferring to the trial court’s resolution of conflicting evidence. Id.
(citing Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978)). Our review is limited to
determining whether the trial court abused its discretion in ruling on the
application for temporary injunction; we do not reach the merits of the underlying
case. Davis, 571 S.W.2d at 861–62.
13
The trial court expressly denied the physicians’ renewed application for
temporary injunction based on the conclusion that it was moot. In the order
denying the application for temporary injunction, the trial court stated, “Since the
act sought to be enjoined has already been performed, this court is no longer
capable of granting the relief sought . . . .”
An issue may be moot if it becomes impossible for the court to grant
effective relief. H&R Block Fin. Advisors, Inc., 262 S.W.3d 896, 900 (Tex.
App.—Houston [14th Dist.] 2008, no pet.) (citing Williams v. Lara, 52 S.W.3d
171, 184 (Tex. 2001)). The appeal of a trial court’s denial of a motion for
temporary injunction may become moot if the actions sought to be enjoined occur
prior to the resolution of the appeal of the denial of the temporary injunction. See
Day v. First City Nat’l Bank of Hous., 654 S.W.2d 794, 795 (Tex. App.—Houston
[14th Dist.] 1983, no writ). According to St. Luke’s, that description applies to the
physicians’ application for temporary injunction in this case.
After this court issued its opinion in Sonwalkar v. St. Luke’s Sugar Land
Partnership, L.L.P., 394 S.W.3d 186 (Tex. App.—Houston [1st Dist.] 2012, no
pet.), the physicians reurged their prior application for temporary injunction in the
trial court. This application for temporary injunction did not request that St.
Luke’s be required to reverse any acts it had already performed, but only sought to
prevent St. Luke’s from taking certain future actions pertaining to the governance
14
of the Partnership and disposition of its assets. To evaluate whether the request for
temporary injunctive relief has become moot in light of the evidence presented by
St. Luke’s, we must consider the precise requests for relief. Those requests were:
a. Taking any action to terminate the Partnership Interests or
ownership interest of . . . any of the Plaintiffs;
b. Except pursuant to a vote of the partners where Class A Unit
holders have the ability to vote, collectively, 49% of the partnership
interest, taking any action identified in Paragraph 8.03(h) of the
Amended Partnership Agreement, including actions to:
i. Reorganize the Partnership;
ii. Take any action in contravention of the Amended
Partnership Agreement;
iii. Make an assignment for the benefit of creditors of the
Partnership or file a voluntary petition under the federal
Bankruptcy Code or any state insolvency law;
iv. Confess any judgment against the Partnership; or
v. Amend or otherwise change the Amended and Restated
Partnership Agreement.
c. Except pursuant to a vote of the Governing Board that includes
representatives of Class A Unit holders who are permitted,
collectively, to vote 49% of the Voting Interest, taking any action
identified in Paragraphs 8.09(a)–(f) of the Amended Partnership
Agreement, including actions to:
i. Issue new Units, admit new partners, or substitute
partners in the Partnership;
ii. Borrow money in an amount exceeding $250,000 from
any third party for any purpose;
15
iii. Sell, transfer, assign, dispose of, trade, exchange,
quitclaim, surrender, release or abandon any Partnership
property or interests therein other than in an amount less
than $250,000;
iv. Purchase any real property or make, execute, or deliver
any deed or long-term ground lease for any real property;
v. Require or call for any additional capital contributions by
the partners or approve the amounts and proportions of
such additional capital contributions; or
vi. Impose or approve any fundamental or material change
to the general business objectives and purpose of the
Partnership.
d. Calling a Meeting of Governing Board without providing notice
to the Class A Governing Board representatives elected by Class A
Unit holders.
Comparing these requests to the arguments and evidence presented by St. Luke’s,
no new development has mooted the physicians’ application for temporary
injunctive relief.
The mootness arguments are essentially predicated on two premises. The
first is that the physicians’ interests in the Partnership were actually terminated
such that the Partnership is now a defunct entity which only survives to defend this
pending litigation. The second is that the Partnership’s assets, principally the
hospital, were conveyed to or otherwise absorbed by the managing partner, so it is
too late to preserve the physicians’ interest in maintaining those assets. Neither
premise survives close scrutiny.
16
With respect to the purported termination of the physicians’ partnership
interests, our previous opinion already explained that the physicians demonstrated
a probable right to injunctive relief to prevent the Partnership from squeezing out
the physicians by means of the capital call without approval by 75% of the Voting
Interest as required by the Amended Partnership Agreement. Sonwalkar, 394
S.W.3d at 202.3 The managing partner may have acted on the assumption that it
was authorized to take the actions it did, but the physicians have demonstrated a
probable right to injunctive relief based on the argument that the managing
partner’s understanding was an incorrect one. Even assuming that the capital call
was legitimate, and even assuming the physician partners defaulted by failing to
respond to the capital call, the Partnership still failed to effectively terminate the
physicians’ partnership interests under the Amended Partnership Agreement,
which required, among other things, the execution and delivery by the defaulting
partners of “any assignments and other instruments that may be reasonable to
evidence and fully and effectively transfer the interest of the Defaulting Partner.”
The Partnership requested assignments from the physician partners, but the
physicians refused to provide them. The Partnership took no further action to
3
The dissenting opinion in this appeal is partially premised on its rejection
and re-evaluation of the grounds upon which the prior panel of this court
resolved the previous interlocutory appeal.
17
confirm and enforce its interpretation of the Amended Partnership Agreement so as
to terminate the interests of its remaining physician partners. 4
The mere fact that the Partnership gave the physicians notices of default and
termination does not mean that they actually were in default or that their
partnership interests were actually terminated. The mere fact that the general
partner took various actions and made representations based on a mistaken belief
that the Partnership no longer existed and it somehow became the owner of the
hospital by operation of law did not make it the owner of the hospital, as suggested
by the dissent. The record contains no evidence that the managing partner now
owns the hospital, and the dissent points to none. Accordingly, the course of the
4
The dissent does not engage this issue and simply accepts at face value the
assertion that the physicians’ interests have been terminated. For its part, in
response to these arguments, St. Luke’s notes that the Amended Partnership
Agreement provided that the managing partner, acting “as the Defaulting
Partner’s irrevocable agent,” was authorized to execute “any legal
instruments to the appropriate continuing Partners and/or Purchaser.”
However, St. Luke’s does not contend that such documents were actually
executed, nor did it produce any evidence that this happened. St. Luke’s
attempts to explain this by saying that “no assignment was even necessary
because the Partnership itself does not hold or exercise individual
partnership interests.” That response disregards the fact that the assignment
of the physicians’ partnership interests back to the Partnership would have
facilitated the treatment of such interests as having been extinguished, and it
also would have served the function of “evidenc[ing] and fully and
effectively transfer[ring] the interest of the Defaulting Partner” as
contemplated by this provision of the Agreement. In any case, the more
fundamental problem for St. Luke’s still remains—the phyisicans have
demonstrated a probable right to injunctive relief based on the arguments
that the capital call was unauthorized, therefore there was no default, and
thus there also was no basis to terminate the physician partners.
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managing partner’s conduct was undertaken on the mistaken assumption that the
Partnership had been eviscerated, and in assumption of the risk of all consequences
which may flow from actions taken in reliance on that mistaken understanding.
With respect to the contention that upon the alleged termination of the
physicians’ partnership interests, the Partnership had ceased to exist for any
purpose other than continuing to defend this litigation, that position is undercut by
the physicians’ demonstration of a probable right to injunctive relief because their
interests were not actually terminated. But even supposing that the general partner
had been the only remaining partner, it does not follow that the general partner was
effectively the legal heir to all of the Partnership’s assets, such that general partner
simply could treat Partnership assets as its own. Even if the general partner had
determined to wind-up the affairs of the Partnership, see TEX. BUS. ORG. CODE
§§ 11.051, 11.057 (West 2012), the final disposition of Partnership assets is a part
of the winding-up process, see id. § 152.706(a), and a prerequisite to the
termination of a partnership business, see id. § 152.701(1).5 Moreover, paragraph
5
St. Luke’s responds that a wind-up does not require liquidation of assets and
sale to third parties, and that the termination of the physician partners’
interests resulted in the managing partner being the sole remaining partner in
the Partnership. We have explained the flaw in the reasoning that assumes
an effective termination of the physician partners, but even if the managing
partner had been the sole remaining partner of the Partnership, a proper
attempt at winding up the business of the Partnership could have, and
prudently would have, included a formal, documented transfer of assets,
particularly a valuable asset such as a hospital.
19
13.02 of the Amended Partnership Agreement expressly provided that “[o]n
termination, the assets of the Partnership shall be liquidated and applied to
payment of the outstanding Partnership liabilities,” and paragraph 13.03 provided
that “the Partnership shall not terminate until there has been a winding up of the
Partnership’s business and affairs, and the assets of the Partnership have been
distributed as provided in Section 13.02.”
Of course, it still could have been the case that the managing partner,
laboring under its misimpression that the physicians had been squeezed out of the
Partnership, actually took actions to the effect that ownership of the hospital was
actually transferred away from the Partnership. But there is no evidence
whatsoever that actually occurred, and again the dissent has pointed to none. The
only evidence presented by St. Luke’s on this point had to do with administrative
aspects of operating a hospital: reassignment of the “CMS provider number”;
obtaining new licenses; obtaining a tax advantage by operating the hospital under
auspices of a not-for-profit entity; and transferring debt incurred in the name of the
Partnership to other entities affiliated with St. Luke’s. We cannot infer that any of
these actions indicated an actual transfer of hospital ownership from the
Partnership to the managing partner, and no evidence to that effect was actually
presented to the trial court. The evidence presented actually indicated the opposite,
as illustrated by Koontz’s description of the obstacles encountered in the effort to
20
transfer the CMS provider number. In connection with the request for transfer of
the provider number, CMS expected to receive some supporting documentation,
such as a bill of sale. There was no such document, and the evidence instead
showed that in order to accomplish that transfer, the managing partner had to
“produce other documents” to persuade CMS that a transfer had occurred by
operation of law “related to the rescission” and because the Partnership purportedly
had “only one partner.” As noted previously, the misunderstanding held by the
managing partner about the legal effect of its attempt to terminate the physicians’
partnership interests did not have the effect of extinguishing the Partnership or any
ownership rights the Partnership has in the hospital.
With the two major premises of the St. Luke’s arguments thus discredited, it
follows that the mootness arguments simply do not correspond to the actual
application for temporary injunction. A request that St. Luke’s be required to
reverse any of its actions predicated on termination of the physicians’ partnership
interests presumably would not be a moot request, but that question is not
presented because no such relief was requested. The physicians did seek to enjoin
“any action to terminate the Partnership Interests or ownership interest of . . . any
of the Plaintiffs”—that request is not moot as the Partnership has not been actually
extinguished, though St. Luke’s evidently persists in a belief otherwise, and in
reliance on that misunderstanding continues to take actions respecting the hospital
21
that are adverse to the physicians’ interests. The physicians further sought to
enjoin actions requiring their assent under the Amended Partnership Agreement—
and given the continued viability of the Partnership, those requests also are not
moot. Finally, the physicians sought to enjoin any meeting of the Partnership’s
Governing Board without notice to their representative—again, not a moot request
given the continuation of the Partnership.
The physicians had the burden of proof to establish their entitlement to the
injunctive relief they sought. See, e.g., Walling, 863 S.W.2d at 58. In our prior
decision we concluded this burden had been satisfied. Sonwalkar, 394 S.W.3d at
202–03. We conclude that the suggestion of intervening circumstances causing the
physicians’ application to become moot is unavailing. And we discern nothing
else in the record of this interlocutory appeal that would support a conclusion that
the requested injunction should not be granted.
22
Conclusion
We reverse the order of the trial court, and we remand the cause for further
proceedings to set an injunction bond and issue the appellants’ requested
temporary injunction.
Michael Massengale
Justice
Panel consists of Justices Keyes, Higley, and Massengale.
Justice Keyes, dissenting.
23