In Steward Health Care System v. CHSPSC, Judge Sanders found that CHSPSC, an affiliate of Community Health Systems (CHS), is subject to personal jurisdiction in Massachusetts for claims made under transition-services agreement (TSAs) signed along with an asset-purchase agreement (APA).
Under the APA between Steward Health Care System LLC (Steward) and CHSPSC, Steward agreed to purchase eight hospitals outside Massachusetts. Under the TSAs between the same parties, CHSPSC agreed to provide services to facilitate the transition of the hospitals.
After disputes arose between Steward and CHSPSC, CHSPSC sent Steward a letter threatening to cut off services under the TSAs. Steward responded by suing CHSPSC in the Business Litigation Session of the Massachusetts Superior Court, seeking an order enjoining CHSPSC from terminating TSA services. CHSPSC moved to dismiss under Mass. R. Civ. P. 12(b)(2), arguing that the court lacked personal jurisdiction over CHSPSC. Judge Sanders denied the motion.
Judge Sanders noted that CHSPSC is a Delaware LLC with a principal place of business in Tennessee. Judge Sanders further noted that CHSPSC “has no offices in Massachusetts, owns no real estate and has no license to do business here. Moreover, all of the services performed under the applicable agreements are provided elsewhere.” Focusing on contacts CHSPSC had with Massachusetts before and after contract formation, however, Judge Sanders ruled that CHSPSC was subject to jurisdiction.
Judge Sanders found that CHSPSC’s “contacts with this state easily satisfy the requirements . . . the Massachusetts Long Arm Statute, G.L. c. 223 §3.”
CHSPSC sent numerous emails and made many telephone calls to Steward representatives at a time when Steward had its principal place of business in Massachusetts. These communications culminated in the execution of the APA and the TSAs from which this claim arises. Those emails and phone calls continued after the contracts were executed. Moreover, in billing for its services, CHSPSC sent invoices to a Steward representative in Massachusetts and accepted payments [from] Steward’s Massachusetts bank accounts. That the hospitals to which these agreements pertained were outside of Massachusetts and that the services at issue relate to those hospitals does not change the fact that, for jurisdictional purposes, Steward was transacting business in Massachusetts and that this business gave rise to the claims before the Court.
Judge Sanders also found that “the assertion of jurisdiction [comported with] constitutional requirements” of due process.
[T]he claims at issue arise out of CHSPSC's contacts with Massachusetts. This Court also concludes that those contacts were purposeful and that the assertion of jurisdiction would not be constitutionally unfair. CHSPSC knew from the outset that Steward was a Massachusetts company, it affirmatively solicited Steward in Massachusetts about the prospect of doing business together and it signed agreements to maintain an ongoing relationship with Steward at a time when Steward was and remained for some period an entity with its principal place of business here. Given those contacts, it was reasonably foreseeable that CHSPSC could be haled into a Massachusetts court.
The Business Litigation Session of the Massachusetts Superior Court
Docket Number: 2018-03399-BLS2
Date of Decision: August 20, 2019
Judge’s full name: Janet L. Sanders, Justice of the Superior Court
Michael J. Leard is an associate in Nutter’s Litigation Department. He represents Fortune 500 companies in the areas of commercial litigation, product liability, pharmaceutical and medical device litigation, toxic tort, and ...
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Eric P. Magnuson co-chairs Nutter’s Business Litigation practice group. Blending practicality with tenacity and strategic thinking, Eric helps clients solve legal challenges so that his clients can focus on what they do ...
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