Trial set in $20M dispute over sale of Crozer system
MEDIA COURTHOUSE >> Delaware County Common Pleas Court President Judge Chad F. Kenney has set a June 21 trial date to adjudicate a $20 million dispute in the sale of the nonprofit Crozer-Keystone Health System to for-profit Prospect Medical Holdings Inc.
Kenney set the date after hearing arguments Monday from Rocco P. Imperatrice III, representing CKHS and Crozer-Keystone Community Foundation, and David Hurwitz, representing Prospect Medical Holdings and Prospect Crozer LLC.
At issue is a $300 million agreement the parties entered into in January 2016, in which Prospect agreed to take on approximately $260 million in liabilities and provide CKHS with the balance in cash.
Under the sale finalized in July of last year, CKHS consolidated two foundations into CKCF, which would be the ultimate recipient of the proceeds, according to a petition filed by Imperatrice in the Orphans Court Division last month.
Crozer claims it notified the buyers of an estimated purchase price balance of $52,996,000, which was due at closing. Imperatrice said Monday that Prospect did not dispute that figure, though both parties recognized there would be a delay in accounts receivable following the transition and agreed that CKHS would accept only $20 million at closing with the rest due within 90 days.
Prospect made that $20 million payment and later paid an additional $12.9 million, according to the petition. Crozer is now asking Kenney to order the payment of what it claims is the remaining balance, as well as $745,730 in interest, for a total of $20,811,730.
Hurwitz, however, said Prospect has paid out all it intends to under the sale. He pointed to an email between then-Crozer Chief Financial Officer Philip J. Ryan and Prospect that he said shows Prospect disputed the $53 million figure and rebutted with a $30 million offer that was subsequently approved by Crozer’s board.
Imperatrice argued that the email and other communications indicated only that Crozer agreed to defer some of the payment, not reduce it, and that the sales agreement was not amended to reflect the lower figure.
“Why would Crozer-Keystone agree, without consideration, without amendment to the agreement, to walk away from a payment of $33 million?” he asked.
“To close the deal,” Hurwitz answered.
Kenney found the only way to resolve the issue would be through a trial, which the parties agreed would likely take about three days.
Imperatrice said Monday that there are additional considerations Crozer will be seeking, including $3.5 million it claims is owed for the Cassatt Insurance Co., as well as removal as guarantor on two leases for properties in Broomall and Springfield now used by Prospect. Those claims are expected to be raised in additional petitions.