CKHS, Inc. & The Foundation for Delaware County v. Prospect Medical Holdings, Inc. ( 2023 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
CKHS, Inc. and The Foundation : CASES CONSOLIDATED
for Delaware County :
:
v. : No. 1118 C.D. 2022
:
Prospect Medical Holdings, Inc. :
and Prospect Crozer, LLC, :
and Commonwealth of :
Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and :
Prospect Crozer, LLC :
CKHS, Inc. and The Foundation for :
Delaware County :
:
v. : No. 1265 C.D. 2022
:
Prospect Medical Holdings, Inc. and :
Prospect Crozer, LLC and :
Commonwealth of Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and Prospect Crozer, :
LLC : Argued: March 6, 2023
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE CEISLER FILED: May 3, 2023
In these consolidated appeals, Appellants Prospect Medical Holdings, Inc.,
and Prospect Crozer, LLC, (individually PMH and Prospect Crozer, and collectively
Appellants), appeal two orders issued by the Court of Common Pleas of Delaware
County (Common Pleas) on, respectively, October 11, 2022, and November 2, 2022.
Through these orders, Common Pleas granted Appellees CKHS, Inc., and The
Foundation for Delaware County’s (CKHS and Foundation, individually, and
Appellees, collectively) First Amended Petition for Emergency Preliminary
Injunctive Relief (Amended Petition), thereby preliminarily enjoining Appellants
from turning a hospital they own into a behavioral health facility, and denied
Appellants’ subsequent request to dissolve or stay that preliminary injunction. After
thorough review, we reverse Common Pleas’ October 11, 2022 order and dismiss as
moot Appellants’ appeal of Common Pleas’ November 2, 2022 order.
I. Background
The central focus of this matter is Delaware County Memorial Hospital
(County Hospital), an acute care facility located in Drexel Hill, Pennsylvania. On
January 8, 2016, Crozer-Keystone Health System (as CKHS was known at that
point) agreed to sell the vast majority of its holdings, including County Hospital and
a multitude of other assets, to Appellants. See Reproduced Record (R.R.) at 719a-
820a. This sale was memorialized through an asset purchase agreement (APA),
which, of particular import to this case, contains a clause barring Appellants from
closing any of the purchased hospitals prior to July 1, 2026, i.e., 10 years after the
APA’s “Effective Date,” without the express approval of both a local advisory
board1 and the Foundation. See id. at 753a-54a, 794a-96a.2
1
This advisory board was also established through the APA. See R.R. at 794a-95a.
2
Specifically, Section 11.16 of the APA provides:
Future Sale or Closing. For a period of time of ten (10) years after
the Effective Time, [Appellants] shall not sell or close any of the
licensed Hospitals, including any campus of a licensed Hospital
(Footnote continued on next page…)
2
On September 21, 2022, Appellants announced that they would be converting
County Hospital into a “behavioral health hospital” and contemporaneously notified
both Delaware County Council and County Hospital’s employees, in writing, that
all of those employees would be fired in short order. See id. at 524a-25a, 589a-92a,
883a-91a. Despite taking these steps, and apparently having some manner of pre-
announcement communication with Appellees’ counsel, Appellants did not seek or
secure the Foundation’s assent before moving forward with its plans. See id. at 643a,
659a, 664a.
In response, Appellees filed a two-count breach of contract suit in Common
Pleas on September 28, 2022, through which it sought a permanent injunction that
would prevent Appellants from taking any steps to close County Hospital or cease
offering acute care services at that location, as well as a Petition for Emergency
Preliminary Injunctive Relief. Id. at 14a-230a. On October 3, 2022, Appellees filed
their First Amended Complaint, which was substantially similar to the original
providing inpatient acute care services as of the Effective Time,
acquired as part of the transactions contemplated hereby unless
consented to by the Advisory Board and the Foundation in advance.
Notwithstanding anything herein to the contrary, the prohibition of
this Section 11.16 shall not apply to: (a) any sale or closure required
by a Government Entity; (b) any merger, sale or other transaction
that does not relate solely or principally to the Assets purchased
pursuant to this Agreement; or (c) any corporate-level transactions
involving [Appellants’] stock or securities, including macro-level
mergers, recapitalizations or reorganizations or other changes of
control of PMH or its parent. In the event of any transactions
described in subsections (b) and (c) above, or any other change in
control of [Appellants] after the Effective Time, any successor shall
be required to comply with, and shall be bound by, the post-closing
covenants and other obligations of Buyers as set forth in this
Agreement.
R.R. at 796a (emphasis in original).
3
iteration, as well as the Amended Petition. Shortly thereafter, the Commonwealth of
Pennsylvania, Office of the Attorney General (OAG), joined both the First Amended
Complaint and Amended Petition in support of Appellees, and Appellants responded
in opposition to the Amended Petition. Id. at 461a-91a.3
Common Pleas convened a hearing regarding the Amended Petition on
October 7, 2022,4 at which the parties presented several hours’ worth of evidence
and oral argument, and then took the matter under advisement at the hearing’s close.
See id. at 503a-717a. Thereafter, on October 11, 2022, Common Pleas issued an
order that granted the Amended Petition in part. Id. at 916a-17a. In doing so,
Common Pleas directed Appellants to “immediately suspend any actions materially
altering the present operation of . . . County . . . Hospital, including but not limited
to the acute care services and other services provided by . . . County . . . Hospital as
a licensed hospital providing general hospital services to the public, pending further
order of [Common Pleas.]” Id. Common Pleas also instructed Appellants to
“maintain all services presently offered at . . . County . . . Hospital[, in addition to
County Hospital’s] present operations[,]” as well as to refrain from “directly or
indirectly engag[ing] in any activity that would in any way materially and adversely
affect such services or operations[.]” Id. at 917a. Finally, Common Pleas ruled that
Appellees were not required to post a bond to secure the preliminary injunction,
3
Appellants have also challenged the First Amended Complaint via preliminary objections.
See R.R. at 1249a-85. However, those preliminary objections, and any rulings thereon, are not the
subject of this appeal.
4
On September 30, 2022, Common Pleas issued an order recusing all of its judges from
handling Appellees’ suit. R.R. at 460a. As a result, the Honorable Robert J. Shenkin, a senior judge
from the Court of Common Pleas of Chester County, was appointed to preside over this matter as
a visiting judge. See id. at 500a, 916a-17a; Appellants’ Br at 5; Appellees’ Br. at 12.
4
because Section 14.21 of the APA relieved them of the need to do so under the
circumstances.5 Id. Appellants appealed this order to our Court on October 12, 2022.
On October 14, 2022, Appellants filed a motion with Common Pleas, through
which they requested that the preliminary injunction either be dissolved or stayed
pending appeal. Id. at 964a-99a. Appellants then filed an amended version of this
motion (Amended Motion to Dissolve) on October 21, 2022. Id. at 1009a-39a.
Therein, Appellants argued that Common Pleas should lift the preliminary injunction
because the Pennsylvania Department of Health (Department) was an indispensable
party whose absence deprived Common Pleas of jurisdiction, as well as because
severe staffing issues were preventing Appellants from providing services at County
Hospital in compliance with Common Pleas’ directive. Id. at 1010a, 1022a-27a.6 In
the alternative, Appellants asserted that a stay was warranted because they were
likely to prevail on appeal. Id. at 1011a, 1027a-37a. Common Pleas then held a
second hearing on October 28, 2022, after which it issued an order on November 2,
2022, that denied the Amended Motion to Dissolve. Id. at 1084a-1225a.
Additionally, Common Pleas used that order to clarify that it had not enjoined
Appellants “from proceeding with their plans precedent to the transition of [County
Hospital] to a behavioral health facility,” but had only barred them from actually
effecting the transition. Id. at 1225a (some punctuation omitted).
5
Section 14.21 of the APA states, in relevant part, that “the Parties [thereto] shall be
entitled to an injunction or injunctions (without the need to post bond or other security) to prevent
breaches of [the APA] and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which they are entitled at law
or in equity.” R.R. at 810a (emphasis added).
6
Appellants also argued that even if the Department had been named as a party, this Court,
rather than Common Pleas, would have exclusive original jurisdiction over the matter. R.R. at
1010a, 1025a.
5
This order did not prevent several additional wrinkles from subsequently
appearing and further complicating matters. On November 4, 2022, the Department
ordered Appellants to suspend emergency services and imposed a ban on patient
admissions at County Hospital, effective November 7, 2022, because patients’ health
and safety was being jeopardized by County Hospital’s failure to provide adequate
“diagnostic imaging services.” Id. at 1240a-46a. Then, on November 7, 2022,
Appellants appealed Common Pleas’ November 2, 2022 order to our Court, which
it supplemented on November 10, 2022, with applications to stay the preliminary
injunction and expedite both briefing and oral argument before this Court.7
Thereafter, on November 15, 2022, OAG filed a petition (Rule Petition) with
Common Pleas, through which it alleged that Appellants were violating Common
Pleas’ injunction orders by failing to adequately staff County Hospital and requested
that Common Pleas issue a rule directing Appellants to show cause as to why they
should not be held in contempt. Id. at 1303a-38a.8 In response, Common Pleas
scheduled a rule hearing for December 15, 2022. This Court heard oral argument on
December 7, 2022, regarding Appellants’ stay application, and then granted it the
following day, December 8, 2022, via a single-judge order. In doing so, this Court
stayed Common Pleas’ October 11, 2022 order “to the extent that [it required
Appellants] to maintain all services and all present operations of [County]
Hospital[.]” Commonwealth Ct. Or., 12/8/22, at 1. However, this Court also made
clear that Appellants were nevertheless still obliged, by both the October 11, 2022
order and the Department’s November 4, 2022 suspension directive, “to use good
7
We granted Appellants’ request to expedite this matter via per curiam order on November
16, 2022.
8
Appellees also joined in this Rule Petition. R.R. at 1340a-41a.
6
faith reasonable efforts to staff [County] Hospital in order to lift the Department[’s]
suspension of emergency services and patient admissions.” Id. at 1-2. In recognition
of this stay, Common Pleas indefinitely postponed the rule hearing on December 9,
2022. R.R. at 1469a-70a. This state of affairs, in which Common Pleas’ October 11,
2022 order is largely stayed, and the Department’s suspension order and OAG’s
Rule Petition remain active, continues to the present day.
II. Discussion
Appellants present a multitude of challenges to Common Pleas’
aforementioned orders, which we summarize and reorder as follows. First, Common
Pleas lacked jurisdiction to issue the preliminary injunction, because Appellees
failed to join the Department, a party which Appellants argue is indispensable to this
matter. Appellants’ Br. at 27-32. Second, Common Pleas improperly found that a
preliminary injunction was necessary to prevent irreparable harm, as the clause
declaring a breach of the APA’s provisions to ipso facto constitute irreparable harm
is unenforceable, and because the record evidence was too speculative to support a
finding of irreparable harm. Id. at 39-42. Third, Common Pleas incorrectly
determined that Appellants’ plan to turn County Hospital into a behavioral health
hospital constituted a closure of that facility under the APA and, thus, erroneously
concluded that Appellees were likely to succeed on the merits of their breach of
contract claims. Id. at 32-39. Finally, Common Pleas abused its discretion by
denying the Amended Motion to Dissolve, as the evidence presented at the October
28, 2022 hearing established that circumstances had changed and that the
preliminary injunction was no longer warranted; according to Appellants, this is
because it is now “virtually impossible” for Appellants to comply with the
7
preliminary injunction’s terms and because the injunction is both injurious to the
public interest and is causing more harm than good. Id. at 43-46.
We are unpersuaded by Appellants’ first argument, regarding the
Department’s indispensability to this action. “The failure to join an indispensable
party to a lawsuit deprives the court of subject matter jurisdiction. Whether a court
lacks jurisdiction due to the failure to join an indispensable party may be raised at
any time or sua sponte.” HYK Constr. Co. v. Smithfield Twp., 8 A.3d 1009, 1015
(Pa. Cmwlth. 2010) (internal citations omitted).
[The Supreme] Court has stated that a party is
indispensable “when his or her rights are so connected
with the claims of the litigants that no decree can be made
without impairing those rights.” Sprague v. Casey, . . . 550
A.2d 184, 189 ([Pa.] 1988). “[T]he basic inquiry in
determining whether a party is indispensable concerns
whether justice can be done in the absence of” him or her.
CRY, Inc. v. Mill Serv., Inc., . . . 640 A.2d 372, 375 ([Pa.]
1994). In undertaking this inquiry, the nature of the claim
and the relief sought must be considered. See id. at . . .
375-76.
....
While this joinder provision is mandatory, it is subject to
limiting principles. For example, where the interest
involved is indirect or incidental, joinder may not be
required
City of Philadelphia v. Com., 838 A.2d 566, 581 (Pa. 2003). Furthermore, when
considering whether a party is indispensable, a court must, at minimum, consider the
following questions:
1. Do absent parties have a right or interest related to the
claim?
2. If so, what is the nature of that right or interest?
3. Is that right or interest essential to the merits of the
issue?
8
4. Can justice be afforded without violating the due
process rights of absent parties?
Mechanicsburg Area Sch. Dist. v. Kline, 431 A.2d 953, 956 (Pa. 1981).
Appellants assert that each of these four questions must be answered in the
affirmative here. Specifically, they argue that this is the case, because the
Department is the governmental agency that has regulatory authority over hospitals
in the Commonwealth, including County Hospital, as well as because the
preliminary injunction issued by Common Pleas directly conflicts with the
Department’s suspension order. Appellants’ Br. at 28-31. In addition, they rely
heavily upon CRY, in support of their argument that the Department is an
indispensable party to this matter. See id.We, however, disagree with Appellants’ preferred interpretation of the law
and the facts. In CRY, the Supreme Court concluded that the Department of
Environmental Resources (DER)9 was an indispensable party. This was because the
CRY plaintiffs sought relief pursuant to a multiplicity of environmental laws in a
manner that, if granted, would have directly implicated DER’s regulatory authority
and have necessitated DER’s close cooperation in order to put that relief into real-
world effect. See 640 A.2d at 376. By contrast, Appellees’ claims in this matter are
all based upon its contract with Appellants, i.e., the APA, to which the Department
is not a party, and the relief Appellees either seek or have gained thus far neither
directly implicates the Department’s regulatory authority, nor relies in any way upon
the Department’s exercise of its enforcement powers.
9
DER is now known as the Department of Environmental Protection.
9
Furthermore, while it is true that the Department has broad authority to
regulate hospitals and other medical facilities under the Health Care Facilities Act10
and its pendent administrative regulations,11 there is no conflict in this instance
between that authority and the preliminary injunctive relief granted to Appellees.
The Department’s suspension of County Hospital’s ability to admit patients and
provide emergency department services was in direct response to Appellants’ failure
to adequately staff County Hospital. See R.R. at 1241a. Were Appellants to correct
this problem by doing the obvious, i.e., hiring enough personnel to ensure that they
maintain adequate staffing levels at County Hospital, they would eliminate the basis
for the suspension order, which would enable them to get it lifted and would put
them in compliance with Common Pleas’ directives. In other words, any “conflict”
between the Department’s authority and Common Pleas’ orders is, at this point, the
illusory product of Appellants’ actions.
Moreover, even if, facially speaking, the Department’s regulatory authority
and the relief sought (or obtained) by Appellees in this matter appeared to truly clash,
the APA itself would resolve that conflict. Per Section 11.16 of the APA, which is
the crux of Appellees’ suit, the 10-year-long prohibition against Appellants closing
or selling County Hospital “shall not apply to . . . any sale or closure required by a
Government Entity[.]” Id. at 796a. “Government Entity” is defined in Section 4.9 of
the APA as “any government or any agency, bureau, board, directorate, commission,
court, department, official, political subdivision, tribunal or other instrumentality of
any government, whether federal, state or local[.]” Id. at 761a. Given this, the
Department is indisputably a government entity which could issue a closure or sale
10
Act of July 19, 1979, P.L. 130, as amended, 35 P.S. §§ 448.101-448.904b.
11
See, e.g., 28 Pa. Code §§ 51.2, 51.41.
10
order regarding County Hospital that would be entirely unaffected by the restrictions
imposed by Section 11.16. As such, any judicially dispensed relief in this matter
would simply be inapplicable in the event that such relief would otherwise conflict
with or countermand the Department’s exercise of its authority.
Moving on, Appellants use their next two arguments to directly challenge
Common Pleas’ issuance of the preliminary injunction, specifically with regard to
Common Pleas’ determinations regarding the existence of irreparable harm and
Appellees’ likelihood of success on the merits of their claims.
The six essential prerequisites that a moving party must
demonstrate to obtain a preliminary injunction are as
follows: (1) the injunction is necessary to prevent
immediate and irreparable harm that cannot be
compensated adequately by damages; (2) greater injury
would result from refusing the injunction than from
granting it, and, concomitantly, the issuance of an
injunction will not substantially harm other interested
parties in the proceedings; (3) the preliminary injunction
will properly restore the parties to their status as it existed
immediately prior to the alleged wrongful conduct; (4) the
party seeking injunctive relief has a clear right to relief and
is likely to prevail on the merits; (5) the injunction is
reasonably suited to abate the offending activity; and, (6)
the preliminary injunction will not adversely affect the
public interest.
SEIU Healthcare Pennsylvania v. Com., 104 A.3d 495, 501 (Pa. 2014). “For a
preliminary injunction to issue, every one of these prerequisites must be established;
if the petitioner fails to establish any one of them, there is no need to address the
others.” Allegheny Cnty. v. Com., 544 A.2d 1305, 1307 (Pa. 1988).
We keep in mind that an appellate court reviews an order
granting or denying a preliminary injunction for an abuse
of discretion. Summit Towne Centre, Inc. v. Shoe Show of
Rocky Mount, Inc., . . . 828 A.2d 995, 1000 ([Pa.] 2003).
Under this highly deferential standard of review, an
appellate court does not inquire into the merits of the
11
controversy, but examines the record “to determine if there
were any apparently reasonable grounds for the action of
the court below.” Id. (quoting Roberts v. [Bd.] of Dirs. of
Sch. Dist., . . . 341 A.2d 475, 478 ([Pa.] 1975)).
SEIU Healthcare, 104 A.3d at 501. “Moreover, we will not ‘pass upon the reasons
for or against such action unless it is plain that no such grounds existed or that the
rules of law relied on are palpably wrong or clearly inapplicable[.]’” Credit All.
Corp. v. Philadelphia Minit-Man Car Wash Corp., 301 A.2d 816, 818 (Pa. 1973)
(quoting United Nat. Gas Co. v. Wagner, 208 A.2d 843, 844 (Pa. 1965)).
With regard to the existence of irreparable harm, Section 14.21 of the APA
provides as follows:
The Parties[, i.e., Appellants and Crozer-Keystone Health
System,] hereto agree that irreparable damage would
occur in the event that any provision of [the APA] is not
performed in accordance with its specific terms or is
otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions
(without the need to post bond or other security) to prevent
breaches of [the APA] and to enforce specifically the
terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity. Without in any
way limiting the remedies prescribed to the Parties under
this Section 14.21, and for purposes of clarification, the
Parties agree and acknowledge that, while not a Party to
[the APA], the Foundation shall be entitled to an
injunction or injunctions and any other such remedies to
which the Parties are entitled at law or in equity, but only
to prevent breaches of [the APA] and to enforce
specifically the terms and provisions hereof.
R.R. at 810a (emphasis in original). We agree with Appellants that a clause of this
nature, which declares irreparable harm to exist in the event contractual terms are
breached, cannot alone support a conclusion that the first prong of the preliminary
injunction standard has been satisfied. This issue appears to be one of first
12
impression under Pennsylvania law, as our research has revealed only a single prior
case from our Commonwealth that even addressed such contractual clauses, which
did so with what cannot even be called a cursory level of legal analysis. See The
York Grp., Inc. v. Yorktowne Caskets, Inc., 924 A.2d 1234, 1243 (Pa. Super. 2007).12
Therefore, we look to out-of-state decisions and those from the federal courts
for persuasive guidance. See Costa v. Ward, 290 A.3d 335 n.24 (Pa. Cmwlth. 2022);
In re Est. of Rowley, 84 A.3d 337, 341 n.8 (Pa. Cmwlth. 2013). In Delaware, our
sister state’s courts “have long held that ‘contractual stipulations as to irreparable
harm alone suffice to establish that element for the purpose of issuing . . . injunctive
relief.’” Martin Marietta Materials, Inc. v. Vulcan Materials Co., 68 A.3d 1208,
1226 (Del. 2012) (quoting Cirrus Holding Co. v. Cirrus Indus., Inc., 794 A.2d 1191,
1209 (Del. Ch. 2001)); see True N. Commc’ns Inc. v. Publicis S.A., 711 A.2d 34, 44
(Del. Ch. 1997). That, however, constitutes the minority position, as the federal
courts have consistently held that such clauses are, in effect, not worth the paper
upon which they are written. See, e.g., Barranco v. 3D Sys. Corp., 952 F.3d 1122,
1130 (9th Cir. 2020) (“[T]he terms of a contract alone cannot require a court to grant
equitable relief.”); Dominion Video Satellite, Inc. v. Echostar Satellite Corp., 356
F.3d 1256, 1263 (10th Cir. 2004) (“Courts finding irreparable harm from breaches
of [contractual] provisions have not rested their determinations solely on the
12
Appellants argue that another case, Rollins Protective Services Company, A Division of
Rollins v. Shaffer, 557 A.2d 413 (Pa. Super. 1989), also involved contractual language of this
nature and stands for the proposition that “Pennsylvania law does not permit parties to contract out
of the legal requirement that an injunction requires a showing of irreparable harm.” Appellants’
Reply Br. at 15. However, Rollins did not involve a contractual provision like the one at issue here,
which expressly declares irreparable harm to have occurred in the event the provision is breached;
rather, Rollins addressed whether the breach of an employment contract’s non-compete clause
automatically constituted irreparable harm under Pennsylvania law, independent of the language
used therein. 557 A.2d at 413-14. Rollins is thus of limited relevancy, at best, to this matter.
13
existence and subsequent breaches of [those] provisions.”); Smith, Bucklin &
Assocs., Inc. v. Sonntag, 83 F.3d 476, 481 (D.C. Cir. 1996) (a contractual clause
stating that irreparable harm occurs in the event of a breach “by itself is an
insufficient prop”); Dice v. Clinicorp, Inc., 887 F. Supp. 803, 810 (W.D. Pa. 1995)
(“A contractual provision simply cannot act as a substitute for a finding by [a court]
that it would be appropriate to invoke its equitable powers. . . . Although [the]
provision may constitute evidence in support of a finding of irreparable harm, [its]
mere inclusion . . . cannot act as a substitute for the requisite showing of irreparable
harm.”); Firemen’s Ins. Co. of Newark, N.J. v. Keating, 753 F. Supp. 1146, 1154
(S.D.N.Y. 1990) (“[I]t is clear that the parties to a contract cannot, by including
certain language in that contract, create a right to injunctive relief where it would
otherwise be inappropriate.”); Baker’s Aid, a Div. of M. Raubvogel Co. v. Hussmann
Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1987) (“[C]ontractual language declaring
money damages inadequate in the event of a breach does not control the question
whether preliminary injunctive relief is appropriate.”).
The majority position rests upon an appreciation of the high bar that must be
surmounted in order for a party to secure an injunction.
“[T]he grant of injunctive relief is an extraordinary
remedy . . . which should be granted only in limited
circumstances.” Frank’s GMC Truck [Ctr.], Inc. v. [Gen.]
Motors Corp., 847 F.2d 100, 102 (3d Cir. 1988) (citing
United States v. City of Philadelphia, 644 F.2d 187, 191
n.1 (3d Cir. 1980)). As Justice Baldwin, sitting on the
Circuit Court for the District of New Jersey wrote [193]
years ago, “[t]here is no power the exercise of which is
more delicate, which requires greater caution,
deliberation, and sound discretion, or more dangerous in a
doubtful case, than the issuing (of) an injunction; it is the
strong arm of equity, that never ought to be extended
unless to cases of great injury, where courts of law cannot
afford an adequate or commensurate remedy in damages.”
14
Bonaparte v. Camden & A.R. Co., 3 F. Cas. 821(C.C.D.N.J. 1830) (No. 1,617).
....
It would represent an extraordinary variance from this
basic principle for a court to recognize that the parties to a
suit at equity have contracted around one of [the]
fundamental elements [of an injunction].
First Health Grp. Corp. v. Nat’l Prescription Adm’rs, Inc., 155 F. Supp. 2d 194, 235
(M.D. Pa. 2001).13 We agree. Therefore, we adopt the majority position and hold that
contractual provisions like Section 14.21 of the APA may, at most, constitute
persuasive guidance regarding the existence of irreparable harm, but cannot
ultimately strip a court of its discretionary authority to determine whether such harm
will actually occur in the absence of a preliminary injunction.
This is more of an academic point in this instance, though, as Common Pleas
did not predicate its finding of irreparable harm upon Section 14.21; rather, Common
Pleas merely looked upon that provision as but one factor in its determination on
that issue. As Common Pleas explained:
[T]he parties contractually agreed that a breach of the APA
would result in irreparable. See [Section] 14.21 of the APA
The crux of [Appellees’] case is that [Appellants] will shut
down the emergency room of [County Hospital] and will
not continue to provide emergency and acute care to those
persons desiring or requiring such care, particularly
members of the immediate community in which the
hospital is located. Although other similar services are
available in the general vicinity, there can be no doubt that
in some instances persons presenting at [County Hospital]
with the need for acute and/or emergency services would
be delayed in receiving these services if they were forced
to go to another, more distant, facility. We find from this
13
It also bears mentioning that “[b]ecause the nature of the alleged breach and its
consequences are unknown when a contract is executed, a question exists as to whether the parties
can effectively waive a judicial determination [as to irreparable harm].” First Health, 155 F. Supp.
2d at 234-35.
15
evidence that such persons would suffer immediate and
irreparable harm from the failure to obtain needed services
in a timely manner and that such failure cannot be
adequately compensated by monetary damages,
particularly, for example, to the widow or widower of a
person who died from the delay in receiving emergency
services.
Common Pleas Op., 12/2/22, at 5-6. Accordingly, Common Pleas did not abuse its
discretion by relying in part upon Section 14.21 of the APA to support its finding of
irreparable harm.
Even so, we agree with Appellants that Common Pleas abused its discretion
by determining that Appellees had established they would suffer irreparable harm in
the absence of a preliminary injunction. In order to support a finding of this nature,
a petitioner must provide a court with “actual proof of irreparable harm.” Summit
Towne, 828 A.2d at 1002. In other words, a petitioner is tasked with offering
“concrete evidence” in support of their claims, not mere “speculation and
hypothesis.” Id. Without such evidence, a petitioner can neither show that they will
suffer irreparable harm, nor secure a preliminary injunction. Id. at 1002-03.
Here, Common Pleas determined that Appellants’ plan to stop providing acute
care services at County Hospital would endanger community members’ ability to
receive emergency medical treatment in a timely manner, irreparably harming their
health and, indeed, their lives. Common Pleas Op., 12/2/22, at 5-6. While this
concern may ultimately carry the day at a later juncture, based upon a more
thoroughly developed record, it remains that the existing record is devoid of concrete
evidence that would support Common Pleas’ determination regarding the existence
of irreparable harm.
In this instance, Melissa Lyon, Delaware County Health Department’s
(County Health Department) Public Health Director, was Appellees’ sole witness
16
who testified regarding how deleterious it would be to the local community if
Appellants ceased offering acute care services at County Hospital. The following
exchanges encompass Lyon’s testimony regarding that concern:
[Appellees’ Attorney:] Is access and availability to
emergency room services one of the things the [County
Health] Department is concerned about?
[Lyon:] That is one aspect that we always take into
consideration is how access and communities access
services, correct.
[Appellees’ Attorney:] There’s been a plan—
[Appellants’] plan introduced into evidence. Have you
seen that plan? It’s a transformation plan [for County
Hospital].
[Lyon:] I have not seen that plan in detail. I am aware of
that plan and had access to components of it by reviewing
a website.
[Appellees’ Attorney:] If there is a closure of acute care
services at [County Hospital], what would be the effect, if
any, on public health?
[Lyon:] In my public health experience over the last 22
years, whenever an access is removed from a community,
it almost always, if not always, negatively impacts those
health outcomes for the community. Accessing care,
whether it’s emergency or primary care, communities
become very committed to a system that’s near them or
that they’re familiar with. They build trust over years.
You’ll hear people say, oh, my child was delivered at that
hospital and my other -- you know, my nephew’s child or
so on and so forth. They become very committed to those
systems, and when they’re removed, it becomes difficult
for them to navigate and -- to different systems. They also
-- if you can imagine if you’re sick, it’s always just hard
to navigate a healthcare system when you’re ill in general,
so areas just begin to raise themselves over time once an
access point is removed from a community.
....
[Appellees’ Attorney:] Ms. Lyon, do you know whether
the closure of acute care services would affect a population
17
with Medicaid or socioeconomic disadvantaged or an
elderly population? . . .
[Lyon:] The answer to that question would be that from
my previous public health experience, those populations
that are served typically would be impacted even more
dramatically because of the barriers that are presented to
them, meaning transportation barriers could be an issue,
having other health systems accept certain insurance
plans. Their ability to have free time in their schedules to
access care in different locations could be challenging, so,
historically, they will just suffer disproportionately.
....
[Appellees’ Attorney:] Ms. Lyon, are you aware as to
whether [Appellants] will be closing [County Hospital’s]
emergency room?
[Lyon:] I have read that the emergency room will be
closing.
[Appellees’ Attorney:] Are you aware that [Appellants
have] proposed [to replace the emergency room with] an
EMS facility?
[Lyon:] I am not familiar with that level of detail.
[Appellees’ Attorney:] If there were a hospital a few miles
away and another hospital in Chester, [Pennsylvania,]
would that have any effect from a public health
perspective on the care of the immediate community?
....
[Lyon:] The immediate community would likely have
access to those facilities, and I fully believe that there’s an
opportunity for those individuals in the community to
access that care. However, their likelihood of doing so
could be varying across the population. For example,
there’s a level of trust in navigating. We all know that
health systems . . . can be challenging, especially if your
health literacy does not meet your expectations on even
understanding what your health condition may be. It
becomes challenging. It’s not just like going to the next
Walmart, right? So if you go to one Walmart, you go to
another Walmart, all Walmarts basically look the same
and are designed the same way. You go from one health
18
system to another health system, it’s not necessarily that
easy to navigate. So I believe that there would be
challenges for those populations that then could impact
their access to needing immediate care and potentially can
exacerbate individual . . . health concerns or health
afflictions or diagnoses that they may have, whether
diabetes or asthma or cardiovascular. The list can go on.
So it could result in a delay of care.
[Appellees’ Attorney:] If it results in a delay, would there
be any possibility of greater harm to the patient?
[Lyon:] Any[ ]time that the delay of care happens, it’s
always a risk of the individual to worsen and have those
complications result in needing to have more emergency
access -- emergency room access. It could also lead them
to be incapacitated. It would really depend on the
individual, but it almost always results in worsening care,
not improved care.
....
[Appellants’ Attorney:] . . . Did you conduct any studies in
advance of coming today of the impacts you’re talking
about, the hypothetical impacts you’re talking about?
[Lyon:] No, I have not conducted any studies for Delaware
County.
[Appellants’ Attorney:] Did you collect any data from
Appellants or Mercy Fitzgerald[, a nearby hospital that
Appellants do not own,] in order to sort of play out any of
the scenarios that you've been talking about to concretize
them?
[Lyon:] No, I have not collected any data.
[Appellants’ Attorney:] Do you have a set of written
conclusions to provide the Court on any topic?
[Lyon:] I do not have any written conclusions.
[Appellants’ Attorney:] You said that you do not have
familiarity with the transition plan, correct? You knew of
parts of it?
[Lyon:] That is correct.
....
19
[Appellants’ Attorney:] There are a number of other
hospitals in Delaware County and the surrounding area
beyond [those owned by Appellants], am I right?
[Lyon:] There are other hospitals in Delaware County,
correct.
[Appellants’ Attorney:] And did you model out what the
impact would be if [Appellants] is able to, upon
completing its renovation [of County Hospital], offer
enhanced services for the population?
[Lyon:] So I appreciate the question about modeling out.
It’s not the work that I would be doing, but no, I did not.
Thank you.
[Appellants’ Attorney:] Okay. Did you conduct any
analysis examining the future state of [County Hospital]
or what it will provide?
[Lyon:] So, again, that would not necessarily be the work
that would fall into a public health department to model
out, but no, I did not.
[Appellants’ Attorney:] So you don’t have any testimony
for the Court today one way or the other about the ultimate
impact of the renovation [of County Hospital] by
[Appellants] on the public health, right?
[Lyon:] That would be correct.
R.R. at 672a-81a.
This testimony is markedly devoid of the concrete evidence necessary to
legally justify Common Pleas’ irreparable harm determination. To the contrary, all
of Lyon’s statements, insofar as they relate to how the local community will be
affected if acute care services are no longer offered at County Hospital, are couched
in terms that are hypothetical, generalized, and speculative, rather than ones
buttressed by specific data or information. Given this, Common Pleas lacked
20
apparently reasonable grounds to issue a preliminary injunction in Appellees’ favor
and, thus, abused its discretion by granting the Amended Petition.14
III. Conclusion
In light of the foregoing, we reverse Common Pleas’ October 11, 2022 order
and dismiss Appellants’ challenge to Common Pleas’ November 2, 2022 order as
moot.15
__________________________________
ELLEN CEISLER, Judge
Judge Fizzano Cannon did not participate in the decision of this case.
14
Appellees also argue that testimony offered by Anthony Esposito, Appellants’ Chief
Executive Officer, supports Common Pleas’ finding of irreparable harm. See Appellees’ Sur-reply
Br. at 6. In this testimony, Esposito agreed with the characterization presented by Appellees’
attorney that, generally speaking, Appellants’ hospitals in the area are “necessary” for the
community, in part because they take “pressure” off of “other health systems that are unable to
effectively serve all patients[.]” R.R. at 576a. These comments, however, shed no light upon how
the local community will be specifically affected if acute care services are no longer offered at
County Hospital. As such, Esposito’s testimony does not constitute evidence that is concrete
enough to justify Common Pleas’ irreparable harm determination.
15
We need not address the remainder of Appellants’ challenges to the preliminary
injunction, because we have resolved Appellants’ appeal of Common Pleas’ October 11, 2022
order in their favor. Allegheny Cnty., 544 A.2d at 1307.
21
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
CKHS, Inc. and The Foundation : CASES CONSOLIDATED
for Delaware County :
:
v. : No. 1118 C.D. 2022
:
Prospect Medical Holdings, Inc. :
and Prospect Crozer, LLC, :
and Commonwealth of :
Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and :
Prospect Crozer, LLC :
CKHS, Inc. and The Foundation for :
Delaware County :
:
v. : No. 1265 C.D. 2022
:
Prospect Medical Holdings, Inc. and :
Prospect Crozer, LLC and :
Commonwealth of Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and Prospect Crozer, :
LLC :
ORDER
AND NOW, this 3rd day of May, 2023, it is hereby ORDERED:
1. Appellants Prospect Medical Holdings, Inc. and Prospect Crozer,
LLC’s (Appellants) appeal, docketed at 1118 C.D. 2022, through which
Appellants challenged the Court of Common Pleas of Delaware
County’s (Common Pleas) October 11, 2022 order that granted a
preliminary injunction in favor of Appellees CKHS, Inc. and The
Foundation for Delaware County, is GRANTED;
2. Common Pleas’ October 11, 2022 order is REVERSED;
3. Appellants’ appeal, docketed at 1265 C.D. 2022, through which
Appellants challenged Common Pleas’ November 2, 2022 order that
denied Appellants’ amended motion to dissolve or stay the preliminary
injunction, is DISMISSED AS MOOT.
__________________________________
ELLEN CEISLER, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
CKHS, Inc. and The Foundation : CASES CONSOLIDATED
for Delaware County :
:
v. : No. 1118 C.D. 2022
:
Prospect Medical Holdings, Inc. :
and Prospect Crozer, LLC, :
and Commonwealth of :
Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and :
Prospect Crozer, LLC :
CKHS, Inc. and The Foundation for :
Delaware County :
:
v. : No. 1265 C.D. 2022
:
Prospect Medical Holdings, Inc. and :
Prospect Crozer, LLC and :
Commonwealth of Pennsylvania :
:
Appeal of: Prospect Medical :
Holdings, Inc. and Prospect Crozer, :
LLC : Argued: March 6, 2023
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
OPINION NOT REPORTED
CONCURRING AND DISSENTING OPINION
BY JUDGE McCULLOUGH
FILED: May 3, 2023
I concur with the Majority’s conclusions that the Pennsylvania
Department of Health is not an indispensable party and that Section 14.21 of the
controlling Asset Purchase Agreement (APA) does not, by itself, establish
irreparable harm. I cannot, however, agree with the Majority’s conclusion that
CKHS, Inc. and The Foundation for Delaware County (collectively, Appellees)
failed to present sufficient evidence of irreparable harm to support the
reasonableness of the Court of Common Pleas of Delaware County’s (trial court)
preliminary injunction. In this latter respect, and to the degree that the Majority
applies a standard of review more exacting than our precedents permit, I respectfully
dissent.
Our review of a trial court’s grant of a preliminary injunction is highly
deferential. Township of Middle Smithfield v. Kessler, 882 A.2d 17, 21 (Pa. Cmwlth.
2005). The Pennsylvania Supreme Court has explained the applicable standard of
review as follows:
[O]n an appeal from the grant or denial of a preliminary
injunction, we do not inquire into the merits of the
controversy, but only examine the record to determine if
there were any apparently reasonable grounds for the
action of the court below. Only if it is plain that no grounds
exist to support the decree or that the rule of law relied
upon was palpably erroneous or misapplied will we
interfere with the decision of the trial court.
Summit Towne Centre, Inc. v. Shoe Show of Rocky Mount, Inc., 828 A.2d 995, 1000
(Pa. 2003) (quoting Roberts v. Board of Directors of the School District of the City
of Scranton, 341 A.2d 475, 478 (Pa. 1975)). Further,
a preliminary injunction is designed to preserve the subject
of the controversy in the condition in which it is when the
order is made, it is not to subvert, but to maintain the
existing status quo until the legality of the challenged
PAM - 2
conduct can be determined on the merits. There is,
however, a distinction between mandatory and prohibitory
injunctions. Mandatory injunctions command the
performance of some positive act to preserve the status
quo, and prohibitory injunctions enjoin a party from doing
an act that will change it. As here, where the injunction at
issue is merely prohibitory, we do not review the merits of
the controversy but only determine if there are any
reasonable grounds to support the trial court’s action. If no
such grounds exist, only then will we reverse.
Greater Nanticoke Area Educational Association v. Greater Nanticoke Area School
District, 938 A.2d 1177, 1183 (Pa. Cmwlth. 2007) (internal citations and quotations
omitted).
The Majority concludes that Appellees’ irreparable harm evidence,
which consisted chiefly of the testimony of Melissa Lyon, the Public Health Director
of the Delaware County Health Department, was “hypothetical, generalized, and
speculative,” and therefore was not “concrete,” “actual proof” of irreparable harm.
Appeal of: Prospect Medical Holdings, Inc. and Prospect Crozer, LLC (Pa.
Cmwlth., Nos. 1118 and 1265 C.D. 2022, filed May 3, 2023), slip op. at 16, 20 (MO).
I cannot agree with that characterization. Although Prospect Medical Holdings, Inc.
and Prospect Crozer, LLC (Prospect) will continue certain acute care service lines
at Delaware County Memorial Hospital (County Hospital), the emergency room will
be shuttered and the remaining service lines will not together constitute an acute care
facility. (Reproduced Record (R.R.) 516a, 518a, 663a.) Although individuals could
seek emergent care elsewhere in this health system, the trial court reasonably could
have concluded that, at the very least, patients will not have access to the same
services at the same locations and will have to re-orient to new, unfamiliar facilities.
PAM - 3
Ms. Lyon, who has 22 years of public health experience, said at least
this much, and her testimony was not so hypothetical or generalized that it could not
reasonably have supported the trial court’s limited injunction maintaining County
Hospital’s status quo.1 Ms. Lyon testified to her department’s involvement in
conducting community and population healthcare needs assessments, which include
the assessment of emergent care needs. (R.R. 672a.) She testified that changes like
those proposed by Prospect always, or almost always, negatively impact health
outcomes in a community because patients must adjust away from familiar,
regularly-used facilities to others that are less familiar and less able to provide
logistical services for elderly or socioeconomically disadvantaged patients. (R.R.
673a-74a, 676a.) Further, the lack of familiarity and need for adjustment to another
facility or system could result in a delay of care. (R.R. 677a.)
The Majority is correct that Ms. Lyon did not testify to “specific data”
showing the impact that the discontinuance of acute care services, emergent care
particularly, would have on the community around County Hospital. (MO at 20.)
In this context, however, the Majority requires too much. Although data specific to
this community and health system might be helpful and even necessary to obtaining
a permanent injunction, the very purpose of preliminary injunctive relief permits
harm evidence that is less precise. Indeed, irreparable and irreversible harm is, by
its nature, speculative. See Anchel v. Shea, 762 A.2d 346, 351 (Pa. Super. 2000)
(“An injury is regarded as ‘irreparable’ if it will cause damage which can be
1
Read together, the trial court’s orders of October 11, 2022, and November 2, 2022,
imposed a limited status quo injunction precluding County Hospital from materially altering its
then-present operations, including acute care services. The trial court made clear that the
injunction did not prevent Prospect from continuing logistical preparations for the transition to a
behavioral health facility; it merely could not implement and consummate the transition, if at all,
until after a decision on the merits in this case. (R.R. 916a, 1225a.)
PAM - 4
estimated only by conjecture and not by an accurate pecuniary standard.”) (citation
and quotations omitted).2
Thus, I would conclude that Appellees presented sufficient evidence of
irreparable harm to support the issuance of a preliminary injunction temporarily
enjoining Prospect from consummating the transition of County Hospital into a
behavioral health facility. I accordingly would proceed to consider the other relevant
preliminary injunction factors to determine whether the trial court had “any
reasonable grounds” to maintain County Hospital’s status quo pending final decision
on Appellees’ claims. To the extent that the Majority prematurely stopped short of
conducting that analysis, I respectfully dissent.
________________________________
PATRICIA A. McCULLOUGH, Judge
2
Although not binding, opinions of our sister appellate court are valid persuasive authority
for our analysis. See In re Superior-Pacific Fund, Inc., 693 A.2d 248, 253 (Pa. Cmwlth. 1997)
(recognizing that, although “decisions of our sister Superior Court are not binding upon this Court,
we always give great deference to their persuasive wisdom and logic”).
PAM - 5