United States District Court, D. Arizona
ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY
HONORABLE SUSAN M. BRNOVICH, UNITED STATES DISTRICT JUDGE
issue is the motion for summary judgment filed by defendants
Anireddy, Esker, Miller, Bryant, Endoscopy Center of Yuma,
L.L.C. (“ECY”), and Yuma Endoscopy Center, L.L.C.
“Defendants”). (Doc. 62, “Mot.”).
Plaintiffs AmSurg Holdings, Inc. (“AmSurg”), and
The Yuma AZ Endoscopy ASC, L.L.C. filed a response (Doc. 74,
“Resp.”), to which Defendants filed a reply (Doc.
86, “Reply”). Oral argument was held on January
ECY is a physician entity located in Yuma, Arizona.
Defendants Divesh Anireddy, M.D., and Alec Esker, M.D., are
Members of ECY. AmSurg is a corporation in the business of
developing, owning, and operating ambulatory surgery centers
in partnership with physicians. Their dispute arises from a
joint venture that began in October 2005, when AmSurg bought
a 51% share of a surgery center operated by ECY. (DSOF, Ex.
1). Plaintiffs allege they paid $6.5 million for their share
of the surgery center. (Doc. 46 ¶ 14,
“Complaint”). To operate the surgery center,
AmSurg and ECY formed an LLC called The Yuma AZ Endoscopy
ASC, LLC (“ASC”). (DSOF, Ex. 1). Defendant
Beverly Bryant was an administrator at ASC, where defendant
Seth Miller, M.D., also performed procedures before starting
a competing surgery center, YEC. In their Complaint,
Plaintiffs allege Defendants purposely undermined the success
of the joint venture in order to operate and develop YEC.
(Doc. 46, “Complaint”).
and ECY signed an operating agreement (the
“Agreement”) for ASC that states that the purpose
of ASC is to own and operate the “Center.” (DSOF,
Ex. 1). The Center is defined as “the ambulatory
surgery center operated by [ASC] and located in Yuma,
Arizona, including the real property, or leasehold
improvements, furniture, fixtures, the Equipment, books
records, supplies, accounts receivable, goodwill, other
intangibles and other assets used in its operation.”
(DSOF, Ex. 1). ECY maintained a 49% stake in the Center, and
AmSurg and ECY are the only two members of ASC. (DSOF, Ex.
Agreement also includes an anti-assignment clause that, among
other things, requires all members to approve another
member's assignment of its membership interest to a
non-party. (DSOF, Ex. 1). An assignment that is inconsistent
with the Agreement “shall be void.” (DSOF, Ex.
1). The Agreement is governed by Tennessee law, specifically
the Tennessee Limited Liability Company Act, Tenn. Code. Ann.
§§ 48-201-101 et seq. (DSOF, Ex. 1).
time of the Agreement, AmSurg Holdings, Inc. and its parent
company, AmSurg Corp., were both corporations organized under
Tennessee laws. (DSOF, Ex. 1). In 2014, AmSurg Holdings, Inc.
(“AmSurg-Tennessee”) merged into a newly-created
Delaware corporation of the same name
(“AmSurg-Delaware”). (DSOF ¶ 7). In 2016,
AmSurg Corp. also merged into a different Delaware
Corporation called New Amethyst, which then merged into
Envision Healthcare Holdings, Inc., a Delaware corporation
(“Envision”). (PASOF ¶ 19). The parent
company was not a party to the Agreement. AmSurg-Delaware had
no further mergers.
argue Plaintiffs lacking standing to sue because the mergers
violate the Agreement's anti-assignment clause, thus
voiding Plaintiff's interest in ASC. (Mot. at 8- 17).
Plaintiffs, however, characterize the merger as a
“routine business decision” meant only to change
AmSurg's state of domicile from Tennessee to Delaware.
(Resp. at 1, 3; PASOF ¶ 8). They assert the merger did
not change “AmSurg's business operations,
practices, policies, officers or other personnel, ”
(Resp. at 3; PASOF ¶ 9), and that the merger was not a
traditional assignment but a transfer or assignment by
operation of law, which is not a prohibited assignment
as contemplated by the agreement. They note AmSurg-Delaware
even retained the same IRS Federal Employer Identification
Number after the merger. (Resp. at 3; PASOF ¶ 10).
Defendants do not present any facts to dispute the assertion
that the merger didn't change AmSurg's business
operations, practices, policies, officers or other personnel.
Defendants, for their part, say Plaintiffs hid the merger
from them, (Mot. at 16), and they only
“discovered” the merger after discovery began in
this litigation. (DSOF ¶ 12). Plaintiffs respond by
noting the merger was a public transaction filed with the
Tennessee and Delaware Secretaries of State. (Resp. at 2;
PASOF ¶ 7). Plaintiffs also argue that equity compels
the court to reject Defendants' motion.
motion asks for summary judgment on all causes of action
alleged in the Complaint arguing that Plaintiffs have no
standing to sue. (Mot. at 2).
judgment is appropriate when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a). Under
this standard, “[o]nly disputes over facts that might
affect the outcome of the suit under governing [substantive]
law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A “genuine issue” of
material fact arises only “if the evidence is such that
a reasonable jury could return a verdict for the non-moving
considering a motion for summary judgment, the court must
regard as true the non-moving party's evidence if it is
supported by affidavits or other evidentiary material.
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986);
Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1289
(9th Cir. 1987). The non-moving party may not merely rest on
its pleadings; it must produce some significant probative
evidence tending to contradict the moving party's
allegations, thereby creating a question of material fact.
Anderson, 477 U.S. at 256-57 (holding that the
plaintiff must present affirmative evidence in order to
defeat a properly supported motion for summary judgment);
First Nat'l Bank of Ariz. v. Cities Serv. Co.,
391 U.S. 253, 289 (1968).
move for summary judgment on the grounds that the entities
they contracted with, AmSurg-Tennessee and AmSurg Corp.,
ceased to exist when they merged into different corporations
and the anti-assignment clause prevents any rights the
original entities had from transferring to the new
corporations AmSurg-Delaware and Envision. Therefore,
Plaintiffs do not have standing to sue. For the reasons that
follow, Defendants' arguments are unpersuasive.
The ASC's anti-assignment clause
anti-assignment clause is found in Section 12 of the
Agreement. Defendants argue Plaintiffs only have standing to
sue if the original entities assigned their membership
interest to the new entities consistent with Subsection 12.3,
the portion of the Agreement that governs assignments to
“any person who is not a member.” (Mot. at 5).
The relevant portions of the Agreement are as follows:
12.1. Assignment of Membership Interests.
No assignment of all or any part of a Membership Interest in
the LLC (including any Financial Rights, Governance Rights or
other rights pertaining to a Membership ...