SOURCE: Waller


April 26, 2013 13:41 ET

Court Settlement Results in $40 Million Payout to Benefit Tennessee Nonprofits

Longstanding Suit Resolves Claims Concerning the Unfair Pricing of Nursing Homes Sold to Nonprofits by Publicly-Traded Companies

NASHVILLE, TN--(Marketwired - Apr 26, 2013) - The State of Tennessee will receive approximately $40 million as a result of the settlement of a long-running dispute between two publicly traded corporations and the court-appointed Receiver for two Tennessee nonprofit corporations. The settlement was announced jointly by the Tennessee Attorney General, National Health Investors, Inc. (NHI), National HealthCare Corporation (NHC), and the Receiver for SeniorTrust of Florida, Inc. and ElderTrust of Florida, Inc.

The resolution of the litigation, together with the Receiver's liquidation of the nonprofits' assets, will result in the $40 million payout benefiting charitable purposes in Tennessee. The Receiver's primary dispute with NHI and NHC concerned the financial terms by which NHI had sold and financed the purchase of the nursing home facilities to the nonprofits. Court-appointed Receiver James A. Skinner retained Waller to represent him in the litigation.

In an earlier press statement, the Tennessee Attorney General, who has responsibility to oversee and regulate Tennessee nonprofits, expressed satisfaction with the settlement of these disputes, which is subject to approval by the court in which the receiverships are pending. "We believe this settlement is in the best interest of the public and upholds the appropriate use of Tennessee charities," said Attorney General Bob Cooper. "The Court will ultimately determine how these funds can be used for charitable purposes, and the Office of the Attorney General will seek and welcome public input in that process."

"This settlement represents an extremely positive outcome for the citizens of Tennessee," said Skinner. "With the assistance of Paul Davidson and other Waller attorneys, the Tennessee Attorney General's Office has effectively and equitably ensured that Tennessee nonprofit corporations are governed and operated in accordance with their charitable purposes."

"We are proud to have helped the Attorney General's office fulfill a crucial responsibility -- to ensure that nonprofit assets are used to realize charitable purposes," said Davidson, who led Waller's representation of the Receiver. "Nonprofit Board members have an obligation to meet their fiduciary duties to the nonprofit, including the duty of loyalty, regardless of the circumstances which led to the creation of the nonprofit corporation or their appointment to its board of directors."

According to the lawsuit filed by the Receiver for SeniorTrust and ElderTrust, National Health Investors, Inc. and National HealthCare Corporation formed and controlled the two 501(c)(3) nonprofit corporations as part of a strategy to sell financially troubled nursing homes that NHI owned to nonprofits at prices significantly above fair value. In addition, the lawsuits claimed that NHC charged the nonprofits above fair rates for management fees. 

NHI helped to establish SeniorTrust and ElderTrust, two Tennessee 501(c)(3) nonprofit corporations, in 2000. Between 2001 and 2004, NHI sold a group of skilled nursing facilities in Missouri and Kansas to SeniorTrust and a group of skilled nursing facilities in Massachusetts and New Hampshire to ElderTrust. In 2007, NHC acquired the lease of a long-term care facility in Chattanooga, Tennessee, known as Standifer Place from SeniorTrust. The Receiver's dispute with NHC also concerned the financial terms on which NHC acquired the lease. 

The SeniorTrust and ElderTrust lawsuits are the second and third disputes involving Tennessee-based nonprofits that NHI has settled. In 2009, Waller represented Care Foundation of America, Inc. in its lawsuit against NHI which focused on similar issues of board influence and nursing homes sold to a nonprofit at prices above fair market value. The 2009 settlement resulted in Care Foundation receiving approximately $44 million to be used for charitable purposes in Tennessee. The combined value of the payouts received as a result of the settlements with NHI and NHC is approximately $84 million which can now be used to benefit Tennessee and its citizens. 

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