Eden Township Healthcare District v. Sutter Health

As part of an agreement with the Eden Township Healthcare District (the District) to upgrade Eden Hospital (Eden), Sutter Health (Sutter) committed to spending $300 million to construct a replacement hospital for Eden. Sutter also planned to exercise an option it had acquired under the agreement to purchase San Leandro Hospital (SLH) and convert it from an *213 acute care emergency service facility to an acute rehabilitation center. The District refused to convey SLH. An arbitrator ruled in favor of Sutter. The District then filed a lawsuit contending the underlying agreement is void due to a conflict of interest that allegedly arose because of the roles two individuals played in negotiating the agreement.

Cross-complainant the District appeals from the trial court’s order granting summary judgment to cross-defendants Sutter and Eden Medical Center (EMC) (collectively referred to as respondents), and denying the District’s motion for summary adjudication. The District claims the trial court erred in concluding certain agreements made by the parties are not void under the conflict of interest law as stated in Government Code section 1090 et seq. (section 1090). 1 We…

I concur in the opinion and judgment and write separately to further discuss why I agree the government salary “noninterest” exception (Gov. Code, § 1091.5, subd. (a)(9)) provides an appropriate framework for analyzing the conflict of interest issues presented by this particular case.

First, the history of the Eden Township Healthcare District (District), including the creation and operation of Eden Medical Center (EMC), is telling in this regard. “Eden Township Hospital District [is] a governmental entity functioning under The Local Hospital District Law,” Health and Safety Code section 32000 et seq. 1 (Rosner v. Eden Township Hospital Dist. (1962) 58 Cal.2d 592, 594 [ 25 Cal.Rptr. 551 , 375 P.2d 431 ].) The “primary purpose” of this law is to protect “the public health and welfare by furnishing hospital services in areas where hospital facilities are for some reason inadequate, especially in those rural districts where hospitals cannot be maintained without extraordinary governmental support.” (Talley v. Northern San Diego County Hosp. Dist. (1953) 41 Cal.2d 33, 40 [ 257 P.2d 22 ].) The law allows the formation of hospital districts by a “favorable vote of a majority of the…