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Chattanooga-Hamilton Co. Hosp. Authority and Erlanger suing Walker County

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The Chattanooga-Hamilton County Hospital Authority and Erlanger are suing Walker County for lapsed payments in relation to failed Hutcheson Medical Center.

Hutcheson closed its doors in early December of 2015 and re-opened under new management later that same month.

In the civil lawsuit, filed in federal court on December 28, the authority alleges Walker County breached a contract by not paying on a line of credit. According to the complaint, a $20,000,000 line of credit was created through Erlanger for the Hospital Authority of Walker, Dade and Catoosa Counties to provide working capital for Hutcheson Medical Center in April 2011.

“As of December 29, 2015, the Authority owes Erlanger $34,451,200.14 under the Line of Credit, and interest continues to accrue at a rate of $2,739.73 per day, and late fees at a rate of $400,000 per month on the indebtedness,” the complaint states.

“Accordingly, Walker County is liable to Erlanger in an amount equal to one-half (½) of the sums due under the Line of Credit up to a maximum of $10 million, minus such credits for cash proceeds actually received by Erlanger associated with the sale of the Erlanger Collateral pursuant to the Settlement Agreement.”

The complaint alleges Walker County has declined to pay, or make arrangements to pay, any portion of the debt owned.

Stuart James, special counsel for Walker County, says no one has contacted him asking if the county intends to honor the agreement without litigation.

"I have been involved with this litigation for some time and counsel for Erlanger has been communicating with me—they know who I am,” said James in a written statement provided to Channel 3. “I have not been approached, nor have I received, any communication from Erlanger about whether Walker County intends to honor any alleged obligation under any alleged agreement with Erlanger."

"I would have expected to be contacted regarding this lawsuit before it was filed so that Walker County could be given the same opportunities Erlanger is apparently willing to give Catoosa,” added James, who says he’s surprised to see the lawsuit name Walker County, but not Catoosa County.

The lawsuit does not name Catoosa County, but includes a footnote on why.

"Because Catoosa County appears willing to honor its obligations to Erlanger under the intergovernmental agency without the necessity of litigation, Erlanger has not named Catoosa County as a party to this case. Should Catoosa County fail to fulfill its obligations there under, however, Erlanger respectfully reserves the right to seek and to add it as a defendant in this action."

“I was stunned to see Erlanger’s lawsuit and its footnote on Catoosa,” said Donald Oliver, Walker County Attorney.

“I have had many conversations with Catoosa officials where they have agreed with my analysis, which is that based on the documents already in evidence in the prior cases, neither Walker County nor Catoosa County is liable to Erlanger for one penny…it appears Catoosa is now ready for its taxpayers to pay Erlanger at least $8.5 million it does not owe. I mystified to say the least,” said Oliver.

James says he will answer the suit in the next week, “asserting that Walker County enjoys sovereign immunity from suit regarding the matters involving Hutcheson and, moreover, that the issues in the lawsuit involving Walker County can adequately be resolved in the currently pending bankruptcy and legal cases pending against the Hospital Authority.”

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