SCRIPPSHEALTH: Sued By Doctors Group
ScrippsHealth Hospital System faces a $60 million lawsuit filed Tuesday by nearly 300 Scripps Clinic physicians "alleging fraud and business interference on the part of hospital management." The San Diego Daily Transcript reports that "physicians and other investors claim the hospital managers and trustees convinced them to invest in Scripps Clinic but later backed out of key agreements, which ultimately cost the investors more than $60 million in financial damages." The doctors claim ScrippsHealth reneged on an agreement in which "the Scripps Clinic name could be used in connection with a stock offering." According to the suit, "the ScrippsHealth Board of Trustees adopted a resolution finding that Scripps Clinic's plans to use the name in connection with an initial public offering constituted a violation of the agreement." In a letter to Scripps Clinic CEO Dr. Thomas Waltz, ScrippsHealth administrator Ames Early claimed that such action would adversely affect the nonprofit "system's philanthropic activities ... if the clinic associated the Scripps name with the initial public offering."
What's Going On
ScrippsHealth Executive Vice President Stan Pappelbaum called the lawsuit "completely without merit." He said, "ScrippsHealth is resolved to remain a not-for-profit, community benefit organization while the investors intend to sell shares through a Wall Street stock offering to benefit themselves. These positions are clearly incompatible." Pappelbaum added that the Scripps name should not employed as "part of a profit-making venture that benefits a few investors rather than San Diego families." According to the lawsuit, ScrippsHealth also violated an agreement regarding competing services, in which it had promised to "only promote Scripps Clinic and not support other medical or physician group management services." The Daily Transcript notes that "ScrippsHealth now is forming a joint venture called ScrippsHealth System," which "would compete directly with Scripps Clinic." The lawsuit asks ScrippsHealth to "straighten out the situation," and says if that does not occur, the "plaintiffs will be asking for monetary damages" (Peterson, 2/17).