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Nessmann v. Hospital Administrative District No. 4

Superior Court of Maine, Piscataquis

March 20, 2019

GERALD S. NESSMANN in his capacity as elected director of Hospital Administrative District No. 4, representing the interests of the Inhabitants of the Tovra of Sebec, THE INHABITANTS OF THE TOWN OF MDNSON, and THE INHABITANTS OF THE TOWN OF SEBEC, both bodies corporate and politic, Plaintiffs,


          Hon. William R. Anderson, Justice

         Plaintiff Gerald Nessmann, an elected board member of Defendant Hospital Administrative District No, 4 (HAD4) from the Town of Sebee, brought suit against HAD4 regarding its actions, inactions, and the potential outcomes pertaining to a seemingly impending merger with Eastern Maine Health Services (now referred to as Northern Light Health). The inhabitants of the Town of Sebec and the inhabitants of the Town of Monson joined the suit and asserted their own claims.

         As the parties are well familiar, on October 23, 2018, the Superior Court sua sponte granted an ex parte temporary restraining order in favor of Mr. Nessmann that prevented HAD4's board of directors from voting on the proposed merger plan on October 24, 2018. It soon became clear that the temporary restraining order had been improvidently granted and needed to be dissolved. The Court dissolved the temporary restraining order and directed the parties to brief whether Mr. Nessmann's request for a preliminary injunction should be addressed or whether HAD4's Motion to Dismiss the Complaint tor a failure to state a claim should be addressed. Because the Motion to Dismiss had the potential to dispose of the entire Complaint and obviate the need to address the preliminary injunction, the Court directed the parties to complete briefing on the Motion to Dismiss. Though the Court indicated it would schedule oral argument on the Motion to Dismiss, its analysis of the operative Complaint and the briefs led it to conclude that oral argument would be unnecessary; the Motion can be decided on the briefs. The Court is now in a position to render a decision on HAD4's Motion to Dismiss, which it grants as detailed more below.


         A complaint can be dismissed if it "fail[s] to state a claim upon which relief can be granted . . . ." M.R. Civ. P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) tests "the legal sufficiency of the complaint"; the Court views the factual allegations in the complaint "in the light most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to relief pursuant to some legal theory." Carey v. Bd. of Overseers of the Bar, 2018 ME 119, ¶ 29, 192 A.3d 589.

         On a motion to dismiss for failure to state a claim, the Court generally cannot consider documents outside the pleadings without treating the motion as one for summary judgment. See M.R. Civ. P. 12(b); see also Moody v. State Liquor & Lottery Comm'n, 2004 ME 20, ¶ 8, 843 A.2d 43. However, the Court can consider "official public documents, documents that are central to the plaintiffs claim, and documents referred to in the complaint . . . when the authenticity of such documents is not challenged." Id. ¶ 11. When the Court does consider such documents, those documents merge into the pleadings. Id. ¶ 10. Plaintiffs attached a number of documents to the Complaint that meet the Moody exception and thus merge into the pleadings.[1]


         HAD4 is a quasi-municipal corporation that was established by the Maine Legislature in 1973 by Special and Private Law.[2] (Compl. ¶ 1.) Its chartering legislation has been amended several times since then. (Compl. ¶ 1.) As a quasi-municipal corporation, HAD4 is subject to the Freedom of Access Act (FOAA), which is codified at 1 M.R.S. §§ 400-414. (Compl. ¶ 10.) HAD4 owns and operates Mayo Regional Hospital in Dover-Foxcroft. (Compl. ¶ 2.) HAD4 is governed by a board of directors consisting of nineteen directors, with each Member Town electing from one to three directors. (Compl. ¶ 4.) Gerald Nessmann has been a director representing the Town of Sebec since 2011. (Compl. ¶ 5.)

         Central to this case, HAD4 began investigating potential affiliation options with a number of nearby healthcare providers in 2014 and 2015. (Compl. ¶ 13.) This led to HAD4 entering into a first preliminary affiliation agreement with Eastern Maine Health Services (now Northern Light Health).[3] (Compl. ¶ 14.) The goal of this affiliation has been to merge with EMHS and amend the legislative Charter, which Plaintiffs allege would allow transfer of all HAD4 assets to EMHS without any compensation. (Compl. ¶ 33.) These assets are a key aspect of the claims in this case because EMHS was in a financially challenging situation in late 2018. (Compl. ¶ 17.) HAD4, on the other hand, enjoys a very good credit rating and has no issue with accessing funding within the limits of its Charter and general bond underwriting parameters. (Compl. ¶ 18.) Over the years, HAD4 has accumulated reserve funds which, as of September 30, 2018, totaled more than $16, 000, 000. (Compl. ¶ 19.) Plaintiffs contend these funds are assets of the Member Towns. (Compl. ¶ 19.) The total net equity (book assets minus book liabilities) of HAD4 as of September 30, 2018, was roughly $28, 000, 000, which included the reserve funds. (Compl. ¶ 20.)

         During the course of negotiations with EMHS, Mr. Nessmann has articulated his concern over the alleged handing over of the reserve funds to EMHS without consideration as part of the merger. (Compl. ¶ 21.) He continued to express concerns over the process. (Compl. ¶¶ 22-32.) On August 20, 2018, Mr. Nessmann requested information from HAD4 CEO Marie Vienneau regarding a board confidentiality policy, the merger negotiations with EMHS, and the anticipated amendment to the Charter. (Compl. ¶ 34.) Including subsequent follow-ups, Mr. Nessmann has not received any of the information he requested. (Compl. ¶ 53.) As of the filing of the Complaint, none of the directors had received copies of the proposed merger plan or the proposed Charter amendment, though they subsequently received copies because Mr. Nessmann attached a draft copy to his affidavit supporting the Opposition to the Motion to Dismiss. (Compl. ¶¶ 45, 54.) Mr. Nessmann initiated this case on October 23, 2018, in an attempt to gain access to documents regarding the proposed merger and to put a halt to the proposed merger.


         The Court will address the claims in the operative Amended Complaint, filed on November 1, 2018, in two groups: those claims brought by Gerald Nessmann, in his capacity as an elected director of HAD4 representing the interests of the Inhabitants of the Town of Sebec, and those claims brought by the inhabitants of Sebec and Monson.

         1. Gerald Nessmann's claims.

         Count I of the Complaint seeks inspection of HAD4's corporate books and records pursuant to 13-B M.R.S. § 715 of the Nonprofit Corporation Act. (Compl. ¶¶ 56-59.) HAD4 challenged Mr. Nessmann's ability to bring such a claim because the Act expressly excludes a "political subdivision or body politic and corporate of the State" from the definition of a "corporation." 13-B M.R.S. § 102(4)(C). The enabling legislative Charter designated HAD4 as a "body politic and corporate" P. & S.L. 1973, ch. 76, § 1 (emergency, effective May 11, 1973); cf Town of Burlington v. Hosp. Admin. Dist. No. 1, 2001 ME 59, ¶ 15, 769 A.2d 857 (regarding a comparable hospital administration district, concluding that a designation as a "body politic and corporate" in the enabling legislation rendered the hospital administration district a "political subdivision" for purposes of FOAA). It appears plainly that the Nonprofit Corporation Act does not apply to HAD4, and Mr. Nessmann conceded as much. (Pl.s' Opp. to Mot. Dismiss 3.) Notwithstanding this ...

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