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CAUSE NO. 2019-25350
BEHAVIORAL HEALTH REALTY, LLC, IN THE DISTRICT COURT
AND BEHAVIORAL HEALTH
MANAGEMENT, LLC d/b/a
BEHAVIORAL HOSPITAL OF
BELLAIRE
Plaintiffs,
HARRIS COUNTY, TEXAS
GA HC REIT II BELLAIRE HOSPITAL
LLC; AMERICAN HEALTHCARE
INVESTORS LLC JUDICIAL DISTRICT
Defendants.
PLAINTIFFS’ SECONDAMENDED PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
Plaintiff Behavioral Health Realty, LLC (“BH Realty’) and Behavioral Health
Management, LLC d/b/a Behavioral Hospital of Bellaire (“BH Management’) (collectively
“Plaintiffs”) file this second amended petition because the Defendants, GA HC REIT II Bellaire
Hospital LLC (“GAHC”) and American Healthcare Investors, LLC (“AHI”) (GAHC and AHI are
sometimes collectively referred to herein as “Defendants”), have failed and refused to pay for
repairs made to its Propertywhich Plaintiffs lease , despite Defendants’ obligation
to do so.
ISCOVERY EVEL
Plaintiffs intend for discovery to be conducted under Level 3 of the Texas Rules of
Civil Procedure.
LAIM_OR_ ELIEF
Plaintiffs seek monetary relief over $1,000,000.
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ARTIES
Plaintiff Behavioral Health Management, LLC d/b/a Behavioral Hospital of
Bellaire is a Delaware limited liability company.
Plaintiff Behavioral Health Realty, LLC is a Delaware limited liability company.
Defendant GA HC REIT II Bellaire Hospital LLC is a Delaware limited liability
company and maintains its principal place of business at 4000 MacArthur Blvd., West Tower,
Suite 200, Newport Beach, Califomia, thereby making it also a citizen of Delaware for purposes
of diversity jurisdiction. GAHC’s designated agent for service of process with the Texas Secretary
of State is the Corporation Service Company d/b/a CSC Lawyers Incorporating Service Company,
211 E. 7th Street, Suite 620, Austin, Texas 78701 3218. GAHC has been served and has appeared.
in this matter through counsel.
Defendant American Healthcare Investors, LLC is also a Delaware limited liability
company and maintains its principal place of business at 18191 Von Karman Avenue, Suite 300,
Irvine, CA 92612, thereby making it also a citizen of Delaware for purposes of diversity
jutisdiction. AHI’ s designated
agent for service of process
with the Texas Secretary
of State is the
Corporation Service Company d/b/a CSC Lawyers Incorporating Service Company, 211 E. 7th
Street, Suite 620, Austin, Texas 78701 AHI has been served and has appeared in this matter
through counsel.
URISDICTION ENUE
The Court has personal jurisdiction over Defendants and venue is proper in Harris
County, Texas, because GAHC agreedpursuant
to the Lease at issue in this matt to mandatory
jurisdiction
and venue in Hanis County, Texas. The Lease at issue contains a valid forum selection
Clause designating mandatory venue and jurisdiction in the courts of the State of Texas sitting in
626650.1 103178.0009
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Harris County, Texas. The Lease also designates Texas law as the goveming body of law for
construing
the Lease at issue.
The Court also has personal jurisdiction over Defendants because they purposefully
availed themselves of the benefits of “doing business” in Texas by GAHC signing the Lease
goveming real property located in the State of Texas. In addition, upon information and belief,
AHI serves as a manager
and business affiliate for the GAHC’s properties in Texas and controls
all day to day operations
of the Property.
GAHC and AHI have also engaged in other business activities in Texas, for
instance, they previously (and did again in this instance) engaged a Texas company (Cotton
Holdings Inc.) to conduct remediation work at the Property. Both GAHC and AHI made
representations to Plaintiffs and Plaintiffs’ agents at the Property which is located in Texas and
oversaw the remediation work at the Property
In addition
to the foregoing, all ora substantial part of the occurrences
giving rise
to this lawsuit took place in Haris County, Texas, therefore Haris County is the appropriate venue
for this action.
ACTS
The Behavioral Hospital of Bellaire is located at 5314 Dashwood Drive, Suite 300,
Houston, TX 77081 (the Property”), and serves
as anin patient and outpatient psychiatric hospital
for the Greater Houston area. The Property is owned by GAHC, and American Healthcare
Investors, LLC AHI”) serves as manager and business affiliate for GAHC and acts as the
property manager
for the Property. On November 1, 2016, Plaintiffs committed
to a 16 year lease
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with GAHC to remain at the Property (the Lease”). Plaintiffs lease suite 200 at the Property
and
Comerstone has leased the remainder of the Property.
Upon information and belief, AHI handles all business functions for the Property.
Upon information and belief, is asingle purpose entity and has no other assets beside s the
Property. Upon information and belief, is amere pass through entity and all operations and
business functions are performed
by AHI and/or others. Upon information and belief, the Property
is mortgaged to service a $1,878,000.00 loan for the benefit of AHI and its affiliates, which owna
large number of single purpose entities, like GAHC
Landlord is defined by the Lease as, “GA HC REIT II Bellaire Hospital, LLC, a
Delaware limited liability company, acting by and through American Healthcare Investors, LLC
(“Agent” for Landlord).” Thus, the Lease itself includes AHI in the definition of Landlord.
Upon information and belief, GAHC acts almost exclusively through AHI and has no day to day
operations apart from AHI. Further GAHC s address in the Lease is American Healthcare
Investors, LLC, 18191 Von Karmen Avenue, Irvine, CA 92612...” The Lease
was signed by
AHI on behalf of GAHC. AHI personnel handled all of the actions related to Humicane Harvey
flooding and remediation and all interactions with Plaintiffsand the Comerstone companies
BH Realty has been a tenant of the Property for a number of years, and BH
Management
has been in control of BH Realty s business operations
at the Property including
the operation of the psychiatric
hospital as contemplated
by the lease between BH Realty and
GAHC. BH Realty does not own and operate hospitals. It is a real estate holding entity and BH
A copy of the Lease is attached hereto as Exhibit A
See Lease, Exhibit A, pg. 7, § 1.1.
See Lease, Exhibit A, pg. 8, § 1.14.
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Management
has at all relevant times operated
the hospital at the Property. Upon information
and
belief, GAHCand AHI have long known and acquiesced in this arrangement.
The Lease does not prohibit third party beneficiaries and, in fact, the definition
of
Tenant includes the language if there is more than one Tenant, the obligations hereunder
imposed upon Tenants shall be joint and several. Plaintiffs assert that GAHC and AHI were
aware before and during the Lease that BH Management employees would occupy the Property
and conduct all functions of the hospital. In fact, GAHC and AHI were aware and acquiesced to
this state of affairs under the prior lease for the Property. The previous lease was terminated
per
Section 2.1 of the Lease and the new Lease
was executed.
Plaintiffspsychiatric hospital is dependent upon having an appropriate location to
operate, and serves as an in patient facility for many of its patients. The Lease contemplates that
in the instance of a fire or other casualty loss GAHC shall be responsible for the necessary repairs
to the Property, such that Plaintiffs can maintain their ability to serve their patients. Previously
at the Property there was an issue with faulty sprinklers that caused mold and roof leaks. This issue
largely predates the present Lease, but is informative regarding GAH s repeated failure to
properly maintain the premises pursuant to the terms of the Lease.
GAHC and/or AHI ultimately paid for the repairs to the Property stemming from
the prior
roof leaks, which establishes a course of dealing between the parties with regard
to water
See Second Amended Petition, Exhibit A, Lease, pg. 7, § 1.2.
The Lease states “Permitted Use: Psychiatric Hospital...,” BH Management operates sucha hospital. See Second
ended Petition, Exhibit A, Lease, pg. 8, § 1.17.
See Second Amended Petition, Exhibit A, Lease, pg. 8, § 2.1.
See Lease, Exhibit A, pg. 24, § 14.1 (emphasis added) (“Tf all or substantial portion of the Premises is rendered
untenantable or inaccessible by damage to all or any part of the Building from fire, the elements, accident, or other
casualty (collectively, "Casualty") then, ... Landlord shall, at its expense, use reasonable efforts to repair or rebuild
the Premises and/or Building, as the case may be, to substantially their former condition.”).
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damage and the repairs required as a result. GAHC and AHI also assured Plaintiffs
that no issues
existed with leaks or associated problems prior to the partiesentrance
into the Lease.
On August 25, 2017, Hurricane Harvey made landfall in Texas, and from the 25
through the 29 of August caused immense
amounts of rain
to fall in the Houston area, leading to
flooding. Several wings of the Property were flooded with Category ITI flood water.!°
Following the initial flooding stemming from Humicane Harvey, GAHC and AHI
started inadequate remediation efforts but failed to provide effective and appropriate remediation
to Plaintiffs, despite the Lease requiring such action. As a result, indoor air quality deteriorated,
sanitary concems arose, high humidity conditions existed, and offensive odor permeated the
facility.
GAHC and AHI were notified by Plaintiffs of these issues immediately following
the flooding, but Defendants initial efforts were not timel nor effective. These unaddressed
factors made use or even access to the Propertydifficult
and untenantable.
Accordingly, on Monday, August 28, 2017 Rolyn Companies, Inc. Rolyn
company
that provides disasterrecovery, restoration, remediation, and decontamination services
wes contacted by Plaintiffs to help respond to the emergency casualty loss and assist with
Mitigation efforts. Upon information and belief, GAHC and AHI did remediate the results of the
Unfortunately, this is not the first time that Plaintiffs have had to take legal action against GAHC in order to ensure
that GAHC meets its obligations. See Behavioral Health Realty, LLC and Behavioral Health Manax LLC d/b/a
Behavioral Hospital of Bellairev. GA HC REIT II Bellaire Hospital LLC; Cause No. 2015 65281, Inthe 152 strict
Court of Harris County, Texas.
See Lease, Exhibit A, pg. 18, § 8.1, (“Landlord warrants and represents that that it has completed repairs to the roof
in order to remedy leaks and damage that was discovered in 2014 and that those repairs and remediation were made
ina good and workman like manner.”).
Category III Water is known as "black water" and is grossly unsanitary. This water contains harmful bacteria and
fungi, with the potential to cause severe discomfort or sickness. Type 3 category is a contaminated water source that
affects the indoor environment. This category includes water sources from sewage, seawater, rising water from rivers
or streams, ground surface water or standing water. See "Water Damage Restoration Guideline." Northem Arizona
University. Retrieved 2 September 2014.
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flooding for the other tenant at the Property and paid for such remediation. GAHC and AHI now
improperly refuse to pay for remediation of the Behavioral Hospital of Bellaire.
GAHC and AHI were
at all times kept informed of Rolyn s efforts and made no
objection to Rolyn s mitigation efforts. GAHC, GAHC s agents and/or employees, AHI, and
AHI s agents and/or employees were at the Property and all worked with Rolyn and monitored
its
progress, communicated regarding that progress, asked for its billing, and never advised anyone
that GAHC orAHI had any concems about Rolyn s efforts and/or sandAHI s liability for
thework and in fact indicated they were seeking to budgetfor
the loss
GAHC and AHI initially brought Cotton Holdings Inc. Cotton”) to the Property,
amitigation company which had provided services in prior leak and flooding incidents. However
Cotton was overwhelmed and unable to handle Plaintiffs problems as Cotton was also working to
assist the other tenant of the Property. Cotton was not even handling
the other tenant s problems
effectively. As a result, GAHC and AHI asked Rolyn to assist Cotton with the work on the other
tenant
s issues, as well as to continue work on the premises of Behavioral Hospital of Bellaire.
No later than Tuesday, August 29, 2017, a representative of Plaintiffs
communicated
to an AHI representative that Plaintiffs expected and demanded that GAHC and its
affiliate pay for Rolyn s efforts at mitigation and the subsequent restoration of the Property. GAHC
and AHI never stated it would not pay while work continued. In effect, GAHC and AHI stood by
and allowed the remediation process to proceed.
From August 28, 2017 through October 21, 2017, Rolyn completed substantial
recovery, restoration, remediation, and repair efforts on the leased portion of the Property, with
sand AHI s permission, knowledge, and monitoring/instructiand as a result of those
efforts GAHC and/or AHI received a substantial benefit. Invoices which have already been
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provided
to GAHC and AHI (at their request) show
that the total cost of Rolyn s work on the
Property was $3, 759,044.54.
Plaintiffs efforts to obtain reimbursement from and/or its affiliate for the
escalating repair costs began in August 2017 and continued until late summer 2018. During this
time and AHI never stated they would not pay the invoices. In fact, AHI’s representative
communicated to Plaintiffs representative that he was working with my accounting to properly
budget
for this loss,” and frequently requested status updates on the progress and cost of the repairs.
This statement, among other similar representations, were made by ’sand AHI’s employees
and agents to ensure that Plaintiffs’ and Rolyn’s repair efforts continued, despite the fact that
evidently
did not intend to abide by the terms of the Lease and pay for the repairs.
Finally, on January 23, 2019, following months of attempts to obtain
reimbursement for the repair costs, Plaintiffssent Defendants a Notice of Default under the terms
of the Lease, and indicated its intent to commence legal action if it was not reimbursed
for the
repair costs. 1"
Defendants acknowledged receipt of the Notice of Default, but once again failed to
honor their duties by failing to provide any reimbursement funds. GAHC and AHI not only denied
Plaintiffs claims, but also claimed Plaintiffs breached the Lease yet have still collected monthly
rentat
all times
Plaintiffs remained current on their rent obligations and fully performed under the
terms
of the Lease, despite the Lease’s contemplation of an abatement of the requirement to pay
rent when GAHC and A Hlunreasonably delayed repair efforts. In contrast, and AHI have
consistently failed to perform as required
by the Lease, and remain
in default.
A copy of the Notice of Default is attached hereto as Exhibit B
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All conditions precedent have occurred.
REACH OF ONTRACT
Plaintiffsreallege and incorporate by reference all previous paragraphs.
Plaintiffsseek a judgment from for breach of contract.
and BH Realty signed a written Lease contract govemed by Texas law. The
Lease specifically contemplates that will be responsible for repairs in the event of a flood.
loss. Despite Plaintiffs performing the contract by continuing to pay rent and mitigating the loss
by hiring Rolyn, however failed to perform by refusing to pay the repair costs for the
restoration of the Property.
Defendants have not abated rent as required.
All covenants have been performed by Plaintiffs
BH Management, while not an express signatory to the Lease, is and always
has
been the entity which operated Behavioral Hospital of Bellaire at the Property. The Lease
contemplates that BH Realty’s employees and invitees will be able to conduct and frequent the
business contemplated
under the terms of the Lease a psychiatric hospital. BH Realty permits
BH Management to perform all business functions of the hospital on BH Realty’
s behalf.
and AHI are aware of this arrangement
and consented to BH Management’
s status as a third party
beneficiary of the Lease.
’s breaches of contract have caused Plaintiffs damages of $3,759,044.54 in
repair costs, in addition
to damages resulting
from the loss of business due to s refusalto
repair
the Property.
CIVIL CONSPIRACY
Plaintiffsreallege and incorporate by reference all previous paragraphs.
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Throughout the events giving rise to this lawsuit and AHI were both
members of a combination of two (or more) persons, '? and the object of that combination was to
accomplish
both an unlawful purpose, and
a lawful purpose
by unlawful means.
and AHI had a meeting of the minds on the goals and the courses
of action
necessary to achieve those goals.
and AHI engaged
in overt, unlawful acts to accomplish
their goals, and as
a proximate result of those wrongful acts, Plaintiffs suffered injury.
NJUST NRICHMEN’
Plaintiffs reallege and incorporate by reference all previous paragraphs.
Plaintiffs seek a judgment from and AHI for unjust enrichment.
In the altemative to the foregoing and without waiving same, Plaintiffs paid for at
least in repairs to the Property.
and AHI have been unjustly enriched by its receipt of those repairs and it
would be inequitable to pennit and AHI to retain that benefit without compensating
Plaintiffs.
IOLATION OF ECTION OFTHE EXAS ROPERTY ODE
Plaintiffs reallege and incorporate by reference all previous paragraphs.
Tex. Prop. Code Ann. § 91.004 states: (a) If the landlord of a tenant who is not in
default
under a lease fails to comply in any respect with the lease agreement, the landlord
is liable
to the tenant for damages resulting from the failure. (b) To secure payment of the damages, the
tenant
has a lien on the landlord's nonexempt property in the tenant's possession
and on the rent
due to the landlord under the lease.
Business entities may conspire with one another.
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is in default under the Lease for failure to repair the Property.
has been duly notified of this default pursuant to the terms of the Lease.
Despite notice and demand, has declined
to remedy
the default.
As aresult of GAHC’s violation of Tex. Prop. Code Am. § 91.004, Plaintiffs have
alien on all of ’s non exempt property in its possession, as well as on the rent due to the
rthe Lease.
MONEY HAD RECEIVED
Plaintiffs reallege and incorporate by reference all previous paragraphs.
BH Realty is the signatory of the Lease and BH Management occupies the Property
and operates
the hospital. GAHC and AHI failed to remediate and repair the Property and failed
to pay Plaintiff for the remediation which was performed to make the Property tenantable.
Defendants have failed and refused to repay to Plaintiffs the funds expended for
remediation and repair, and therefore hold money that in equity and good conscience belongs to
the Plaintiffs.
RAUD
Plaintiffs reallege and incorporate by reference all previous paragraphs.
As pleaded above, both and AHI made numerous representations
to
Plaintiffs regarding the repairs to the Property and GAHC’s willingness to reimburse Plaintiffs for
the funds expended on repairs and remediation efforts.
Both and AHI knew the representations
made were false and intended
Plaintiffs to rely on themin order to induce Plaintiffs to continue their efforts to repair the Property.
Plaintiffs relied on GAHC and AHI’s misrepresentations to their detriment and
suffered injury as a result.
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STOPPEL IN PAIS
Plaintiffsreallege and incorporate by reference all previous paragraphs.
and AHI should not be permitted to decline to pay for the repairs to the
Property after both GAHC and AHI represented
to Plaintiffs that would pay for the repairs
made by Rolyn, Plaintiffs believed and relied upon these statements, and as a result Plaintiffs
elected to continue
to pay for the repairs.
UANTUM__ ERUIT_ALEBANT
Plaintiffs reallege and incorporate by reference all previous paragraphs.
Plaintiffs provided valuable services and fumished materials for the repairs to the
Property, and informed both and AHI that (i) Plaintiffs intended to pay for the repairs, but
(ii) that Plaintiffs expected to be reimbursed for the materials and services advanced.
The services and materials were accepted by GAHC and AHI, and those materials
and services have restored and/or improved the value of the Property and *s and AHI’s
continued ability to rent the Property at Plaintiffs’ expense.
Plaintiffs reallege and incorporate by reference all previous paragraphs.
Defendants undertook and started performance of remediation and repair at the
Premises but failed to complete Defendants’ obligations under the Lease. Therefore, Defendants
are obligated, having started performance, to complete performance and to pay damages for their
failure to complete performance.
Plaintiffs reallage and incorporate by reference all previous paragraphs.
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Defendants continued to collect rent from Plaintiffs and thereby obligated
themselves
to continue to perform under the Lease regardless of any claimed deficiencies. By
continuing
to demand and collect rent, Defendants waived any claimed breach of Plaintiffs and are
estopped to argue such alleged breach.
ECLARATORY_ UDGMENT
Plaintiffs reallege and incorporate by reference all previous paragraphs.
Plaintiffs seek relief under Tex. Civ. Prac. & Rem. Code§ 37.004, the Declaratory
Judgments Act, and request a declaratory judgment finding a valid and enforceable Lease exists,
and declaring
that GAHC has an obligation
under the Lease to provide for repairs to the Property
in the event of a casualty loss.
Tex. Civ. Prac. & Rem.Code§ 37.004(a), states that “[a] contract
may be construed.
either before or after there has been
a breach,” and that “[a] person interested under ... writings
constituting a contract ... may have determined any question of construction or validity arising
under the ... contract.”
In this instance, Plaintiffs assert, and ask the Court to declare, that GAHC’ s failure
to repair
the Property is a default under the terms of the Lease, and Plaintiffs
are entitled to
reimbursement
for the repairs, as well as for fees and costs.
TTORNEY
’s defaults caused Plaintiffs to place the matter with the undersigned
attomeys for initiation of legal action and agreed to pay its attomeys a reasonable and necessary
fee. Plaintiffs are entitled to recover such fee from in accordance
in accordance with the
terms of the Lease itself Sand IV. RAC ODE
See Lease, Exhibit A, pg. 30, § 21.9.
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EQUESTS OR__ISCLOSUR:
Pursuant to Texas Rule of Civil Procedure 194, Plaintiffs
request that Defendants
disclose, within thirty (30) days
of service
of this request, the information
or material described
in
Tex.R.Civ.P. 194.2 (a) (1).
RAYER
For these reasons, the Plaintiffs Behavioral Health Realty, LLC and Behavioral Health
Management, LLC d/b/a Behavioral Hospital of Bellaire, pray that Defendants, A HC REIT II
Bellaire Hospital LLC and American Healthcare Investors, LLC, be cited to appear and that on
final trial, Plaintiffs have judgment against the Defendants for:
Claims in tort, jointly and severally, which are equal to all amounts paid for
e repairs
to the Property, an amount not less than all
eamed accrued interest at the maximum rate allowed by law;
Against GAHC for breach of contract for the failure to repair the Property,
inan amount not less than including liquidated damages
all eamed accrued interest at the maximum rate allowed by law;
A lienon GAHC’s non exempt property in the Plaintiffs’ possession and on
the rent due to GAHC under the Lease in the amount of $1,804,709.40;
All economic damages;
All consequential damages;
A declaration stating that GAHC is in default of the Lease, and that
Plaintiffs are entitled to reimbursement for the repairs to the Property, as
well as to alien on rents paid to GAHC, as well as to all attomeys’ fees and
costs associated with bringing the declaratory action;
Reasonable aittot s fees in an amount to be proven at the time of trial,
‘with the award of such additional attomey’s fees as may be proven
at the time of trial in the event of a motion for new trial, an appeal to the
Court of Appeals and in the event of a subsequent petition for review to the
Supreme Court of the State of Texas;
interestand Post judgment interest on the total amount of the
julQuest ot the highest rate rer {aw or in equity, from the date of
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judgment until paid, save and except that portion of the judgment awarded
in respect
of attomey’ s fees in the event of a motion fornew tial, an appeal
and/or a petition for review;
Allcosts of court expended by Plaintiffs; and
All other and further relief, special or general, legal or equitable, as
Plaintiffs may be shown justly entitled to receive.
Respectfully submitted,
McGLINCHEY STAFFORD
By: (s/ [od W. Mofrman
OHRMAN
TATE AR
jmohman@moglinchey: com,
TATE AR
mamannil 1 com
1001 McKinney, Suite 1500
Houston, TX 77002
Telephone: (713) 520 1900
Facsimile: (713) 520 1025
Attorneys for Plaintiffs Behavioral Health Realty,
LLC and Behavioral Health Management, LLC
d/b/a Behavioral Hospital of Bellaire
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing has been forwarded to all
counsel of record and parties listed below via the Court’s ECF E Filing Service System in
accordance with Texas Rules of Civil Procedure 21a on this the 22™day of June, 2020
Marcy L. Rothman.
morothman@krcl.com
Daniel Guerra
dguerra@krcl.com
BoydA. Mouse
bmouse@krcl.com
Kane RussellColeman Logan PC
5051 Westheimer Road, 10 Floor
Houston, Texas 77056
Kenneth R. O’ Rourke
O'Melveny & Myers, LLP
1625 Eye Street N.W.
626650.1 103178.0009
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Washington DC 20006
Telephone: 202 5300
korouke@omm.com
Matthew Kline
O'Melveny & Myers, LLP
1999 Avenue of the Stars, 8 Floor
Los Angeles, CA 90067
Telephone: 310 6700
mkline@omm.com
/s/ Joel W. Mohrman
Joel W. Mohrman
626650.1 103178.0009
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Preview
CAUSE NO. 2019-25350 BEHAVIORAL HEALTH REALTY, LLC, IN THE DISTRICT COURT AND BEHAVIORAL HEALTH MANAGEMENT, LLC d/b/a BEHAVIORAL HOSPITAL OF BELLAIRE Plaintiffs, HARRIS COUNTY, TEXAS GA HC REIT II BELLAIRE HOSPITAL LLC; AMERICAN HEALTHCARE INVESTORS LLC JUDICIAL DISTRICT Defendants. PLAINTIFFS’ SECONDAMENDED PETITION TO THE HONORABLE JUDGE OF SAID COURT: Plaintiff Behavioral Health Realty, LLC (“BH Realty’) and Behavioral Health Management, LLC d/b/a Behavioral Hospital of Bellaire (“BH Management’) (collectively “Plaintiffs”) file this second amended petition because the Defendants, GA HC REIT II Bellaire Hospital LLC (“GAHC”) and American Healthcare Investors, LLC (“AHI”) (GAHC and AHI are sometimes collectively referred to herein as “Defendants”), have failed and refused to pay for repairs made to its Propertywhich Plaintiffs lease , despite Defendants’ obligation to do so. ISCOVERY EVEL Plaintiffs intend for discovery to be conducted under Level 3 of the Texas Rules of Civil Procedure. LAIM_OR_ ELIEF Plaintiffs seek monetary relief over $1,000,000. 626650.1 103178.0009 Page of 16 ARTIES Plaintiff Behavioral Health Management, LLC d/b/a Behavioral Hospital of Bellaire is a Delaware limited liability company. Plaintiff Behavioral Health Realty, LLC is a Delaware limited liability company. Defendant GA HC REIT II Bellaire Hospital LLC is a Delaware limited liability company and maintains its principal place of business at 4000 MacArthur Blvd., West Tower, Suite 200, Newport Beach, Califomia, thereby making it also a citizen of Delaware for purposes of diversity jurisdiction. GAHC’s designated agent for service of process with the Texas Secretary of State is the Corporation Service Company d/b/a CSC Lawyers Incorporating Service Company, 211 E. 7th Street, Suite 620, Austin, Texas 78701 3218. GAHC has been served and has appeared. in this matter through counsel. Defendant American Healthcare Investors, LLC is also a Delaware limited liability company and maintains its principal place of business at 18191 Von Karman Avenue, Suite 300, Irvine, CA 92612, thereby making it also a citizen of Delaware for purposes of diversity jutisdiction. AHI’ s designated agent for service of process with the Texas Secretary of State is the Corporation Service Company d/b/a CSC Lawyers Incorporating Service Company, 211 E. 7th Street, Suite 620, Austin, Texas 78701 AHI has been served and has appeared in this matter through counsel. URISDICTION ENUE The Court has personal jurisdiction over Defendants and venue is proper in Harris County, Texas, because GAHC agreedpursuant to the Lease at issue in this matt to mandatory jurisdiction and venue in Hanis County, Texas. The Lease at issue contains a valid forum selection Clause designating mandatory venue and jurisdiction in the courts of the State of Texas sitting in 626650.1 103178.0009 Page of Harris County, Texas. The Lease also designates Texas law as the goveming body of law for construing the Lease at issue. The Court also has personal jurisdiction over Defendants because they purposefully availed themselves of the benefits of “doing business” in Texas by GAHC signing the Lease goveming real property located in the State of Texas. In addition, upon information and belief, AHI serves as a manager and business affiliate for the GAHC’s properties in Texas and controls all day to day operations of the Property. GAHC and AHI have also engaged in other business activities in Texas, for instance, they previously (and did again in this instance) engaged a Texas company (Cotton Holdings Inc.) to conduct remediation work at the Property. Both GAHC and AHI made representations to Plaintiffs and Plaintiffs’ agents at the Property which is located in Texas and oversaw the remediation work at the Property In addition to the foregoing, all ora substantial part of the occurrences giving rise to this lawsuit took place in Haris County, Texas, therefore Haris County is the appropriate venue for this action. ACTS The Behavioral Hospital of Bellaire is located at 5314 Dashwood Drive, Suite 300, Houston, TX 77081 (the Property”), and serves as anin patient and outpatient psychiatric hospital for the Greater Houston area. The Property is owned by GAHC, and American Healthcare Investors, LLC AHI”) serves as manager and business affiliate for GAHC and acts as the property manager for the Property. On November 1, 2016, Plaintiffs committed to a 16 year lease 626650.1 103178.0009 Page of with GAHC to remain at the Property (the Lease”). Plaintiffs lease suite 200 at the Property and Comerstone has leased the remainder of the Property. Upon information and belief, AHI handles all business functions for the Property. Upon information and belief, is asingle purpose entity and has no other assets beside s the Property. Upon information and belief, is amere pass through entity and all operations and business functions are performed by AHI and/or others. Upon information and belief, the Property is mortgaged to service a $1,878,000.00 loan for the benefit of AHI and its affiliates, which owna large number of single purpose entities, like GAHC Landlord is defined by the Lease as, “GA HC REIT II Bellaire Hospital, LLC, a Delaware limited liability company, acting by and through American Healthcare Investors, LLC (“Agent” for Landlord).” Thus, the Lease itself includes AHI in the definition of Landlord. Upon information and belief, GAHC acts almost exclusively through AHI and has no day to day operations apart from AHI. Further GAHC s address in the Lease is American Healthcare Investors, LLC, 18191 Von Karmen Avenue, Irvine, CA 92612...” The Lease was signed by AHI on behalf of GAHC. AHI personnel handled all of the actions related to Humicane Harvey flooding and remediation and all interactions with Plaintiffsand the Comerstone companies BH Realty has been a tenant of the Property for a number of years, and BH Management has been in control of BH Realty s business operations at the Property including the operation of the psychiatric hospital as contemplated by the lease between BH Realty and GAHC. BH Realty does not own and operate hospitals. It is a real estate holding entity and BH A copy of the Lease is attached hereto as Exhibit A See Lease, Exhibit A, pg. 7, § 1.1. See Lease, Exhibit A, pg. 8, § 1.14. 626650.1 103178.0009 Page of Management has at all relevant times operated the hospital at the Property. Upon information and belief, GAHCand AHI have long known and acquiesced in this arrangement. The Lease does not prohibit third party beneficiaries and, in fact, the definition of Tenant includes the language if there is more than one Tenant, the obligations hereunder imposed upon Tenants shall be joint and several. Plaintiffs assert that GAHC and AHI were aware before and during the Lease that BH Management employees would occupy the Property and conduct all functions of the hospital. In fact, GAHC and AHI were aware and acquiesced to this state of affairs under the prior lease for the Property. The previous lease was terminated per Section 2.1 of the Lease and the new Lease was executed. Plaintiffspsychiatric hospital is dependent upon having an appropriate location to operate, and serves as an in patient facility for many of its patients. The Lease contemplates that in the instance of a fire or other casualty loss GAHC shall be responsible for the necessary repairs to the Property, such that Plaintiffs can maintain their ability to serve their patients. Previously at the Property there was an issue with faulty sprinklers that caused mold and roof leaks. This issue largely predates the present Lease, but is informative regarding GAH s repeated failure to properly maintain the premises pursuant to the terms of the Lease. GAHC and/or AHI ultimately paid for the repairs to the Property stemming from the prior roof leaks, which establishes a course of dealing between the parties with regard to water See Second Amended Petition, Exhibit A, Lease, pg. 7, § 1.2. The Lease states “Permitted Use: Psychiatric Hospital...,” BH Management operates sucha hospital. See Second ended Petition, Exhibit A, Lease, pg. 8, § 1.17. See Second Amended Petition, Exhibit A, Lease, pg. 8, § 2.1. See Lease, Exhibit A, pg. 24, § 14.1 (emphasis added) (“Tf all or substantial portion of the Premises is rendered untenantable or inaccessible by damage to all or any part of the Building from fire, the elements, accident, or other casualty (collectively, "Casualty") then, ... Landlord shall, at its expense, use reasonable efforts to repair or rebuild the Premises and/or Building, as the case may be, to substantially their former condition.”). 626650.1 103178.0009 Page of damage and the repairs required as a result. GAHC and AHI also assured Plaintiffs that no issues existed with leaks or associated problems prior to the partiesentrance into the Lease. On August 25, 2017, Hurricane Harvey made landfall in Texas, and from the 25 through the 29 of August caused immense amounts of rain to fall in the Houston area, leading to flooding. Several wings of the Property were flooded with Category ITI flood water.!° Following the initial flooding stemming from Humicane Harvey, GAHC and AHI started inadequate remediation efforts but failed to provide effective and appropriate remediation to Plaintiffs, despite the Lease requiring such action. As a result, indoor air quality deteriorated, sanitary concems arose, high humidity conditions existed, and offensive odor permeated the facility. GAHC and AHI were notified by Plaintiffs of these issues immediately following the flooding, but Defendants initial efforts were not timel nor effective. These unaddressed factors made use or even access to the Propertydifficult and untenantable. Accordingly, on Monday, August 28, 2017 Rolyn Companies, Inc. Rolyn company that provides disasterrecovery, restoration, remediation, and decontamination services wes contacted by Plaintiffs to help respond to the emergency casualty loss and assist with Mitigation efforts. Upon information and belief, GAHC and AHI did remediate the results of the Unfortunately, this is not the first time that Plaintiffs have had to take legal action against GAHC in order to ensure that GAHC meets its obligations. See Behavioral Health Realty, LLC and Behavioral Health Manax LLC d/b/a Behavioral Hospital of Bellairev. GA HC REIT II Bellaire Hospital LLC; Cause No. 2015 65281, Inthe 152 strict Court of Harris County, Texas. See Lease, Exhibit A, pg. 18, § 8.1, (“Landlord warrants and represents that that it has completed repairs to the roof in order to remedy leaks and damage that was discovered in 2014 and that those repairs and remediation were made ina good and workman like manner.”). Category III Water is known as "black water" and is grossly unsanitary. This water contains harmful bacteria and fungi, with the potential to cause severe discomfort or sickness. Type 3 category is a contaminated water source that affects the indoor environment. This category includes water sources from sewage, seawater, rising water from rivers or streams, ground surface water or standing water. See "Water Damage Restoration Guideline." Northem Arizona University. Retrieved 2 September 2014. 626650.1 103178.0009 Page of flooding for the other tenant at the Property and paid for such remediation. GAHC and AHI now improperly refuse to pay for remediation of the Behavioral Hospital of Bellaire. GAHC and AHI were at all times kept informed of Rolyn s efforts and made no objection to Rolyn s mitigation efforts. GAHC, GAHC s agents and/or employees, AHI, and AHI s agents and/or employees were at the Property and all worked with Rolyn and monitored its progress, communicated regarding that progress, asked for its billing, and never advised anyone that GAHC orAHI had any concems about Rolyn s efforts and/or sandAHI s liability for thework and in fact indicated they were seeking to budgetfor the loss GAHC and AHI initially brought Cotton Holdings Inc. Cotton”) to the Property, amitigation company which had provided services in prior leak and flooding incidents. However Cotton was overwhelmed and unable to handle Plaintiffs problems as Cotton was also working to assist the other tenant of the Property. Cotton was not even handling the other tenant s problems effectively. As a result, GAHC and AHI asked Rolyn to assist Cotton with the work on the other tenant s issues, as well as to continue work on the premises of Behavioral Hospital of Bellaire. No later than Tuesday, August 29, 2017, a representative of Plaintiffs communicated to an AHI representative that Plaintiffs expected and demanded that GAHC and its affiliate pay for Rolyn s efforts at mitigation and the subsequent restoration of the Property. GAHC and AHI never stated it would not pay while work continued. In effect, GAHC and AHI stood by and allowed the remediation process to proceed. From August 28, 2017 through October 21, 2017, Rolyn completed substantial recovery, restoration, remediation, and repair efforts on the leased portion of the Property, with sand AHI s permission, knowledge, and monitoring/instructiand as a result of those efforts GAHC and/or AHI received a substantial benefit. Invoices which have already been 626650.1 103178.0009 Page of provided to GAHC and AHI (at their request) show that the total cost of Rolyn s work on the Property was $3, 759,044.54. Plaintiffs efforts to obtain reimbursement from and/or its affiliate for the escalating repair costs began in August 2017 and continued until late summer 2018. During this time and AHI never stated they would not pay the invoices. In fact, AHI’s representative communicated to Plaintiffs representative that he was working with my accounting to properly budget for this loss,” and frequently requested status updates on the progress and cost of the repairs. This statement, among other similar representations, were made by ’sand AHI’s employees and agents to ensure that Plaintiffs’ and Rolyn’s repair efforts continued, despite the fact that evidently did not intend to abide by the terms of the Lease and pay for the repairs. Finally, on January 23, 2019, following months of attempts to obtain reimbursement for the repair costs, Plaintiffssent Defendants a Notice of Default under the terms of the Lease, and indicated its intent to commence legal action if it was not reimbursed for the repair costs. 1" Defendants acknowledged receipt of the Notice of Default, but once again failed to honor their duties by failing to provide any reimbursement funds. GAHC and AHI not only denied Plaintiffs claims, but also claimed Plaintiffs breached the Lease yet have still collected monthly rentat all times Plaintiffs remained current on their rent obligations and fully performed under the terms of the Lease, despite the Lease’s contemplation of an abatement of the requirement to pay rent when GAHC and A Hlunreasonably delayed repair efforts. In contrast, and AHI have consistently failed to perform as required by the Lease, and remain in default. A copy of the Notice of Default is attached hereto as Exhibit B 626650.1 103178.0009 Page of All conditions precedent have occurred. REACH OF ONTRACT Plaintiffsreallege and incorporate by reference all previous paragraphs. Plaintiffsseek a judgment from for breach of contract. and BH Realty signed a written Lease contract govemed by Texas law. The Lease specifically contemplates that will be responsible for repairs in the event of a flood. loss. Despite Plaintiffs performing the contract by continuing to pay rent and mitigating the loss by hiring Rolyn, however failed to perform by refusing to pay the repair costs for the restoration of the Property. Defendants have not abated rent as required. All covenants have been performed by Plaintiffs BH Management, while not an express signatory to the Lease, is and always has been the entity which operated Behavioral Hospital of Bellaire at the Property. The Lease contemplates that BH Realty’s employees and invitees will be able to conduct and frequent the business contemplated under the terms of the Lease a psychiatric hospital. BH Realty permits BH Management to perform all business functions of the hospital on BH Realty’ s behalf. and AHI are aware of this arrangement and consented to BH Management’ s status as a third party beneficiary of the Lease. ’s breaches of contract have caused Plaintiffs damages of $3,759,044.54 in repair costs, in addition to damages resulting from the loss of business due to s refusalto repair the Property. CIVIL CONSPIRACY Plaintiffsreallege and incorporate by reference all previous paragraphs. 626650.1 103178.0009 Page of Throughout the events giving rise to this lawsuit and AHI were both members of a combination of two (or more) persons, '? and the object of that combination was to accomplish both an unlawful purpose, and a lawful purpose by unlawful means. and AHI had a meeting of the minds on the goals and the courses of action necessary to achieve those goals. and AHI engaged in overt, unlawful acts to accomplish their goals, and as a proximate result of those wrongful acts, Plaintiffs suffered injury. NJUST NRICHMEN’ Plaintiffs reallege and incorporate by reference all previous paragraphs. Plaintiffs seek a judgment from and AHI for unjust enrichment. In the altemative to the foregoing and without waiving same, Plaintiffs paid for at least in repairs to the Property. and AHI have been unjustly enriched by its receipt of those repairs and it would be inequitable to pennit and AHI to retain that benefit without compensating Plaintiffs. IOLATION OF ECTION OFTHE EXAS ROPERTY ODE Plaintiffs reallege and incorporate by reference all previous paragraphs. Tex. Prop. Code Ann. § 91.004 states: (a) If the landlord of a tenant who is not in default under a lease fails to comply in any respect with the lease agreement, the landlord is liable to the tenant for damages resulting from the failure. (b) To secure payment of the damages, the tenant has a lien on the landlord's nonexempt property in the tenant's possession and on the rent due to the landlord under the lease. Business entities may conspire with one another. 626650.1 103178.0009 Page of is in default under the Lease for failure to repair the Property. has been duly notified of this default pursuant to the terms of the Lease. Despite notice and demand, has declined to remedy the default. As aresult of GAHC’s violation of Tex. Prop. Code Am. § 91.004, Plaintiffs have alien on all of ’s non exempt property in its possession, as well as on the rent due to the rthe Lease. MONEY HAD RECEIVED Plaintiffs reallege and incorporate by reference all previous paragraphs. BH Realty is the signatory of the Lease and BH Management occupies the Property and operates the hospital. GAHC and AHI failed to remediate and repair the Property and failed to pay Plaintiff for the remediation which was performed to make the Property tenantable. Defendants have failed and refused to repay to Plaintiffs the funds expended for remediation and repair, and therefore hold money that in equity and good conscience belongs to the Plaintiffs. RAUD Plaintiffs reallege and incorporate by reference all previous paragraphs. As pleaded above, both and AHI made numerous representations to Plaintiffs regarding the repairs to the Property and GAHC’s willingness to reimburse Plaintiffs for the funds expended on repairs and remediation efforts. Both and AHI knew the representations made were false and intended Plaintiffs to rely on themin order to induce Plaintiffs to continue their efforts to repair the Property. Plaintiffs relied on GAHC and AHI’s misrepresentations to their detriment and suffered injury as a result. 626650.1 103178.0009 Page of STOPPEL IN PAIS Plaintiffsreallege and incorporate by reference all previous paragraphs. and AHI should not be permitted to decline to pay for the repairs to the Property after both GAHC and AHI represented to Plaintiffs that would pay for the repairs made by Rolyn, Plaintiffs believed and relied upon these statements, and as a result Plaintiffs elected to continue to pay for the repairs. UANTUM__ ERUIT_ALEBANT Plaintiffs reallege and incorporate by reference all previous paragraphs. Plaintiffs provided valuable services and fumished materials for the repairs to the Property, and informed both and AHI that (i) Plaintiffs intended to pay for the repairs, but (ii) that Plaintiffs expected to be reimbursed for the materials and services advanced. The services and materials were accepted by GAHC and AHI, and those materials and services have restored and/or improved the value of the Property and *s and AHI’s continued ability to rent the Property at Plaintiffs’ expense. Plaintiffs reallege and incorporate by reference all previous paragraphs. Defendants undertook and started performance of remediation and repair at the Premises but failed to complete Defendants’ obligations under the Lease. Therefore, Defendants are obligated, having started performance, to complete performance and to pay damages for their failure to complete performance. Plaintiffs reallage and incorporate by reference all previous paragraphs. 626650.1 103178.0009 Page of Defendants continued to collect rent from Plaintiffs and thereby obligated themselves to continue to perform under the Lease regardless of any claimed deficiencies. By continuing to demand and collect rent, Defendants waived any claimed breach of Plaintiffs and are estopped to argue such alleged breach. ECLARATORY_ UDGMENT Plaintiffs reallege and incorporate by reference all previous paragraphs. Plaintiffs seek relief under Tex. Civ. Prac. & Rem. Code§ 37.004, the Declaratory Judgments Act, and request a declaratory judgment finding a valid and enforceable Lease exists, and declaring that GAHC has an obligation under the Lease to provide for repairs to the Property in the event of a casualty loss. Tex. Civ. Prac. & Rem.Code§ 37.004(a), states that “[a] contract may be construed. either before or after there has been a breach,” and that “[a] person interested under ... writings constituting a contract ... may have determined any question of construction or validity arising under the ... contract.” In this instance, Plaintiffs assert, and ask the Court to declare, that GAHC’ s failure to repair the Property is a default under the terms of the Lease, and Plaintiffs are entitled to reimbursement for the repairs, as well as for fees and costs. TTORNEY ’s defaults caused Plaintiffs to place the matter with the undersigned attomeys for initiation of legal action and agreed to pay its attomeys a reasonable and necessary fee. Plaintiffs are entitled to recover such fee from in accordance in accordance with the terms of the Lease itself Sand IV. RAC ODE See Lease, Exhibit A, pg. 30, § 21.9. 626650.1 103178.0009 Page of EQUESTS OR__ISCLOSUR: Pursuant to Texas Rule of Civil Procedure 194, Plaintiffs request that Defendants disclose, within thirty (30) days of service of this request, the information or material described in Tex.R.Civ.P. 194.2 (a) (1). RAYER For these reasons, the Plaintiffs Behavioral Health Realty, LLC and Behavioral Health Management, LLC d/b/a Behavioral Hospital of Bellaire, pray that Defendants, A HC REIT II Bellaire Hospital LLC and American Healthcare Investors, LLC, be cited to appear and that on final trial, Plaintiffs have judgment against the Defendants for: Claims in tort, jointly and severally, which are equal to all amounts paid for e repairs to the Property, an amount not less than all eamed accrued interest at the maximum rate allowed by law; Against GAHC for breach of contract for the failure to repair the Property, inan amount not less than including liquidated damages all eamed accrued interest at the maximum rate allowed by law; A lienon GAHC’s non exempt property in the Plaintiffs’ possession and on the rent due to GAHC under the Lease in the amount of $1,804,709.40; All economic damages; All consequential damages; A declaration stating that GAHC is in default of the Lease, and that Plaintiffs are entitled to reimbursement for the repairs to the Property, as well as to alien on rents paid to GAHC, as well as to all attomeys’ fees and costs associated with bringing the declaratory action; Reasonable aittot s fees in an amount to be proven at the time of trial, ‘with the award of such additional attomey’s fees as may be proven at the time of trial in the event of a motion for new trial, an appeal to the Court of Appeals and in the event of a subsequent petition for review to the Supreme Court of the State of Texas; interestand Post judgment interest on the total amount of the julQuest ot the highest rate rer {aw or in equity, from the date of 626650.1 103178.0009 Page of judgment until paid, save and except that portion of the judgment awarded in respect of attomey’ s fees in the event of a motion fornew tial, an appeal and/or a petition for review; Allcosts of court expended by Plaintiffs; and All other and further relief, special or general, legal or equitable, as Plaintiffs may be shown justly entitled to receive. Respectfully submitted, McGLINCHEY STAFFORD By: (s/ [od W. Mofrman OHRMAN TATE AR jmohman@moglinchey: com, TATE AR mamannil 1 com 1001 McKinney, Suite 1500 Houston, TX 77002 Telephone: (713) 520 1900 Facsimile: (713) 520 1025 Attorneys for Plaintiffs Behavioral Health Realty, LLC and Behavioral Health Management, LLC d/b/a Behavioral Hospital of Bellaire CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing has been forwarded to all counsel of record and parties listed below via the Court’s ECF E Filing Service System in accordance with Texas Rules of Civil Procedure 21a on this the 22™day of June, 2020 Marcy L. Rothman. morothman@krcl.com Daniel Guerra dguerra@krcl.com BoydA. Mouse bmouse@krcl.com Kane RussellColeman Logan PC 5051 Westheimer Road, 10 Floor Houston, Texas 77056 Kenneth R. O’ Rourke O'Melveny & Myers, LLP 1625 Eye Street N.W. 626650.1 103178.0009 Page of Washington DC 20006 Telephone: 202 5300 korouke@omm.com Matthew Kline O'Melveny & Myers, LLP 1999 Avenue of the Stars, 8 Floor Los Angeles, CA 90067 Telephone: 310 6700 mkline@omm.com /s/ Joel W. Mohrman Joel W. Mohrman 626650.1 103178.0009 Page of