Motion for No Evidence Summary Judgment in MUGDOCK TAVERN INVESTMENTS, et al vs. CAT SEATTLE LLC, et al| Trellis.Law

On November 01, 2012 a Motion,Ex Parte was filed involving a dispute between Duffy I, Lp, Mugdock Tavern Investments, and Ascend Health Corporation, Cat Seattle Llc, Kresch, Richard, for CNTR CNSMR COM DEBT in the District Court of Dallas County.

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FILED
DALLAS COUNTY
5/9/2014 5:30:06 PM
GARY FITZSIMMONS
DISTRICT CLERK

CAUSE NO. DC-12-12887

MUGDOCK TAVERN INVESTMENTS § IN THE DISTRICT COURT OF
and DUFFY I, LP, §
§
Plaintiffs, §
§
v. §
§
CAT SEATTLE, LLC, ASCEND §
HEALTH CORPORATION, and §
RICHARD KRESCH, Individually, §
§ DALLAS COUNTY, TEXAS
Defendants and Counter- §
Plaintiffs, §
§
v. §
§
Duffy I, LP and JAMES P. GRAHAM §
§
Counter-Defendants. §
§
§ 134TH JUDICIAL DISTRICT
____________________________________________________________________________

DEFENDANTS/COUNTER-PLAINTIFFS’ FIRST SUPPLEMENT TO
THEIR SECOND AMENDED MOTION FOR SUMMARY JUDGMENT
AND NO-EVIDENCE MOTION FOR SUMMARY JUDGMENT
_____________________________________________________________________________

CAT Seattle, LLC (“CAT Seattle), Ascend Health Corporation (“Ascend”), and Dr.

Richard Kresch (“Dr. Kresch”) (collectively, the “Ascend Defendants”) hereby file their First

Supplement to their Second Amended Motion for Summary Judgment and No-Evidence Motion

for Summary Judgment as follows:

I. SUMMARY OF MOTION

On April 9, 2014, the Ascend Defendants filed their Second Amended Motion for

Summary Judgment and No Evidence Motion for Summary Judgment (the “MSJ”), which is

incorporated herein by reference. The MSJ is currently set for hearing on May 30, 2014. The

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Ascend Defendants are filing this supplement to raise additional arguments that readily establish

that Plaintiffs’ claims fail as a matter of law and that the Ascend Defendants are entitled to

summary judgment. Specifically, the Ascend Defendants hereby move for summary judgment

on the following additional grounds:

1. Plaintiffs’ breach of fiduciary duty claim fails as a matter of law because:

(a) Duffy cannot establish that it was owed a fiduciary duty;

(b) Plaintiffs seek the remedy of disgorgement against a party that did not
owe it any fiduciary duties as a matter of law;

(c) Plaintiffs have no evidence of causation between the alleged breaches
of fiduciary duty and the amount sought to be disgorged; and

(d) Plaintiffs have no evidence that the Ascend Defendants breached any
fiduciary duties owed to them under Delaware law.

2. Plaintiffs’ equitable claims seeking specific performance of the specific
terms of voluminous protocols that Plaintiffs allege must be followed at
the Ascend Defendants’ facilities is not cognizable because:

(a) Plaintiffs have an adequate remedy at law in the form of a claim for
damages (albeit a claim they failed to establish in this lawsuit); and

(b) The relief sought improperly seeks constant and ongoing judicial
supervision in the internal affairs of the Ascend Defendants’ facilities.

3. Plaintiffs’ fraudulent inducement claims based on the Ascend Defendants’
alleged failure to open a “Shick Shadel facility” in Texas is barred by the
doctrine of ratification because Plaintiffs voluntarily amended the very
document that was allegedly procured by fraud after its discovery of the
alleged misrepresentations.

Based on these additional grounds, and those originally raised in the MSJ, the Ascend

Defendants respectfully request that the Court grant them summary judgment as to each claim

asserted by Plaintiffs in the Second Amended Petition. After dismissal of these claims, the only

live claims remaining in this litigation will be those asserted by the Ascend Defendants.

Consequently, the Court should realign the parties and permit the Ascend Defendants to open

and close the evidence at trial, currently scheduled for June 2, 2014.

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II. SUPPLEMENTAL UNDISPUTED FACTS

1. CAT Seattle was created on April 1, 2011 as a wholly-owned subsidiary of

Ascend.1

2. At all relevant times, CAT Seattle has been a Delaware limited liability

company.2

3. On August 3, 2011, CAT Seattle purchased the Schick Shadel Hospital in Seattle,

Washington from Duffy I, LP (“Duffy”).3 As part of that transaction, Duffy I, LP (“Duffy”)

purchased 5 percent (5 units of 100) of CAT Seattle from Ascend.4 Ascend kept the other 95

percent of CAT Seattle.5

4. On August 16, 2011, as part of the overall transaction, Duffy assigned its 5

percent interest in Ascend to James P. Graham (“Graham”).6 Graham then immediately assigned

the same 5 percent interest to Mugdock Tavern Investments (“Mugdock”).7 Both of these

assignments state that they were made pursuant to the “Operating Agreement of CAT Seattle,

LLC, dated August 16, 2011.”8

5. On August 16, 2011, the parties, as reflected in the assignments, agreed upon the

Operating Agreement of CAT Seattle, LLC (hereinafter the “CAT Seattle Operating

Agreement”).9 The CAT Seattle Operating Agreement was agreed upon at the same time as the

1
See Second Supplemental Summary Judgment Evidence Appendix (“2d Suppl. MSJ App.”) at 2d Suppl. MSJ
App. 1 ¶ 2.
2
Id.
3
See Original Summary Judgment Evidence Appendix (“Original MSJ App.”) at APP. 012.
4
Id.
5
Id.
6
See 2d Suppl. MSJ App. at 13-14.
7
See id. at 11-12.
8
See id. at 11-14.
9
See id. at 15-62.

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assignments, although it was not signed.10 Under the CAT Seattle Operating Agreement, both

Graham and Dr. Kresch were managers of CAT Seattle.11

6. On June 3, 2012, Ascend, and others, entered into an Agreement and Plan of

Merger with Universal Health Systems (“UHS”).12

7. On July 3, 2012, Ascend emailed Graham a valuation breakdown of the interests

of CAT Seattle being acquired by UHS.13 The email provided that the units held by Mugdock

would be acquired on the same terms and conditions as all of the other units of CAT Seattle that

were being acquired by UHS, including the units held by Ascend.14

8. On August 9, 2012, Graham and Dr. Kresch met in person at Graham’s offices in

Dallas, Texas to discuss the valuation and Ascend’s possible purchase of Mugdock’s 5 percent

interest in CAT Seattle.15 During this meeting, Graham made his audio recordings that have

been the subject of motion practice in this proceeding.16 On the recording, Graham expressly

makes reference to his allegation herein that Ascend, under the original APA, was required to

open a Schick Shadel facility in Texas within 12 months of closing, but opened a facility in name

only without proper compliance with the Schick Shadel model of treatment.17

9. Notwithstanding those allegations, on August 23, 2012, Duffy, CAT Seattle, and

Ascend entered into an Amendment to the APA (“Amendment”).18 On the same day, Mugdock

10
See id.
11
See id. at 25.
12
See Original MSJ App. at APP. 167-249.
13
See 2d Suppl. MSJ App. at 63-64.
14
See id.
15
See id. at 3 ¶ 5.
16
See Audio Recordings contained on CD on filewith the Court in connection with the Ascend Defendant’s
Crime/Fraud Motion to Compel (“Audio Recordings”).
17
See Audio Recording #3 (on file with Court) at 16:22-16:53, 19:20-19:33; 2d Suppl. MSJ App. at 84 (page 13,
lines 12-19; page 15, lines 21-23).
18
See Original MSJ App. at APP. 250-257.

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sold and assigned its 5 percent interest in CAT Seattle to Ascend.19 Under the assignment,

Mugdock received $2,000,000 in consideration, or a $562,000 premium over the amount it was

to get under the UHS merger for those same units.20

10. In October 2012, Ascend and UHS consummated the merger.21

III. ARGUMENT AND AUTHORITIES

A. Plaintiffs’ Breach of Fiduciary Duty Claim Fails as a Matter of Law.

Plaintiffs’ Second Amended Petition alleges as paragraphs 30-32 that CAT Seattle and

Kresch owed fiduciary duties to Duffy, which they violated. See Pls.’ 2d Am. Pet. at ¶¶ 30-32.

Plaintiffs do not allege any actual damages, however. Instead, Plaintiffs seek equitable

disgorgement from of the entire net profit of CAT Seattle that was earned as part of the merger

with UHS. See id. at ¶ 32. In other words, Plaintiffs want this court to exercise its equitable

jurisdiction to seize money one party for the sale of its own assets (not any assets belonging to

Plaintiffs) to compensate for the breach of duty by an entirely different party. That is not equity;

that is theft. As set forth below, this claim is without merit and should be dismissed.

1. Duffy was not owed any fiduciary duties.

Plaintiffs allege: (1) CAT Seattle and Dr. Kresch “owed certain fiduciary duties to Duffy,

the minority shareholder,” and (2) CAT Seattle and Dr. Kresch breached their fiduciary duties to

Duffy. See Pls.’ 2d Am. Pet. ¶ 31 (emphasis added). But Duffy was not a member of CAT

Seattle in 2012, when Ascend bought the last 5 percent of CAT Seattle—Mugdock was. As

explained above, Duffy freely assigned its 5 percent interest in CAT Seattle to Graham, who then

assigned it to Mugdock, all on August 16, 2011. See 2d Suppl. MSJ App. at 11-14. Thus, if

anyone were owed a fiduciary duty when Ascend was planning to merge with UHS (other than,

19
See 2d Suppl. MSJ App. at 66-81.
20
See id.
21
See id. at 2 ¶ 2.

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of course, CAT Seattle), it would have been Mugdock—not Duffy. See, e.g., Auriga Capital

Corp. v. Gatz Props., 40 A.3d 839, 855 (Del. Ch. 2012) (managers of limited liability companies,

by default, owe fiduciary duties to the company and its members).22 Duffy was not a member of

CAT Seattle in 2012 and, thus, was not owed any fiduciary duties. Significantly, Plaintiffs’

Second Amended Petition does not allege a claim of fiduciary duty as to Mugdock. Thus, as

pled, the Court must dismiss the count for breach of fiduciary duty.

2. Plaintiffs improperly want the Court to force CAT Seattle to disgorge $15.5
million for an alleged breach by Dr. Kresch.

Plaintiffs seek disgorgement from the wrong party. Plaintiffs claimed that CAT Seattle

and Dr. Kresch, but not Ascend, owed Duffy fiduciary duties. See Pls.’ 2d Am. Pet. ¶¶ 31-32.

As a matter of law, CAT Seattle does not owe itsmembers and managers fiduciary duties; it’s

the other way around. Thus, if anyone owed a fiduciary duty it was Dr. Kresch, who as a

manager (just like Graham) owed certain default fiduciary duties to CAT Seattle and its

members: Mugdock and Ascend. See, e.g., Auriga Capital Corp., 40 A.3d at 855.

Even assuming arguendo that Dr. Kresch breached those fiduciary duties (which he did

not), Plaintiffs are not seeking any disgorgement from him; instead, Plaintiffs seek disgorgement

of CAT Seattle’s $15.5 million in net profits. See Pls.’ 2d Am. Pet. ¶ 32. However, CAT Seattle

did not owe anyone a fiduciary duty and Plaintiffs certainly do not have any evidence to suggest

that itdid owe such duties. Plaintiffs did not even allege that Ascend owed anyone fiduciary

duties and, therefore, it cannot be forced to disgorge anything. Again, that leaves Dr. Kresch.

But Plaintiffs have no evidence of any unjust enrichment or benefits allegedly received by Dr.

Kresch, much less any evidence that Dr. Kresch personally received $15.5 million. Thus, the

Court should dismiss Plaintiffs’ breach of fiduciary duty claims.

22
As previously mentioned, CAT Seattle is a Delaware limited liability company. See 2d Suppl. MSJ App. at 2 ¶
2. Thus, Delaware law applies to questions of the duties owed.

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3. Plaintiffs have no evidence of causation.

To obtain equitable disgorgement, Plaintiffs must provide a “reasonable approximation”

of what Dr. Kresch “obtained as a result of the alleged breach of fiduciary duty.” Super Future

Equities, Inc. v. Wells Fargo Bank Minn., N.A., No. 3:06-CV-0271-B, 2007 WL 4410370, *17

(N.D. Tex. Dec. 14, 2007) (applying Texas law). In other words, they have to “distinguish

between that which has been legally and illegally obtained.” Allstate Ins. Co. v. Receivable Fin.

Co., L.L.C., 501 F.3d 398, 413 (5th Cir. 2007) (applying Texas law). Here, Plaintiffs have no

evidence of causation between Dr. Kresch’s alleged breach of fiduciary duty and the $15.5

million that it seeks as a remedy.

The only possible theory that Plaintiffs could allege is that “but for” Dr. Kresch’s alleged

breaches of fiduciary duty, Plaintiffs would have prevented the merger with UHS. It is not

enough for Plaintiff to simply allege that it would not have sold its interest in CAT Seattle (for a

premium) because its disgorgement claim has nothing to do with the consideration exchanged

under that agreement. Instead, Plaintiffs want all of the profits from the merger, for all 100

percent of the interests, and, therefore, they must show a causal relationship between the alleged

breach and the merger. Plaintiffs, however, have no evidence that they could have prevented the

merger. Moreover, the evidence readily establishes that they could not have prevented the

merger even assuming they objected because Ascend could have proceeded with the merger

without buying Mugdock out. Section 8.4 of the CAT Seattle Operating Agreement gave

Ascend “drag along” rights that, once invoked, obligated Mugdock to sell its 5 percent interest in

CAT Seattle “on the same terms and conditions, and at the same consideration per Unit” that

Ascend sold its interest to another company.23 Even if Ascend for some reason could not enforce

23
See 2d Suppl. MSJ App. at 33-34. To the extent Plaintiffsargue the CAT Seattle Operating Agreement is
unenforceable due to the lack of their signatures, the CAT Seattle Operating Agreement was part of a single

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its drag-along rights, Delaware law provides that mergers can be approved by the member who

“own[s] more than 50 percent of the then current percentage . . . in the profits” of CAT Seattle.

See 6 Del. Code § 18-209(b). Because Ascend owned 95 percent of CAT Seattle, Ascend could

have easily approved the merger without Mugdock’s consent. Consequently, even if Mugdock

objected to the merger, it could not have prevented the merger. Thus, Dr. Kresch’s alleged

breaches of fiduciary duty could not have been a “but for” case of the alleged unjust enrichment

that Plaintiffs seek to disgorge.

4. Plaintiffs have no evidence of an actual breach of duty.

Finally, the Court should dismiss Plaintiffs’ fiduciary duty claim because there is no

evidence of any breach. It is axiomatic that before Dr. Kresch can breach his fiduciary duties as

alleged in the pleadings, Plaintiffs must be able to establish that the fiduciary duties he did owe

extended to the matters alleged to be a breach. Under Delaware law, Plaintiffs cannot establish

this element of their claim.

As a default rule in Delaware, managers of limited liability companies owe duties of care

and loyalty. See Auriga Capital Corp., 40 A.3d at 855; Feeley v. NHAOCG, LLC, 62 A.3d 649,

660 (Del. Ch. 2012). Plaintiffs did not allege that Dr. Kresch breached his duty of care. See

transaction documented by several other writings that were all fully executed. See, e.g., id. at 5-13.The CAT
Seattle Operating Agreement is thus enforceable under the multiple writings rule. See, e.g., Jones v. Kelly, 614
S.W.2d 95, 98 (Tex. 1981) (“The general rule is that separate instruments or contracts executed at the same
time, for the same purpose, and in the course of the same transaction are to be considered as one instrument, and
are to be read and construed together.”). Further, the Assignment to Transfer Units between Mugdock and
Ascend, dated August 23, 2012, makes reference and specifically incorporates the CAT SeattleOperating
Agreement. See 2d Suppl. MSJ App. at 66. Such an incorporation makes the CAT Seattle Operating
Agreement binding. See, e.g., In re D. Wilson Const. Co., 196 S.W.3d 774, 781 (Tex. 2006) (“Innumerable
contracts are consummated every day in Texas that incorporate other documents by reference. A contractual
term is not rendered invalid merely because it exists in a document incorporated by reference.”). Moreover,
Plaintiffs and Graham clearly acted as if the CAT Seattle Operating Agreement were in effect and acted as if
they all, at various times, were members of CAT Seattle. As a result, they are estopped from disclaiming the
enforceability of the LLC Agreement. See, e.g., Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 305 (Tex. 2006)
(person who seeks by claim to derive direct benefit from contract may be equitably estopped from avoiding
clauses in such contract even if person is not a signatory).Finally, Delaware clearly states that limited liability
company agreements are enforceable even if they are oral. See 6 Del. Code § 18-101(7).

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Pls.’ 2d Am. Pet. ¶¶ 31-32. Instead, Plaintiffs allege that Dr. Kresch breached his duty of

loyalty. While plaintiff alleges breach of the duty of good faith and honesty, those are not

independent duties under Delaware law, but instead components of the duty of loyalty. See, e.g.,

Stone v. Ritter, 911 A.2d 362, 369-70 (Del. 2006); Auriga Capital Corp., 40 A.3d at 855; Feeley

v. NHAOCG, LLC, 62 A.3d 649, 660 (Del. Ch. 2012). Stated simply, the duty of loyalty, in all

of its forms, prevents a manager or managing member from “receiv[ing] a personal benefit not

shared by all shareholders.” See, e.g., In re Walt Disney Co. Deriv. Lit., 907 A.2d 693, 751 (Del.

Ch. 2005), aff’d, 906 A.2d 27 (Del. 2006).

Plaintiffs’ allegation of breach do not give rise to a claim for breach of the duty of

loyalty, especially given the undisputed evidence that Mugdock received a substantial premium

on its shares of CAT Seattle. For example, Plaintiffs allege that Dr. Kresch did not tell Graham

(who was not a member of CAT Seattle and thus was not owed a fiduciary duty to begin with)

about the UHS merger. See id. at ¶ 32. In July 2012, months before the merger closed, Dr.

Kresch and his associate, Steve Page (“Page”) sent Graham the valuation of Mugdock’s 5

percent under the merger. See 2d Suppl. MSJ App. at 2 ¶ 4, 63-64. The valuation valued

Mugdock’s minority interest the exact same as Ascend’s majority interest. The parties discussed

this valuation in detail during the felonious August 9, 2012 meeting. See Audio Recording # 3

(on file with the Court) at 10:41-13:12; 2d Suppl. MSJ App. at 83 (page 9, lines 1-25 through

page 11, lines 1-6). And, ultimately, Mugdock sold its5 percent on August 23, 2012, months

before the UHS merger closed, for a substantial premium. See 2d Suppl. MSJ App. at 66.

Plaintiffs cannot seriously maintain that Dr. Kresch breached his duty of loyalty by engaging in

conduct where, at first, Mugdock’s interests were treated the exact same as all other interest and,

ultimately, Mugdock sold its interest on far better terms than any other members.

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Nor did Dr. Kresch misrepresent the value of Mugdock’s 5 percent interest in CAT

Seattle. As required by the CAT Seattle Operating Agreement, Ascend offered to purchase

Mugdock’s 5 percent interest on the same terms and conditions and for the same consideration

per unit. See 2d Suppl. MSJ App. at 2 ¶¶ 3-4, 63-64. UHS offered to pay Ascend a purchase

price calculated as 9.7 times Ascend’s earnings before interest, taxes, depreciation, and

amortization (“EBITDA”). See 2d Suppl. MSJ App. at 2 ¶¶ 3-4, 63-64. As part of the valuation

of Ascend as an enterprise, the constituent parts of Ascend, including Schick Shadel, were given

EBITDA valuations. See 2d Suppl. MSJ App. at 2 ¶¶ 3-4, 63-64. Ascend then offered Mugdock

$1,338,660, which was 5 percent of Schick Shadel’s value, for Mugdock’s 5 percent interest in

CAT Seattle. See 2d Suppl. MSJ App. at 2 ¶¶ 3-4, 63-64. Thus, Ascend offered to buy

Mugdock’s units for the same consideration per unit that Ascend would receive from UHS. See

2d Suppl. MSJ App. at 2 ¶¶ 3-4, 63-64. This apparently not being enough (despite the fact that

Mugdock would have more than doubled its investment in less than a year), Mugdock

successfully pushed for more, ultimately agreeing to sell its 5 percent interest for $2 million. See

2d Suppl. MSJ App. at 66. As a result, Mugdock was paid a premium over what Ascend itself

received from UHS. This is far from the classic example of a breach of loyalty, where a

manager “receives a personal benefit not shared by all shareholders.” See, e.g., In re Walt

Disney, 907 A.2d at 751.

Finally, Plaintiffs’ third accusation is simply a fraud allegation repackaged as a breach of

fiduciary duty claim, but one that does not implicate the duty of loyalty. “A plaintiff may not

recast his claim in the language of another cause of action to . . . circumvent existing case law

contrary to the plaintiff’s position.” Crowder v. Am. Airlines, Inc., No. 05-99-00661-CV, 2000

WL 471520, *2 (Tex. App.—Dallas April 25, 2000, pet. denied) (collecting cases). Plaintiffs

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claimed that Mugdock relied on Dr. Kresch’s alleged promise not to mix Schick Shadel patients

with the rest of the Mayhill patients in agreeing to sell the 5 percent interest. See Pls.’ 2d Am.

Pet. ¶¶ 31-32. This is nothing more than saying Plaintiffs relied on a misrepresentation to their

detriment, which is an allegation of fraud, not breach of fiduciary duty, and certainly not a

breach of the duty of loyalty. Thus, Plaintiffs should not be allowed to recast their fraud claim—

for which they have no damages—into a wide-ranging breach of fiduciary claim that they

contend entitles them to millions.

B. The Court Should Dismiss Plaintiffs’ Request for Specific Performance.

Plaintiffs, in contract (and presumably in tort) seek specific performance of the

obligations in section 16.2 of the APA to follow certain voluminous protocol relating to the

managing of the treatment facilities. Specific performance is not appropriate for two reasons.

First, Plaintiffs have an adequate remedy at law for an alleged breach of that provision: actual

damages, if any. “A fundamental rule of equity is that a court will not grant specific

performance unless it is shown that no adequate remedy exists at law.” Am. Housing Resources,

Inc. v. Slaughter, 397 S.W.2d 13, 15 (Tex. App.—Dallas 1980, writ ref’d n.r.e.) (collecting

cases). Plaintiffs’ request for specific performance of section 16.2 is nothing more than a

backdoor request for a permanent mandatory injunction to maintain the chemical aversion

therapy protocols without any allegation, much less proof, of irreparable harm.

Second, unlike section 16.1 of the APA, which was satisfied before the August 3, 2012

deadline, section 16.2 concerns the maintenance of chemical aversion therapy protocols for an

indefinite period of time. “Among the factors to be considered” when deciding whether to grant

specific performance are “whether long-continued supervision by the court will be required,

whether complete relief can be rendered by the remedy sought, and whether if the remedy sought

is granted it can be adequately enforced.” Id. at 15. Ordering the Ascend Defendants (really, at

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this point, UHS, a nonparty) to indefinitely maintain the chemical aversion therapy protocols to

Graham’s liking would require constant and intrusive monitoring, supervision, and judicial

intervention by the Court into the day-to-day medical decisions made by physicians working at

the Schick Shadel facilities. “It is a settled principle that a court of equity . . . will not decree a

party to perform a continuous series of acts extending through a long period of time, requiring

constant supervision by the court, . . .” United Coin Meter Co. v. Johnson-Campbell Lumber

Co., 493 S.W.2d 882, 888 (Tex. Civ. App.—Fort Worth 1973, no writ) (citing 81 C.J.S., Specific

Performance § 75)). Consequently, the Court should grant Defendants summary judgment as to

Plaintiffs’ claims for specific performance.

C. Plaintiffs’ Fraud Claims are Barred by the Doctrine of Ratification.

As explained in the MSJ, section 16.1 of the APA required CAT Seattle to open a Schick

Shadel unit in Texas by August 3, 2012. CAT Seattle in fact opened the Schick Shadel unit at

Mayhill Hospital in Denton, Texas on or around July 9, 2012. By the time the parties entered

into the Amendment to the APA, Plaintiffs and Graham were griping and were fully aware of the

supposed fraud surrounding the opening of the Mayhill unit. During the August 9, 2012

recorded meeting, Graham repeatedly claimed that the Mayhill unit was not a legitimate Schick

Shadel facility. See Audio Recording #3 (on file with Court) at 16:22-16:53, 19:20-19:33; 2d

Suppl. MSJ App. at 84 (page 13, lines 12-19; page 15, lines 21-23).

Despite that position, and with full knowledge of any alleged misrepresentation made

more than a year earlier, Graham caused Plaintiffs to enter into the Amendment and to sell

Mugdock’s 5 percent interest in CAT Seattle for around $2 million. See 2d Suppl. MSJ App. at

66. The Amendment left section 16.1 alone; the parties made changes to section 16.2 (which

principally dealt with the chemical aversion therapy protocols) and to provisions relating to the

retention of employees until the consummation of the UHS merger. See id. Thus, any claims for

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fraud relating to Plaintiffs’ “in name only” section 16.1 theory, e.g., the Ascend Defendants

promised to comply with 16.1 with no intention to do so, was ratified by the Amendment to the

APA and the sale of Mugdock’s 5 percent of CAT Seattle. See, e.g., Chambers v. Equity Bank,

SSB, 319 S.W.3d 892, 897-902 (Tex. App.—Texarkana 2010, no pet.); Motel Enters., Inc. v.

Nobani, 784 S.W.2d 545, 547 (Tex. App.—Houston [1st Dist.] 1990, no writ).

III. CONCLUSION

Wherefore, CAT Seattle, LLC, Ascend Health Corporation, and Dr. Richard Kresch

respectfully request that the Court grant their Second Amended Motion for Summary Judgment

and No-Evidence Motion for Summary Judgment on the grounds stated therein, and as provided

in this supplement, dismiss with prejudice all of Plaintiffs’ claims against these defendants,

realign the parties for trial, and grant the Ascend Defendants such other and further relief, at law

or in equity, to which they may be justly entitled.

Respectfully submitted,

/s/ Victor D. Vital
Victor D. Vital
Texas State Bar No. 00794798
vitalv@gtlaw.com
Nicholas A. Sarokhanian
Texas State Bar No. 24075020
sarokhaniann@gtlaw.com
GREENBERG TRAURIG, LLP
2200 Ross Avenue, Suite 5200
Dallas, Texas 75201
214-665-3600 - Telephone
214-665-3601- Facsimile

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CERTIFICATE OF SERVICE

The undersigned certifies that a true and correct copy of the foregoing document was served on
the following counsel of record pursuant to the Texas Rules of Civil Procedure by electronic
mail on May 9, 2014:

Charles C. Frederiksen
J. Randal Brown, II
Glast, Phillips & Murray, P.C.
14801 Quorum Drive, Suite 500
Dallas, Texas 75254

/s/ Nicholas A. Sarokhanian
Nicholas A. Sarokhanian

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2d Suppl. MSJ App. 1

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DEFENDANTS
exhibitsticker.com

EXHIBIT

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2d Suppl. MSJ App. 10
Defendants/Counter-Plaintiffs’ First Supplement to Their Motion for Summary Page 24
Judgment and No-Evidence Motion for Summary Judgment
DEFENDANTS
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EXHIBIT

2d Suppl. MSJ App. 11
Defendants/Counter-Plaintiffs’ First Supplement to Their Motion for Summary Page 25
Judgment and No-Evidence Motion for Summary Judgment
2d Suppl. MSJ App. 12
Defendants/Counter-Plaintiffs’ First Supplement to Their Motion for Summary Page 26
Judgment and No-Evidence Motion for Summary Judgment
DEFENDANTS
exhibitsticker.com

EXHIBIT

26
2d Suppl. MSJ App. 13
Defendants/Counter-Plaintiffs’ First Supplement to Their Motion for Summary Page 27
Judgment and No-Evidence Motion for Summary Judgment
2d Suppl. MSJ App. 14
Defendants/Counter-Plaintiffs’ First Supplement to Their Motion for Summary Page 28
Judgment and No-Evidence Motion for Summary Judgment
DEFENDANTS
exhibitsticker.com

Case Info

Judge

TILLERY, DALE Track Judge’s New Case

Case No.

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Document Filed Date

May 09, 2014

Case Filing Date

November 01, 2012

County

Parties

ASCEND HEALTH CORPORATION Defendant
CAT SEATTLE LLC Defendant
DUFFY I, LP Plaintiff
FREDERIKSEN, CHARLES C Attorney for the Plaintiff
KRESCH, RICHARD Defendant
LAVIGNE, CHRISTOPHER M Attorney for the Defendant
MUGDOCK TAVERN INVESTMENTS Plaintiff
SAROKHANIAN, NICHOLAS A Attorney for the Defendant
VITAL, VICTOR D Attorney for the Defendant
Charles Floyd Attorneys for Defendants
John Brown Attorneys for Plaintiffs

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Motion,Ex Parte: MUGDOCK TAVERN INVESTMENTS, et al vs. CAT SEATTLE LLC, et al

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Case Info

Parties