Prospect Medical sues Yale New Haven over stalled acquisition

Los Angeles-based Prospect Medical Holdings is suing Yale New Haven Health, demanding that the Connecticut health system honor its contractual obligations to acquire Eastern Connecticut Health Network and Waterbury Hospital.

Prospect Medical Holdings filed the lawsuit June 6 in Connecticut Superior Court alleging that Yale New Haven has breached its acquisition agreement with Prospect by failing to deliver the agreed-upon purchase price and by not making reasonable best efforts to complete the transaction of Waterbury (Conn.) Hospital and Manchester-based Eastern Connecticut Health Network. 

According to the lawsuit, which was obtained by Becker's, instead of moving forward with the acquisition, Prospect alleges that Yale New Haven has actively worked to prevent the closing of the transaction in hopes of renegotiating the purchase price. 

Prospect alleges that this behavior violates the Connecticut Unfair Trade Practices Act and breaches confidentiality agreements. The lawsuit also accuses Yale New Haven of failing to act in good faith throughout the dealings.

Prospect is seeking damages of at least $435 million.

"Our primary purpose in filing this lawsuit is to hold YNHHS to its binding promise to acquire these critically important safety net hospitals and maintain YNHHS's stated commitment to ensuring the hospitals' continuing ability to serve their communities,'' Von Crockett, co-CEO of Prospect Medical Holdings, said in a news release shared with Becker's. "This transaction is in the best interest of these communities and is supported by our physicians, nurses, caregivers and elected officials." 

Yale New Haven signed a deal in November 2022 to acquire the hospitals but has been trying to get out of the deal. 

In March, Yale New Haven sued Prospect Medical to terminate the agreement with the organization over the acquisition of the hospitals. In that lawsuit, Yale New Haven alleged that Prospect Medical breached its contract by failing to pay rent and taxes on time, allowing the hospitals to deteriorate. Additionally, Yale New Haven accused Prospect of engaging in irresponsible financial practices and driving away physicians and vendors.

"Yale New Haven Health stands by our complaint, which outlines Prospect's numerous violations of our Asset Purchase Agreement through serious mismanagement," a spokesperson for Yale New Haven told Becker's. "The lawsuit filed by Prospect is a clear attempt to shift attention away from the for-profit, California-based company's mismanagement of their Connecticut facilities and neglect of the communities who entrusted them with their care. We are prepared to defend ourselves against this suit while pursuing our own litigation to the end."

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