ST. LOUIS — A federal judge has denied a motion for summary judgment filed by two Missouri property companies in a dispute involving leases for two skilled nursing facilities, finding that genuine issues of material fact remain concerning allegations that the defendants were fraudulently induced to enter into the agreements.
U.S. District Judge Henry Edward Autrey issued the order Sept. 22 in the U.S. District Court for the Eastern District of Missouri. The case was brought by Siro Prop Oakwood and Siro Prop Big River against Bermuda Drive Healthcare, Cedars Court Healthcare, Vertical Health Services and William Miller. The plaintiffs alleged the defendants breached two leases and two guarantees by failing to meet their obligations, including paying rent.
The dispute centers on two skilled nursing facilities. Big River owned the Cedar Hill Property.
On June 1, 2023, Cedars Court entered into a five-year lease for the property and operated it as Arbor View Nursing and Rehabilitation. The lease called for base rent of $80,000 per month, in addition to responsibility for utilities and real estate taxes, a 5% late charge on unpaid amounts and 10% interest on delinquencies. Vertical Health Services signed a guaranty the same day agreeing to guarantee Cedars Court's obligations under the lease.
Oakwood owned the second property, located in Normandy in St. Louis County. Bermuda Drive Healthcare entered into a five-year lease for that property on June 1, 2023, to operate Amberwood Estates Nursing and Rehabilitation.
The lease required $90,000 in monthly base rent, with Bermuda also responsible for utilities and real estate taxes, along with a 5% late charge and 10% interest on delinquent amounts. Vertical Health Services also guaranteed Bermuda's obligations under that lease.
The defendants did not dispute that the leases and guaranties were executed. Instead, they argued they were fraudulently induced to enter into the agreements by representations made by Samuel Goldner, who signed the leases as an authorized representative for the plaintiffs.
The defendants alleged Goldner made false statements and concealed material information in an effort to induce William Miller, Vertical Health Services and the operators to enter into the leases, guaranties and operation transfer agreements.
Among their allegations, the defendants claimed Goldner misrepresented the cash flow of facilities transferred to Vertical Health Services and its companies, including Amberwood and Arbor View.
They alleged Goldner represented that the facilities would generate enough cash flow to allow the companies to timely pay rent, but that he knew the represented cash flow would not materialize.
The defendants also alleged Goldner concealed that his back office was no longer providing billing services and that he and the plaintiffs had stopped filing Medicare cost reports, which they said resulted in delays in receiving payments from Medicaid, Medicare and other payors.
The defendants further alleged Goldner concealed plans not to comply with the operation transfer agreements or pay debts incurred by the prior operators. According to the allegations outlined in the court's order, Vertical Health Services was forced to assume hundreds of thousands of dollars in debts that the defendants said were the responsibility of Goldner and his companies, further affecting their cash flow.
The defendants also alleged that Goldner misrepresented Medicaid payment rates for the facilities. According to their claims, Goldner told Miller that the Medicaid payment rates at Amberwood and Arbor View would collectively provide more than $600,000 above the amounts the facilities were actually expected to receive.
Additional allegations concerned the physical condition and capacity of the facilities. The defendants claimed Goldner represented that Arbor View had 150 beds and Amberwood had 115 beds.
They alleged that after taking over the facilities, they discovered more than 100 beds were missing and that the facilities had enough equipment and furniture to properly accommodate only about 100 residents rather than the 265 residents represented.
They also alleged that some of the equipment observed during inspections was rented or being repossessed and that Goldner did not disclose that information.
The defendants also alleged that Goldner concealed latent defects, including roof repairs that were not apparent during a visual inspection. They said Goldner emphasized the need for expedited due diligence because of the circumstances surrounding the facilities and warned of risks to residents if the facilities were shut down or taken over by regulators.
According to the defendants, when Miller expressed concerns about the abbreviated due-diligence process, Goldner assured him that the information provided was accurate and said he would make concessions if unexpected issues arose.
Those alleged concessions included allowing rent to be paid later, paying less rent than required under the leases or applying offsets against rent.
In considering the summary judgment motion, the court applied the standard under Federal Rule of Civil Procedure 56, which permits summary judgment when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law.
The court explained that the party seeking summary judgment initially bears the burden of establishing that no genuine issue of material fact exists.
Autrey concluded that the statements at issue were representations of fact rather than opinions and were specific statements about existing circumstances rather than predictions about the future.
The court also found evidence from which a reasonable jury could determine that Goldner may have led the defendants to believe he would support changes to payment arrangements if the information he provided proved inaccurate.
The court said there was also evidence that Goldner knew the information he provided was not truthful, noting his ownership and landlord relationship with the properties.
The court rejected the plaintiffs' argument that a declaration from Miller relied on inadmissible hearsay, explaining that the declaration described what Goldner allegedly told Miller to induce him to enter into the leases, guaranties and operation transfer agreements rather than being offered to establish the truth of those statements.
Ultimately, the court found the case could not be treated simply as a dispute over unpaid rent. The defendants contend that the alleged fraudulent inducement affects their obligations under the leases and guaranties, while the plaintiffs sought summary judgment on their claims.
Because genuine issues of material fact remain disputed, the court determined that judgment as a matter of law was not appropriate at this stage. Autrey therefore denied the plaintiffs' motion for summary judgment.
U.S. District Court for the Eastern District of Missouri case number: 4:24-cv-01035
