AdventHealth Reaches Settlement For COVID-19 PPE Fraud Claims
Wednesday, March 3, 2021
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
On February 23, 2021, a federal court in Orlando, Florida, ruled that Adventist Health System Sunbelt (now known as AdventHealth, and which owns Florida Hospital, among others) could pursue claims it has over a bad $57.5 million deal to buy personal protective equipment (PPE). The defendants whom the hospital system is suing include Tomax Capital Management, Inc. ("Tomax"), a California corporation; a California attorney and his law firm; and others.
U.S. District Judge Paul G. Byron said the hospital system provided sufficient evidence that Tomax failed to deliver the promised PPE and then conspired to keep the $2 million which was not returned.
The PPE Contract.
According to the complaint in the case, the contract was for AdventHealth to purchase 10 million 3M N95 ventilator masks, according to the May 2020 complaint. Under the terms of the contract, the hospital was to pay a total of $57.5 million for 10 million 3M N95 masks to protect its workers during the Coronavirus pandemic. AdventHealth paid the $57.5 million into a California lawyer's trust account. The 10 million masks were to be delivered to AdventHealth's hospital in Orlando, Florida, by April 18, 2020. However, the masks never arrived.
Now, I just have to jump in and point out something. I don't claim to have ironclad proof of it, but I have seen and read enough about 3M N95 masks on television and in the press while trying to purchase my own. I may be totally off on this figure, but I seem to remember around the beginning of the Coronavirus pandemic that 3M was only manufacturing approximately 1 million masks a month. So where someone would be able to come up with 10 million of these specific masks is mind-boggling to me. Let's just say that this is my own opinion.
When the hospital system requested a refund of the $57.5 million it had paid, it claims it was only refunded $55.5 million, with $2 million missing in action. According to the complaint, AdventHealth never saw the remaining $2 million despite assurance from the attorneys involved in the deal that AdventHealth would get it back. Hence, the present law suit.
I mean, if you can't trust an attorney nowadays, who can ya' trust?
A Civil Conspiracy?
In its suit, AdventHealth makes various claims of breach of contract, conversion, and civil conspiracy and requests actual damages, punitive damages, and prejudgment interest. The conspiracy would involve the allegation that the attorney and law firm conspired with Tomax and others to deprive AdventHealth of the $2 million. Because AdventHealth alleged that it suffered damages in Florida, it was able to bring its case in the federal court here in Orlando.
Read the complaint filed in the U.S. District Court for the Middle District of Florida for more details.
Granted, $2 million isn't a lot of money to some people, but it was obviously enough money to get these Defendants sued in federal court.
Judge Sides With the Hospital System's Position on Motion to Dismiss Complaint.
The federal court judge denied a motion to dismiss the complaint filed by Tomax. In his order, the judge stated: "Plaintiff sufficiently pleads facts supporting the existence of a civil conspiracy that caused injury in Florida." In addition to allowing the claims of the hospital system to move forward, the judge also ruled that the court has authority to exercise personal jurisdiction over the attorney and law firm that were involved, under the state's long-arm statute. To obtain more details, read the judge's order denying the motion to dismiss.
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AdventHealth Reaches a Deal.
U.S. District Judge Paul G. Byron recently granted the parties' joint motion to stay the case until October 12, 2021, when Tomax and principal Yehoram Tom Efrati's final payment to AdventHealth is due under the agreement. You can read the order in full here.
PPE a "Hot Issue."
In another recent pandemic-related case, OSHA began issuing fines to health care systems over PPE violations such as lack of proper equipment for their employees. We have also read a number of reports about companies and individuals being fined and injunctions being obtained by the Federal Trade Commission and the Food and Drug Administration over phony PPE being sold to Americans over the Internet.
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Hale, Nathan. "AdventHealth's Fraud Claim Over $57M PPE Deal Advanced." Law360. (February 23, 2021). Web.
Bolado, Carolina. "AdventHealth Sues Attorney Over Failed $57.5M Masks Deal." Law360. (May 29, 2020). Web.
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law; he is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave. Suite 1000, Altamonte Springs, FL 32714, Phone: (407) 331-6620 Toll-Free: (888) 331-6620.
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