David Rene Dugas, M.D.; W. J. Liles, M.D.; Claude B. Minor, Jr., M.D.; Benjamin M. Stage, M.D.; Randolph H. Taylor, M.D.; and Edward Worley, II, M.D. v. Mike Breard, Rhonda Haygood, and P. Gary Jones, M.D. (Affirmed)

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Judgment rendered October 6, 2010. Application for rehearing may be filed within the delay allowed by art. 2166, La. C.C.P. No. 45,666-CA COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA ***** DAVID RENE DUGAS, M.D., W. J. LILES, M.D., CLAUDE B. MINOR, JR., M.D., BENJAMIN M. STAGE, M.D., RANDOLPH H. TAYLOR, M.D., AND EDWARD WORLEY II, M.D. Plaintiffs-Appellants versus MIKE BREARD, RHONDA HAYGOOD, AND P. GARY JONES, M.D. Defendants-Appellees ***** Appealed from the Fourth Judicial District Court for the Parish of Ouachita, Louisiana Trial Court No. 2009-1670 Honorable John R. Harrison, Judge ***** COOK YANCEY, KING & GALLOWAY By: Bernard S. Johnson Counsel for Appellants CRAWFORD & JOYCE By: Brian E. Crawford BAKER, DONELSON, BEARMAN CALDWELL & BERKOWITZ, PC By: Errol J. King, Jr. Layna S. Cook Counsel for Appellees ***** Before BROWN, PEATROSS and DREW, JJ. DREW, J.: Plaintiffs, six former members1 of the Board of Managers of Monroe Surgical Hospital, LLC ( the hospital ), have brought this quo warranto2 proceeding against three defendants3 who now serve on the hospital s Board of Managers. The trial court properly limited testimony to only the issues relevant to this extraordinary writ, and denied any relief to the plaintiffs. We agree with the ruling of the trial court, and annex its Ruling on Motion Remaining Issue as Appendix A to this opinion, adopting the excellent reasoning reflected therein. FACTS The hospital provided medical services in the Monroe area, being established as a limited liability corporation ( LLC ). The juridical entity has three classes of stock: ¢ ¢ ¢ Class A Shareholders from the medical field; Class B Nonmedical shareholders; and Class C Shares reserved for other hospitals.4 This chronology may help put the facts into context: ¢ April 1, 2006. The hospital, in order to secure needed funding, approves a Consent Resolution, which, among other things, approves the granting to Vantage Health Plan, Inc., an irrevocable right to assume voting control of the hospital, and is signed by seven of the eight managers, including three of the current plaintiffs/appellees. The resolution was also signed by 34 of the 44 1 David Rene Dugas, M.D.; W. J. Liles, M.D.; Claude B. Minor, Jr., M.D.; Benjamin M. Stage, M.D.; Randolph H. Taylor, M.D.; and Edward Worley II, M.D. 2 C.C.P. Art. 3901. Definition Quo warranto is a writ directing an individual to show by what authority he claims or holds public office, or office in a corporation, or directing a corporation to show by what authority it exercises certain powers. Its purpose is to prevent usurpation of office or of powers. 3 Mike Breard, Rhonda Haygood, and P. Gary Jones, M.D. 4 At all relevant times, St. Francis Hospital owned these issued shares. Class A (77%) member/physicians, including all six current plaintiffs/appellees.5 ¢ April 1, 2006. Pursuant to the Consent Resolution, the hospital grants a three-year Irrevocable Membership Interest Option to Vantage,6 in exchange for, among other things, $900,000, subject to a credit for any case management fees paid to the hospital. ¢ April 1, 2006 August 20, 2008. Under management of the former board, the hospital operates for 28 months, with the business entity receiving far more than the total $900,000 from Vantage.7 ¢ August 20, 2008. Within the three-year option period, Vantage forwards written notice to the hospital, advising that it was triggering its rights to obtain voting control of the hospital. ¢ August 25, 2008. At a special meeting of the former board, attended by seven of the eight former board members, various actions are taken, without a dissenting vote,8 in furtherance of an orderly transition of hospital control to Vantage, immediately after which meeting all board members, except one,9 resign. ¢ August 28, 2008. Vantage hires Dr. Garland McCarty as the new CEO of the hospital. ¢ September 10, 2008. At a subsequent meeting of the board,10 Dr. McCarty is selected/appointed to the board by Dr. Yarbrough, and then five other members of the board are selected by Dr. Yarbrough and Dr. McCarty Dr. Robert Raulerson, Keith McRee, and the three defendants/appellees herein, 1. Dr. P. Gary Jones, 2. Mike Breard, and 3. Rhonda Haygood. 5 See Appendix B. 6 In order to secure the option to obtain control of the hospital, Vantage paid $500,000 immediately and agreed to pay $400,000 more if it exercised its option, less credits. Duly authorized by the Consent Resolution, the option was signed by then-CEO Allen Daugherty, on behalf of the hospital, and by P. Gary Jones, M.D., on behalf of Vantage. 7 In actuality, by the time Vantage exercised its option on August 25, 2008, it had paid approximately $2.5 million into the hospital. 8 One board member abstained on some of the resolutions. 9 Dr. David Yarbrough. 10 Consisting of only one person at the meeting s inception, Dr. Yarbrough. 2 ¢ May 16, 2009. Eight months later, the litigation commences, including this quo warranto suit. DISCUSSION A. Did the trial court lawfully grant the motion in limine, allowing only evidence germane to the propriety of the election process itself?11 Plaintiffs argue that this matter must be reversed either because the trial court refused to consider the Consent Resolution, or because the trial court assumed it to be binding. We disagree either way. We find that the trial court sagely granted the limitation sought by defendants. We concur in this ruling, relying upon the consistent reasoning of two of our cases, wherein we also approved the limitation of the inquiry to the narrow issue allowed by quo warranto. See Smith v. Cannon, 43,964 (La. App. 2d Cir. 12/28/09), 2 So. 3d 1227; and Morris v. Thomason, 28,238 (La. App. 2d Cir. 4/8/96), 672 So. 2d 433. Plaintiffs are sophisticated individuals, with various educational and professional achievements. In response to the Vantage takeover, the former board cooperated in the transition, resigned as managers, decided against or did not consider a derivative action, and then, much later, three of the former board members12 filed this quo warranto proceeding. Hindsight is, of course, 20/20, but had the plaintiffs desired to protest the adoption of the Consent Resolution,13 an earlier derivative action may have been appropriate for a more generalized and expansive inquiry into 11 The authority of the three named defendants to hold office on the Board of Managers. 12 Along with three former Class A Members. 13 Each plaintiff voted to approve the Consent Resolution in 2006. 3 any contested actions. Instead, the plaintiffs each acquiesced in and to the terms of the Consent Resolution. Now the plaintiffs complain about the very eventuality they each specifically approved, as a board member or a Class A stockholder, or both. In reliance upon the Consent Resolution, Vantage has paid millions of dollars, and we are hesitant to deal with more than is on our plate now, viz., the narrow quo warranto inquiry. We find that the trial court properly found that the defendants were lawfully elected as board members by majority vote of the remaining board member(s), as per Section 6.02 (f) of the Operating Agreement, which specifically calls for filling any vacancies on the Board of Managers by a majority vote of the managers. B. Did the terms of the Operating Agreement prohibit the adoption of the April 2006 Consent Resolution, which resolution facilitated the replacement of the former membership of the Board of Managers? Three years after Vantage s initial $500,000 monetary investment, in April of 2006, and long after Vantage had poured another $2 million into the hospital, plaintiffs filed this suit, eight months after participating in their last hospital board meeting. The actual goal here is apparently to seek to undo the Vantage takeover, in effect claiming that their own acquiescence in the terms of the Consent Resolution, and indeed their own actions at their last board meeting, were unlawful. They can t have it both ways. All told, Vantage had the legal right to control of the hospital14 through its Option, which was approved by the hospital. A deal is a deal. 14 $500,000 up front, to keep the hospital afloat, and $400,000 (less credits) upon exercising the option. 4 On August 25, 2008, the former board, which included three of these plaintiffs, specifically approved the right of Vantage to exercise special voting rights of the Class C members, in order to appoint a new board.15 When the smoke cleared that day, only one board member was left, Dr. David Yarbrough, who had a hospital to run. The board positions urgently needed filling, and the remaining manager did so, pursuant to the Operating Agreement.16 We find that the election/appointment of the three defendants to the Board of Managers was valid and lawful, in accordance with the Operating Agreement, as well as the resolutions passed at the August 25, 2008, board meeting. We have reviewed the hospital s election procedures, all of which appear necessary and reasonable, considering the Hospital Operating Agreement, as modified by the Consent Resolution,17 and considering the dire circumstances18 in which the hospital found itself in the spring of 2006. C. Is the management of the LLC lawfully reposed in the present management? What the former Board of Managers did on August 25, 2008, was to acquiesce in the natural end product of the contingent reorganization of the hospital approved long before, when the hospital desperately needed an 15 The other three plaintiffs signed the Consent Resolution as Members of the hospital. 16 Any vacancy in any Manager position may be filled by a majority vote of the Managers[.] 17 All former members of the Board of Managers signed the Consent Resolution, in one capacity or another. 18 The hospital was apparently facing imminent bankruptcy, due to deteriorating finances. 5 infusion of capital in order to keep the doors open. The new managers were selected in the same manner as always, by a majority vote of the managers, in accordance with the Operating Agreement. Testimony by the former CEO, Alan Daughtery, indicated that this same process had always been followed. We find no error in the proceedings below. We affirm in all respects, at the cost of appellants. DECREE The judgment of the trial court is AFFIRMED, at the cost of plaintiffs. 6 APPENDIX A APPENDIX B Signatories to Consent Resolution - Early April, 2006 Name Serving as one of 8 Managers at the time? Signed as Manager? Consent Resolution signed by 7 of 8 former managers. Signed as Class A M ember? 34 of 44 signed. Now a Plaintiff? Total of 6 Plaintiffs. Consent Resolution signed by all 6. Dr. Minor, Plaintiff Yes No Yes Yes Dr. Marx Yes Yes Yes Not a Plaintiff. Dr. Taylor, Plaintiff Yes Yes Yes Yes Dr. Barr Yes Yes Yes Not a Plaintiff. Dr. Yarbrough Yes Yes Yes Not a Plaintiff. Dr. Dugas, Plaintiff Yes Yes Yes Yes Dr. Stage, Plaintiff Yes Yes Yes Yes Mr. Daugherty, CEO Yes Yes Not an A Member. Not a Plaintiff. Dr. Liles, Plaintiff No Not a Manager. Yes Yes Dr. W orley, Plaintiff No Not a Manager. Yes Yes 34/44 Class A Members (77%) Signed.

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