DMC SURES MCLAREN HEALTH OVER KARMANOS ACQUISTION

Story first appeared on CrainsDetroit.com.

Detroit Medical Center has filed a lawsuit to effectively block the planned acquisition of Barbara Ann Karmanos Cancer Institute by Flint-based McLaren Health Care Corp.

In a filing late Friday in Oakland County Circuit Court, the DMC asked Judge Wendy Potts to grant the eight-hospital for-profit system a permanent injunction to prevent McLaren and Karmanos from completing “any clinical or other affiliation” that would interfere “with the DMC’s agreements (that converts) to its own benefit the DMC’s exclusive affiliate and brand – Karmanos.”

The DMC also is asking Potts to consider triple the amount of unspecified damages awarded to it, plus attorney fees.

DMC’s lawsuit was prompted by an Oct. 30 announcement in which officials from Karmanos said they would sell the downtown Detroit cancer hospital’s assets for an unspecified amount to McLaren.

DMC officials, including CEO Joe Mullany, immediately criticized the deal and hinted it violated a 2005 sale agreement in which DMC sold its cancer business to Karmanos for the low price of $9.9 million. Karmanos initially had offered $45 million.

Three Wayne State University representatives on the Karmanos board voted against the McLaren acquisition. Wayne State officials have turned down numerous requests by Crain’s for an interview, although the university issued a statement last month saying they would continue to work with Karmanos.

Last week, McLaren and Karmanos filed a lawsuit against DMC seeking to have Potts determine whether Karmanos can advertise and market its services with McLaren in Oakland County.

The 2005 sale agreement prohibited Karmanos, with few exceptions, from marketing or advertising its services in the tri-county area of Oakland, Wayne or Macomb counties with anyone other than DMC, DMC alleges.

The DMC filed a motion on Nov. 27 to have the circuit court dismiss McLaren’s complaint for declaratory judgment. Like its counter-suit filed Dec. 6, DMC said Karmanos is liable for breach of contract and McLaren for tortuous interference with its prior agreement with Karmanos.

McLaren and Karmanos officials were unavailable for comment at deadline.

However, Conrad Mallett Jr., DMC’s chief administrative officer, said DMC still hopes to resolve its disagreement with Karmanos outside of court.

“If Karmanos affiliated with McLaren to get our attention, they have gotten it,” said Mallett, adding that lawyers for DMC, Karmanos and McLaren are talking about resolving the dispute.

“If they want the judge to rule, I expect McLaren will lose because it is clear our affiliation agreement with Karmanos was breached,” Mallett said.

One of the main points of disagreement between Karmanos and DMC has to do with whether the 2005 agreement between the two health care organizations provided for an exclusive affiliation.

“The contractual centerpiece that is repeated throughout the DMC/Karmanos agreements is the agreement of long-term exclusive affiliation between Karmanos and the DMC and that the Karmanos name would be publicly-affiliated exclusively with the DMC,” said the DMC counter-suit.

For example, the agreement specifies that Karmanos advertise and market itself to the public as “affiliated with the Detroit Medical Center.”

The agreement also requires Karmanos at the Detroit Medical Center to be on the Karmanos name, logo, website, all signage, all stationary and all materials sent to the public.

“Since signing the McLaren/Karmanos 2013 agreement, Karmanos does not use the phrase ‘affiliated with the Detroit Medical Center’ in its website,” the DMC counter-suit said.

Karmanos also does not use “affiliated with DMC” on its letterhead and other materials distributed to the public, the DMC said.

DMC also alleges that Karmanos concealed for more than a year from DMC and Wayne State that it was negotiating an affiliation with McLaren. The DMC said its agreement with Karmanos requires notification and approval of any affiliation with other organizations.

McLaren officials have told Crain’s they are comfortable their purchase agreement with Karmanos is legal. They are less sure about whether they can use the Karmanos name on cancer centers at McLaren Oakland, a hospital in Pontiac, McLaren Cancer Clarkston and other McLaren health care facilities in Oakland County.

Greg Lane, McLaren’s chief administrative officer, told Crain’s last week that McLaren believes it has the right to jointly market services with Karmanos in Oakland County. He said the DMC-Karmanos agreement allows for a co-branding exception at McLaren Macomb in Mount Clemens and an outpatient cancer center also located in Mount Clemens.

“What is not clear is the impact any agreement between McLaren and Karmanos will have on Detroit,” Mallett said.

“We are very concerned that the Detroit community, which suffers from some of the highest rates of cancer in the country, will be negatively affected by this affiliation. We can’t stand by and say ‘good luck and God speed.’”