HOSPITAL SERVICE DISTRICT NO OF PARISH OF TERREBONNE STATE v. HOSPITAL SERVICE DISTRICT NO OF PARISH OF LAFOURCHE STATE (2025)

This appeal arises out of a judgment following a trial on the merits out of the Thirty-Second Judicial District Court in favor of the plaintiff/appellee, Hospital Service District No. 1 of the Parish of Terrebonne, State of Louisiana (the Terrebonne HSD), and against the defendants/appellants, Hospital Service District No. 3 of the Parish of Lafourche, State of Louisiana (the Lafourche HSD) and Thibodaux Regional Health System, Inc. (TRHS). There are also motions filed before this court. For the following reasons, we deny the defendants’ motion for leave to file an attachment to reply brief, deny the Terrebonne HSD's motion to strike as moot, affirm the judgment in part, and reverse in part.

FACTS AND PROCEDURAL HISTORY

The Terrebonne HSD was created in 1950 pursuant to La. R.S. 46:1051, et seq., which empowered the police juries of parishes to create hospital service districts (HSD) within their respective parishes. The Terrebonne HSD's territorial boundary is synonymous and co-extensive with the boundary of Terrebonne Parish. The Lafourche HSD was created in 1967, also pursuant to La. R.S. 46:1051, et seq., to operate Thibodaux Regional Medical Center (TRMC) and other affiliate clinics for the Parish of Lafourche.¹ Both the Terrebonne and Lafourche HSDs are political subdivisions within the State of Louisiana.

TRHS, a non-profit 501(c)(3) corporation, was created on November 13, 2018 to operate TRMC, and the Lafourche HSD transferred control of TRMC and its affiliated clinics to TRHS on October 1, 2019. In the transfer, the Lafourche HSD leased all of its property, buildings, and equipment to TRHS. In February of 2022, TRHS opened a multi-specialty clinic and an urgent care center in Houma, Louisiana, within the boundaries of the Terrebonne HSD. On November 3, 2022, the Terrebonne HSD filed a petition for declaratory judgment, preliminary injunction, and damages against the Lafourche HSD and TRHS, seeking a declaration from the trial court that TRHS is a “creature of the [Lafourche HSD],” and asserting that the defendants were operating their clinics outside of the Lafourche HSD's territorial boundary without the Terrebonne HSD's consent, in violation of La. R.S. 46:1051, et seq.

Trial on the merits for the request for declaratory judgment began on March 25, 2024. After the trial's conclusion, the trial court signed a judgment on May 3, 2024, in which it found that the defendants were in violation of La. 46:1051, et seq. by operating medical facilities in Houma within the Terrebonne HSD's boundary without its consent. The trial court further ordered that the defendants cease operation of their medical facilities in Terrebonne Parish by May 31, 2024, “unless [they obtain] the consent required by law from [the Terrebonne HSD] or the Terrebonne Parish governing authority.”

The defendants have appealed the May 3, 2024 judgment.²

APPELLATE JURISDICTION

This court issued a “show cause” order to the trial court because it appeared that the May 3, 2024 judgment contained conditional language. Specifically, the judgment states:

IT IS FURTHER ORDERED AND DECREED that because defendants are in violation of the law, defendants ․ are to cease [their operations] of the medical facilities located in Terrebonne Parish by May 31, 2024, unless [they obtain] the consent required by law from [the Terrebonne HSD] or the Terrebonne Parish governing authority. (emphasis added)

The language of a final judgment must be precise, definite, and certain. Standard Insurance Co. v. Spottsville, 2016-0020 (La. App. 1 Cir. 9/16/16), 204 So.3d 253, 256. A judgment that is contingent on the occurrence of a future event is indeterminate and not a valid, final, appealable judgment. Barfield v. Tammany Holding Company, 2016-1420 (La. App. 1 Cir. 6/2/17), 2017 WL 2399020 at *1 (unpublished). In Sibley v. Sibley, 2014-0045 (La. App. 1 Cir. 9/19/14), 2014 WL 4667577 at *1 (unpublished), this court found that the phrase “in the event” in the language of a judgment was not precise, definite, nor certain. Similarly, in State v. Fumar, 2005-2459 (La. App. 1 Cir. 11/3/06), 2006 WL 3108327 at *4 (unpublished), this court found that a judgment ordering a father to pay child support effective “at the time the [mother] moves out of the home owned by [father]” was not a valid, final judgment because it was based on a contingency.

The parties in the instant appeal have filed a joint response to the show cause order, submitting therein that the judgment is “final, unconditional, and appealable.” They aver that putting aside the conditional word “unless,” the judgment also grants a declaratory judgment holding that the defendants are currently in violation of the hospital service district statutes by operating facilities in Terrebonne Parish without the prior consent of the parish authorities. The parties maintain that even if the injunction portion of the judgment were unappealable, the declaratory judgment is final, unconditional, and appealable.

Also, the parties “do not consider or understand the injunction contained in the judgment to be either tentative or conditional.” The parties aver the trial court imposed a real and immediate restriction on the defendants by prohibiting them from operating medical facilities in Terrebonne Parish without the consent of the Terrebonne HSD or the Terrebonne Parish governing authority. The parties maintain that it is this real and immediate restriction that would require the immediate closure of the TRHS clinics in Terrebonne Parish.

Further, the parties aver that the noted “unless” clause “reflects the [trial] court's position that the territorial restrictions imposed by the hospital service district statutes (as the [trial] court interpreted them) would not apply when the parish's governing authorities have given their consent.” However, the parties aver that consent has never been given for the defendants to operate in Terrebonne Parish, and the parties have no expectation that consent will be given in the future. As such, the parties maintain that the permanent injunction issued by the district court “presently imposes a real, immediate, and lasting restriction on the [d]efendants’ actions by prohibiting them from ever operating in Terrebonne Parish without consent.”

Judgments have the effect of law upon the parties, and words of a law must be given their generally prevailing meaning. La. C.C. art. 11; See also Thibodeaux v. Donnell, 2007-1845 (La. App. 1 Cir. 9/12/08), 994 So.2d 612, 617, affirmed by 2008-2436 (La. 5/5/09), 9 So.3d 120; Futch v. Futch, 26,149 (La. App. 2 Cir. 9/23/94), 643 So.2d 364, 370. “Unless” is generally defined as “if it be not that,” or “if not.” Black's Law Dictionary (6th ed. 1990) Although the definition of “unless” is conditional in nature, we agree with the parties that the judgment is not conditional insofar as it only recognizes that the defendants can operate medical facilities within Terrebonne Parish if consent is given by the Terrebonne HSD or the Terrebonne Parish governing authority. The “unless” clause in the judgment is therefore of no moment.

Since consent has not been given by the Terrebonne HSD to the defendants to run clinics within the Terrebonne HSD's borders, there is a permanent injunction in place ordering the defendants to cease operations in Terrebonne Parish. Accordingly, we find that the judgment does not contain conditional language and is properly before this court on appeal; as such, the instant appeal is maintained.

APPELLATE MOTIONS

TRHS filed with this court a motion for leave to file an attachment to its reply brief, the attachment being a judgment by the 23rd Judicial District Court in the case HSD No. 1 of the Parish of St. James, State of Louisiana d/b/a St. James Parish Hospital v. HSD No. 3 of the Parish of Lafourche, State of Louisiana and Thibodaux Regional Health System, Inc., No. 42023. TRHS also cites and quotes the case as part of its legal argument in its reply brief. The Terrebonne HSD then filed with this court an opposition to that motion and a motion to strike the attachment and all references to the St. James case in TRHS's reply brief. Both motions have been referred to this panel.

The St. James judgment was signed on January 16, 2025, postdating the May 3, 2024 judgment on appeal in the instant case, and it is not part of the appellate record. The “record” on appeal is that which is sent by the trial court to the appellate court and includes the pleadings, court minutes, transcripts, jury instructions, judgments, and other rulings, unless otherwise designated. Parent v. Louisiana Department of Public Safety and Corrections, 2021-0897 (La. App. 1 Cir. 3/3/22), 341 So.3d 804, 806. An appellate court cannot review evidence that is not in the record on appeal and cannot receive new evidence. As an appellate court, we have no jurisdiction to receive new evidence. Parent, 341 So.3d at 806.

In addition, while a court may take judicial notice of its own proceedings, La. C.E. art. 202 does not allow, nor has it ever been interpreted to allow, courts to take judicial notice of suit records in other courts. Documentation of other courts’ proceedings must be offered into evidence in the usual manner. Parent, 341 So.3d at 806. Further, an appeal of the St. James case would nevertheless go before the Fifth Circuit of the Louisiana Court of Appeal. Because the St. James judgment that TRHS seeks to have attached to the appellate record clearly postdates the judgment on appeal and was not considered by the trial court in the instant case, TRHS's motion for leave to file an attachment to its reply brief is denied.

Since we deny the motion for leave to file an attachment to the reply brief, the Terrebonne HSD's motion to strike regarding the attachment is moot. Furthermore, judgments of any district court clearly hold no jurisprudential authority of any kind over an appellate court, and we shall not review or pass judgment on a case from the 23rd JDC by considering it or any references to it, especially since our brethren in the Fifth Circuit have not yet been given the opportunity to review the case on appeal. Therefore, the motion to strike filed by the Terrebonne HSD is denied as moot.

ASSIGNMENTS OF ERROR

The Lafourche HSD submits that the trial court erred as a matter of law by:

1. Failing to dismiss the Lafourche HSD because it is immune from the Terrebonne HSD's suit under the Louisiana Constitution.

2. Concluding that La. R.S. 46:1051, et seq. created a private right of action in the Terrebonne HSD's favor; and

3. Concluding that the Lafourche HSD violated La. R.S. 46:1051, et seq. through the otherwise legal actions of TRHS, an independent 501(c)(3) nonprofit corporation created by the Lafourche HSD with the approval of the Attorney General.

TRHS submits that the trial court erred as a matter of law by:

1. Allowing the Terrebonne HSD to pursue claims alleging violations of La. R.S. 46:1051, et seq., when those statutes do not include a private right of action for their enforcement;

2. Issuing a permanent injunction ordering the closure of TRHS's two clinics in Houma, where Terrebonne HSD expressly waived any claim for injunctive relief, and failed to comply with the procedural or substantive requirements for further relief based on a declaratory judgment;

3. Ordering the closure of TRHS's clinics in Houma for alleged violation of La. R.S. 46:1051, et seq., because TRHS is not a hospital service district and is not subject to those statutes;

4. Relying on statutorily prohibited factors to disregard the separate existence of TRHS and treat it as not separate from the Lafourche HSD; and

5. Holding that hospital service districts are prohibited from providing healthcare to patients in another district without that district's consent when such a restriction is found nowhere in the text of La. R.S. 46:1051, et seq., and is contrary to those statutes’ purpose and intent.

DISCUSSION

With regard to the issue of no private right of action raised by both defendants, TRHS filed a peremptory exception raising the objection of no right of action on December 5, 2022, and the Lafourche HSD filed an exception of no right of action on Dec. 6, 2022. The defendants argue that the trial court should have sustained their peremptory exceptions raising the objection of no right of action, since La. R.S. 46:1051, et seq. do not establish a private right of action for the Terrebonne HSD to pursue against the defendants. Additionally, the Lafourche HSD argues that it is constitutionally immune from suit. The trial court issued an oral ruling on April 4, 2023, denying the defendants’ exceptions of no right of action, but did not issue a corresponding written judgment reflecting the denial.³

The denial of a peremptory exception is an interlocutory ruling. See Lawrence v. Gupta, 527 So.2d 1112 (La. App. 1 Cir. 1988), writ denied, 532 So.2d 750 (La. 1988). Because the trial court's denial of the peremptory exceptions raising the objection of no right of action was interlocutory in nature, no written judgment is necessary, and the thirty-day delay allowed to seek supervisory review under Rule 4-3, Uniform Rules of Louisiana Courts of Appeal, began to run from the date of the oral ruling in open court. See Dutruch v. Zurich-American Ins. Co., 95-1923 (La. App. 1 Cir. 4/22/96), 681 So.2d 953, 954. TRHS applied for supervisory writs on April 18, 2023, and the Lafourche HSD applied for same on April 21, 2023. See Hospital Service District No. 1 of the Parish of Terrebonne, State of Louisiana v. Hospital Service District No. 3 of the Parish of Lafourche, State of Louisiana and Thibodaux Regional Health System, Inc., 2023-0364, 0384 (La. App. 1 Cir. 5/22/23) 2023 WL 3582048, 3582051 (unpublished writ actions), writ denied, 2023-00846 (La. 10/10/23), 371 So.3d 454.

The trial court issued a preliminary injunction against the defendants, which was stayed for thirty days from April 5, 2023. In the writ actions, this court lifted the stay and granted the writs. We reversed the portion of the trial court's April 6, 2023 judgment that granted a preliminary injunction against the defendants. The trial court's denial of the peremptory exceptions raising the objection of no right of action was not addressed by this court in the aforementioned writ actions. Nevertheless, when an unrestricted appeal is taken from a final judgment, the appellant is entitled to seek review of all adverse interlocutory judgments prejudicial to him, in addition to the review of the final judgment. Lambert Gravel Company, Inc. v. Parish of West Feliciana, 2015-1225 (La. App. 1 Cir. 9/20/16), 234 So.3d 889, 896. As such, the interlocutory judgment is properly before this court on appeal.

The standard of review of a ruling on an exception of no right of action, which presents a question of law, is de novo. LeCompte v. Continental Casualty Co., 2016-1359 (La. App. 1 Cir. 7/12/17), 224 So.3d 1005, 1009, writ denied, 2017-1525 (La. 12/15/17), 231 So.3d 635. The function of an exception of no right of action is a determination of whether the plaintiff belongs to the class of persons to whom the law grants the cause of action asserted in the petition. See La. C.C.P. art. 927. The exception of no right of action serves to question whether the plaintiff in the particular case is a member of the class of persons that has a legal interest in the subject matter of the litigation. LeCompte, 224 So.3d at 1009.

Pursuant to La. C.C.P. art. 1872, “[a] person ․ whose rights, status, or other legal relations are affected by a statute ․ may have determined any question of construction or validity arising under the ․ statute ․ and obtain a declaration of rights, status, or other legal relations thereunder.” The purpose of a declaratory judgment action is to “settle and afford relief from uncertainty and insecurity with respect to the rights, status and other legal relations.” La. C.C.P. art. 1881. While the declaratory judgment code articles are to be “liberally construed and administered,” according to La. C.C.P. art. 1881, an action can be brought only by a person having a real and actual interest which he asserts. Jefferson Parish Hospital Service District. No. 2, Parish of Jefferson v. Hospital Service District No. 1 of Parish of St. Charles, 16-702 (La. App. 5 Cir. 4/12/17), 218 So.3d 696, 703, writ denied, 2017-0960 (La. 10/9/17), 227 So.3d 832.

The requirement of a justiciable controversy and its concomitant prohibition of advisory opinions arises from Louisiana jurisprudence and the various procedural laws which apply depending on the type of action brought. Jefferson Parish Hospital Service District. No. 2I 218 So.3d at 704. A “justiciable controversy” is an existing actual and substantial dispute, as distinguished from one that is merely hypothetical or abstract, and a dispute which involves the legal relations of the parties who have real adverse interests. Id. The justiciable controversy requirement is related to the objections of no right of action and no cause of action, insofar as there is no right of action or cause of action when there is no justiciable controversy. Slaughter v. Louisiana State Employees’ Retirement System, 2023-1167 (La. App. 1 Cir. 10/3/24), 2024WL4376966, *5 (unpublished opinion). Where doubt exists as to the appropriateness of an exception raising the objection of no right of action, this court must resolve that doubt in favor of finding a right of action. Id. at *4.

In the instant case, there is a clear justiciable controversy between the Terrebonne HSD and TRHS. TRHS has built clinics within the confines of the Terrebonne HSD without its permission, ostensibly in violation of La. R.S. 46:1051, et seq. should it apply. Indeed, as the district court suggested, for the Terrebonne HSD to have no right of action against a competing entity that encroaches upon its territory would negate the very purpose of La. R.S. 46:1051, et seq.

As to the Lafourche HSD's first assignment of error, which claims constitutional immunity from suit, we find the record plainly shows that the Lafourche HSD has acted under the guise of TRHS to circumvent law and jurisprudence that prohibits one HSD from encroaching upon the boundaries of another HSD. This point will be further explained below. Although Article XII, Section 10 of the Louisiana Constitution provides for certain limits in suits against the state, we nevertheless find that whether the Lafourche HSD could claim immunity from suit in this matter is of little importance since their motives and actions are imbedded in the identical motives and actions of TRHS.

In TRHS's second assignment of error, the defendants argue that the Terrebonne HSD had expressly waived any claim for injunctive relief on “multiple occasions.” Therefore, the defendants contend that the trial court erred in ordering it to cease operation of their medical facilities in Terrebonne Parish. The defendants point out that after this court reversed the trial court's imposition of a preliminary injunction in the aforementioned writ actions, the Terrebonne HSD stated in its brief and in its response to the defendants’ discovery requests that it no longer sought a permanent injunction. The Terrebonne HSD responded by stating that while it might have waived injunctive relief under La. C.C.P. art 3601 after the preliminary injunction was reversed, it was still entitled to relief under La. C.C.P. art 1878(A), which states:

Further relief based on a declaratory judgment or decree may be granted whenever necessary or proper. The application therefor shall be by petition to a court having jurisdiction to grant the relief. If the application is considered sufficient, the court, on reasonable notice, shall require any adverse party whose rights have been adjudicated by the declaratory judgment or decree, to show cause why further relief should not be granted forthwith.

This court has held that an injunction to enforce a declaratory judgment may be appropriate. See Liberty Mut. Ins. Co. v. Louisiana Ins. Rating Com'n, 96-0793 (La. App. 1 Cir. 2/14/97), 696 So.2d 1021, 1029, writs denied, 97-2069, 2062 (La. 12/19/97), 706 So.2d 451, 452; Bueto v. Video Gaming Div., Office of State Police, Dept. of Public Safety, 637 So.2d 544, 548 (La. App. 1 Cir. 1994). The Louisiana Supreme Court has held that “[a] court may declare the rights of parties in order to terminate an actual controversy even if further relief is or could be claimed.” Midboe v. Commission on Ethics for Public Employees, 94-2270 (La. 11/30/94), 646 So.2d 351, 356 (abrogated on other grounds), quoting Chauvet v. City of Westwego, 599 So.2d 294, 296 (La. 1992). The supreme court found that injunctive relief was an appropriate method of demanding the “further relief” contemplated under La. C.C.P. art. 1871, which states more fully that “[c]ourts of record within their respective jurisdictions may declare rights, status, and other legal relations whether or not further relief is or could be claimed.” See Midboe, 646 So.2d at 356.

The defendants requested the trial court to reconsider its granting of the injunction, which the trial court denied, stating:

[W]e'd be disturbing people from going to a doctor's appointment, we have employees that would be potentially harmed if the Court weren't to convert the declaratory judgment into a cessation of the activity․ The only way that this judgment and this․ litigation has any point to it is if the Court not only issues the declaratory judgment but also issues an appropriate order in connection with it; otherwise then all the Court is doing is just issuing an administrative ruling like the attorney general's office[.]

According to La. C.C.P. 1878(A), any further relief after a declaratory judgment must be applied for by petition, and the trial court must give the adverse party reasonable notice of the application to show cause why further relief should not be granted. The Terrebonne HSD's petition, in its request for declaratory judgment, does not make any specific requests for further relief. The Terrebonne HSD also prayed for a preliminary injunction and damages in its petition, but this court has reversed the trial court's issuance of a preliminary injunction, and the Terrebonne HSD has elected to not seek damages. Further, supplemental relief may only be granted if demanded, Ieyoub v. Polito, 97-0796 (La. App. 1 Cir. 5/15/98), 712 So.2d 692, 696, writ denied, 98-1641 (La. 9/25/98), 725 So.2d 490.

Based on the aforementioned articles of the Louisiana Code of Civil Procedure, we are constrained to find that the Terrebonne HSD is not currently entitled to further relief pursuant to La. C.C.P. art. 1878(A), since no demand for further relief was made in the instant case.⁴ As such, we must reverse that portion of the trial court's judgment that states:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that because defendants are in violation of the law, defendants, Hospital Service District No. 3 of the Parish of Lafourche, State of Louisiana and Terrebonne Regional Health System, Inc. are to cease its operation of the medical facilities located in Terrebonne Parish by May 31, 2024, unless it obtains the consent required by law from the Hospital Service District No. 1 of the Parish of Terrebonne, State of Louisiana or the Terrebonne Parish governing authority.

As to the Lafourche HSD's third assignment of error, the pertinent issue there is essentially a mixed question of law and fact—whether TRHS is a “creature” of the Lafourche HSD, and whether La. R.S. 46:1051 et seq. is applicable to TRHS and its activities. Mixed questions of fact are subject to a manifest-error standard of review. Succession of Pellette, 2019-1355 (La. App. 1 Cir. 6/12/20), 305 So.3d 893, 898, writ denied, 2020-00881 (La. 10/14/20), 302 So.3d 1117; Wells Fargo Bank Minnesota, National Association v. Holoway, 2018-1340 (La. App. 1 Cir. 5/24/19), 277 So.3d 800, 805. Extensive evidence was introduced at the trial of the Lafourche HSD's intent to create a 501(c)(3) nonprofit corporation and the purpose behind it, as well as TRHS's financial activities since its formation. Our analysis of that evidence follows.

The articles of incorporation for TRHS were filed on November 13, 2018, and it was created as a 501(c)(3) non-profit corporation, with its purpose being “to operate TRMC in Thibodaux, Louisiana, and related hospital facilities as an acute care general hospital for the benefit of the general public.” Of the five initial directors for the TRHS board, two of them, Obie Cleveland Hill, Ph.D., and Jacob Anthony Giardina, Sr., were members of the Lafourche HSD board of directors before moving to the TRHS board. Mr. Giardina was the former chairman of the Lafourche HSD and signed for the Lafourche HSD in the capacity of lessor and transferor on the bill of sale and lease to TRHS. The bylaws of TRHS state that it shall “exist as a private, non-quasi-public corporation and be operated in a manner separate and distinct from the [Lafourche HSD].”

The intent behind the creation of the 501(c)(3) corporation is evidenced in a document attached to the Lafourche HSD's request for information form submitted to the Attorney General. This document, titled “Updated Appendix D (Description of Negotiations),” contemplates the Lafourche HSD leasing all of its assets to TRHS (the Proposed Transaction) so that TRHS could perform the same health care operations the Lafourche HSD performed. Specifically, the document stated that:

The [Lafourche HSD's] leadership determined through consultations with its outside advisors that the best course of action to address the significant challenges facing the Hospital would be to consider a transaction involving a lease of the Hospital to a 501(c)(3) organization. Such an organization would not be subject to the same restrictions that prohibit the Hospital from adapting to the changing healthcare-delivery model but would still be held accountable to operate the Hospital consistent with its mission through certain commitments set forth in the lease agreement and other transaction documents.

․

The [TRHS] Board met․ on November 14, 2018 to further consider the Proposed Transaction. The [TRHS] Board continued to deliberate regarding the Proposed Transaction in consultation with [TRHS's] counsel. The [TRHS] Board then voted unanimously to approve the Proposed Transaction and the Proposed Transaction documents. Only the disinterested members of the [TRHS] Board—constituting a majority of the [TRHS] Board's total membership—participated in this vote. Two members of the Lessee Board (Jacob Giardina and Cleveland Hill, PhD) did not participate in this vote because they had previously disclosed to the [TRHS] Board their potential conflicts of interest with respect to the Proposed Transaction arising from their status as members of the [Lafourche HSD] Board.

The Lafourche HSD filed an application with the Attorney General's office regarding the Proposed Transaction between the defendants on December 5, 2018. The Lafourche HSD held a public hearing at TRMC on March 29, 2019, where a representative from the Attorney General's Office discussed the application with the Lafourche HSD's board and members. The Lafourche HSD's CEO, Greg Stock, provided information and background to the Attorney General. Mr. Stock explained that the Lafourche HSD had been operating efficiently without debt or tax support since the early 1990s. More specifically, Mr. Stock stated that:

[TRMC] is currently owned and operated as a hospital service district. It's a governmental entity, a division of the [Lafourche Parish] government․ however, though, 55 percent of all our patients come from outside of that small geographical area. Sixty percent of our inpatients come from that. When we actually look at the origin and destination studies, we know it's all from these parishes - West St. Mary area to up in Assumption Parish on the river, across the river, down [Bayou Lafourche], a pretty big geographical area.

․

The model of [health care] delivery has changed․ and a lot of its health care [has m]oved away from inpatient care to more of an ambulatory setting.

․

There's a trend, however, in the United States of community hospitals that cannot adapt to this new delivery model․ that they become financially insolvent․ or they're taken over by somebody else. They lose their local ownership and local representation. We don't want to be either one of those, and so larger systems can have a significant advantage over community hospitals in some regards. One of those is․ there's no obstruction for them to work inside or outside of a service district. Where we cannot go outside of our little service district and provide services, they can. They can go anywhere they want to.

․

As far as the community is concerned, two of the existing [Lafourche HSD] commissioners, Jake Giardina and [Obie] Cleveland Hill have been appointed as members of the new [TRHS] board of directors.

․

So the [Lafourche HSD] then would transfer all of its assets under a lease agreement. Assets such as cash, working capital, everything really to [TRHS] in exchange for a promissory note․ The [principal] of the promissory note would be due at the end of the lease term. [TRHS] would receive credits against annual rent and no payments for certain expenditures such as indigent care, capital expenditures, developing new programs and services, among others.

Mr. Giardina then took over the discussion, stating:

The headquarters of [TRHS] is required to be located in the [Lafourche HSD] area, so it will remain right where we are. [TRHS] will be governed by a board of directors.

․

The lease agreement and other documents also include several important operational commitments such that the hospital, [TRHS], is required to make in connection with the transaction. These commitments include the continuation to operate [TRMC] as an accredited hospital [;] continuing existing programs and services; continue to provide indigent care; making capital improvements to lease facilities; maintaining the facilities and equipment; paying for taxes and utilities; maintaining all insurance for all properties, facilities, and equipment; assuming all of [the Lafourche HSD's] liabilities; assuming all of [the Lafourche HSD's] contracts, including physician agreements; offering employment to all [TRMC] employees with salaries, wages, and benefits consistent with those currently offered and to continue the [TRMC] medical staff bylaws․ In addition to these commitments, the lease documents require [TRHS] to operate exclusively for charitable purposes in accordance with the IRS rules for 501(c)(3) tax-exempt organizations.

The Attorney General approved the application on April 12, 2019, subject to some conditions, including the requirement to file annual reports with the Attorney General regarding the commitments made by TRHS to continue the Lafourche HSD's healthcare operations.

The lease agreement, dated August 12, 2019, between the Lafourche HSD and TRHS, leased all of the Lafourche HSD's assets, including TRMC and other assets styled as “hospital facilities” to TRHS. TRHS was to pay annual rent to the Lafourche HSD in the total amount of $10.45 million. Approximately $8.5 million of the rent pertained to the immovable property, $1.5 million pertained to the equipment, and $450,000.00 pertained to the hospital's imaging center. The lease reiterated that TRHS shall “operate TRMC, at a minimum as an acute care hospital in a manner to maintain accreditation.” TRHS was also required under the lease to make capital improvements to the property of at least $1 million over the initial term of the lease, which was 30 years. However, TRHS was entitled to credits on rent payment for several types of costs and expenditures, primarily capital expenditures associated with the property's maintenance, upgrade, improvement, and expansion. TRHS was required to provide reports at the end of each fiscal year outlining such expenditures for which it could receive credit on rent. According to an independent auditor's report and financial statements from 2019 to September 30, 2020, due to rent credits that had been earned by TRHS, no rent would be due until September 30, 2023.

The lease also required TRHS to use the property during the term of the lease “for operation of a medical surgical hospital or other health care facility or facilities and the provision of such ancillary services and related, incidental uses as are appropriate or desirable in conjunction with the operation of such health care facilities and for no other purpose.” Upon expiration or termination of the lease, title to any property owned by TRHS would revert to the Lafourche HSD without any payment on the part of the Lafourche HSD therefor. The Lafourche HSD and TRHS established in the lease that the legal relationship between the two was to be lessor and lessee, respectively, and had not intended to enter into a partnership.

Several documents were attached to the lease agreement. “Schedule A,” which lists all the “other hospital facilities,” contained nineteen separate assets, including the “main hospital” at 602 North Acadia Road in Thibodaux, other buildings on the same road, and several buildings in the medical plaza. A small number of clinics located in Thibodaux and Assumption Parish were also included, among other buildings and lots. The “Hospital Transition Addendum” listed the transfer of assets from the Lafourche HSD to TRHS, which were: cash; accounts receivable; inventories and supplies; prepayments and deposits; the Lafourche HSD's membership interests in other healthcare businesses; contracts and leases; licenses and accreditations associated with providing healthcare; employee benefit plans and accounts; intellectual property rights; telephone numbers; insurance policies; operation and policy/procedure manuals; and all claims, causes of action, and warranties. The addendum also stated that TRHS was to offer employment to all of the Lafourche HSD's employees with base salaries and benefits consistent with what they received from the Lafourche HSD.

Also attached to the lease agreement is a promissory note in which TRHS promised to pay in principal to the Lafourche HSD $13 3,095,297.00, stating that “TRHS may․ apply the amount of Lease Expenditures which have not been credited against Rent under the Lease as principal or interest payments hereunder.” Also attached to the lease agreement is a memorandum of lease, which stated that for the consideration of ten dollars, the Lafourche HSD agreed to lease its property to TRHS. Attached as exhibits are the property descriptions of the leased immovable property, which appear to be the premises of TGMC, the nearby medical plaza, and another parcel of land located near TGMC.

The bill of sale and assignment and assumption agreement between the Lafourche HSD as transferor and TRHS as transferee, dated September 30, 2019, states that effective October 1, 2019, the Lafourche HSD, “for good and valuable consideration,” assigned and transferred to TRHS and its successors all of “the [Lafourche HSD's] right, title, and interest․ in and to the Transferred Assets.”⁵ We note that in the Lafourche HSD's responses to the Terrebonne HSD's request for admissions, the Lafourche HSD admitted that “approximately” $130 million of operating capital was transferred from the Lafourche HSD to TRHS in 2019, and another $10 million was transferred in 2021. We also note that the initial transfer of “approximately” $130 million closely matches the amount secured by the aforementioned promissory note. The Lafourche HSD also admitted in its responses to the request for admissions that “all or substantially all” of its employees became employees of TRHS, and that with the opening of one of the TRHS clinics in Houma, Mr. Stock publicly stated, “[w]ith the expansion, the barriers of going into areas where there are other clinics are down.”

In TRHS's responses to the Terrebonne HSD's request for admissions, TRHS admitted that it had entered into a lease agreement and hospital transition addendum agreement with the Lafourche HSD, which was approved by the Attorney General, and that pursuant to those agreements, TRHS operated the hospital buildings and equipment. TRHS also admitted that “all or substantially all” of the Lafourche HSD's employees became its employees.

The role of the Lafourche HSD subsequent to the lease agreement is described in an affidavit by Mr. Stock, who had become the CEO of TRHS.⁶ He stated that the Lafourche HSD “is now the lessor and lender, and [TRHS] is the lessee and borrower. [The Lafourche HSD] hires independent auditors to monitor [TRHS] and ensure it is complying with the lease agreement.” He stated further that “[TRHS] relied on the approval of the transaction to proceed with its healthcare investments.”

The financial reports that TRHS was required to submit to the Lafourche HSD each fiscal year were also submitted into evidence. It is noteworthy that in each fiscal year, while TRHS made significant capital expenditures, which could have been credited to its rent payments or payments on the promissory notes, all the clinics and facilities managed by TRHS operated at a loss. For the fiscal year of 2020, TRHS made capital expenditures totaling $11,570,057.00, while its total net operating income was -$14,397,477.00. For the fiscal year of 2021, TRHS made capital expenditures totaling $19,645,579.00, while its total net operating income was -$20,509,605.00. For the fiscal year of 2022, TRHS made capital expenditures of $29,394,578.00, while its total net operating income was - $20,224,041.00. For the fiscal year of 2023, TRHS made capital expenditures of $19,980,551.00, while its total net operating income was -$25,192,681.00.⁷

We find from this extensive amount of evidence that the Lafourche HSD transferred all or substantially all of its assets and employees into a non-profit corporation, TRHS, which it incorporated specifically for the purpose of operating in the same manner as the Lafourche HSD had operated. Leadership was shared by both entities since Mr. Giardina and Dr. Hill were members of both boards. Mr. Stock, who was CEO of TRMC, became the CEO of TRHS. Steven Gaubert, who had been the CFO of the Lafourche HSD, became CFO of TRHS when it was incorporated. Under the conditions of the lease agreement, TRHS was required to operate in the same manner as the Lafourche HSD had operated—as a hospital and healthcare service provider. Despite its being a lessee and obligor to the Lafourche HSD, TRHS has been able to operate practically rent-free for over three years since its incorporation due to credits it has accumulated through capital expenditures and other means, all of which will ultimately revert back to the Lafourche HSD at the termination of the lease.

TRHS, which was created by a hospital service district, exhibits every characteristic of the hospital service district that created it; the only apparent difference is that it is a private and not a public entity. TRHS, which has operated at a significant loss from its creation until 2023, would never have been able to do so without the $140 million of operating capital transferred to it by the Lafourche HSD. That capital was owned by a political subdivision, making it public funds and assets when it was transferred to TRHS. Although ostensibly required to pay rent and payments on the promissory note to the Lafourche HSD, TRHS has not needed to do so since it continues to make capital expenditures. The Lafourche HSD could have made these capital expenditures itself, to expand into other hospital service districts, if not for the limitations placed on it by La. R.S. 46:1051, et seq.

The Lafourche HSD did not transfer or lease its assets to a pre-existing, independent private corporation experienced in providing healthcare for the purpose of continuing the Lafourche HSD's healthcare services. Instead, the Lafourche HSD unilaterally created a new corporation, leased and transferred all its assets to the corporation it created, and then ostensibly received rent and payments from that same corporation. This circular practice is indicative of the Lafourche HSD and TRHS operating as the same entity. The Lafourche HSD has never hidden its intentions, and it even made those intentions very clear in its application to the Attorney General. Although the defendants argue that the transaction was approved by the Attorney General, the approval of the lease agreement was merely that. The Attorney General did not, and cannot, authorize a hospital service district to circumvent the law and expand into another hospital service district without that district's consent. It is therefore irrelevant that the Lafourche HSD voiced its intentions of expansion into the Terrebonne HSD to the Attorney General in its application and at the public meeting.

We find the evidence introduced at trial makes it abundantly clear that TRHS is a “creature” of the Lafourche HSD, making it merely a facade for the public entity to subvert the hospital service district laws. Since we find that TRHS and the Lafourche HSD both function as hospital service districts, our holding in Hospital Service Dist. Number 2 of the Parish of Lafourche v. Hospital Service Dist. No. 1 of the Parish of Terrebonne, 97-1792 (La. App. 1 Cir. 6/29/98), 716 So.2d 168, writ denied, 98-2039 (La. 11/13/98), 730 So.2d 450, is applicable to the instant case.

In Hospital Service Dist. Number 2, this court held that a hospital service district could not own and operate a facility located outside its boundaries as established by the local police jury without the consent of the police jury of the district in which the facility was operated. This court also found that La. 46:1051 is the enabling statute for the creation of hospital service districts, and no other statute or action can rewrite or supersede the enabling statute, thereby extending the authority of hospital service districts beyond that granted by the legislature. Hospital Service Dist. Number 2, 716 So.2d at 170.

While it is true that La. R.S. 46:1051, et seq. do not explicitly prohibit a hospital service district from encroaching onto another hospital service district's territory without proper consent to do so, La. R.S. 46:1051 has been interpreted by Hospital Service Dist. Number 2 to have such a prohibition. This court construed the statute as follows:

When the statutes governing the hospital service districts are read together, the clear intention of the legislature was to encourage the creation by police juries of public hospital service districts, within a specific geographical area, that would serve the needs of the people of the parish․ The police jury could create, within its parish, hospital service districts and give them jurisdiction, or the power to exercise authority, within the designated districts. The authority of the hospital service district could be extended beyond the parish in which it was created, if the outside police jury agreed. (Emphasis in original)

Hospital Service Dist. Number 2, 716 So.2d at 170.

Despite the defendants’ argument that such a prohibition is contrary to the legislative intent of the statute, this court has found otherwise:

To allow the districts’ authority to be unilaterally extended into another parish would result in the evisceration of smaller, poorer, or more rural hospital service districts created to provide services to all the residents of the particular district. The more affluent outside district would willingly serve the areas or needs of the local district or parish that presented a picture of profit, but might not want to provide general unprofitable services for all the residents of the local district or parish.

․

[B]y allowing a public hospital service district to compete with, and possibly cannibalize or destroy, a public district in another parish, many areas of the less affluent, smaller, or rural district could be left without the very medical services that the legislature hoped to promote.

Hospital Service Dist. Number 2, 716 So.2d at 170.

Based on our extensive review of the record in the instant case, we find the trial court did not commit manifest error in finding that TRHS is a “creature” of the Lafourche HSD, making them both subject to the hospital service district laws of La. R.S. 46:1051, et seq.

With regard to TRHS's third and fourth assignments of error, the defendants argue that the trial court erred in ordering the closure of TRHS's clinics located within the Terrebonne HSD's boundaries, because TRHS was essentially a “creature” of the Lafourche HSD, making both entities subject to La. R.S. 46:1051, et seq. In TRHS's fifth assignment of error, the defendants argue that La. R.S. 46:1051, et seq. do not explicitly prohibit the defendants from expanding into another hospital service district without its or the parish government's consent. As we have decided with regard to the second assignment of error to reverse that portion of the trial court's judgment to cease the operation of those clinics, we pretermit any discussion of TRHS's third, fourth, and fifth assignments of error.

DECREE

The motion for leave to file an attachment to reply brief filed by the defendants/appellants, No. 3 of the Parish of Lafourche, State of Louisiana and Thibodaux Regional Health System, Inc., is denied. The motion to strike filed by the plaintiff/appellee, Hospital Service District No. 1 of the Parish of Terrebonne, State of Louisiana, is denied as moot. The judgment of the Thirty-Second Judicial District Court, with respect to its grant of injunctive relief to the plaintiff/appellant, is reversed. The judgment is affirmed in all other respects. Appeal costs in the amount of $29,173.00 are assessed equally among the parties.

MOTION FOR LEAVE TO FILE ATTACHMENT TO REPLY BRIEF DENIED; MOTION TO STRIKE DENIED AS MOOT; JUDGMENT AFFIRMED IN PART AND REVERSED IN PART.

FOOTNOTES

1.   TRMC originated as a small hospital known as “St. Joseph's” some time in the 1930's, and was later run by the Catholic Sisters of Mount Carmel.

2.   The defendants waived their right to request a new trial, and the Terrebonne HSD elected to not seek an award for damages.

3.   The trial court stated in open court: “[B]ased on the language of [La. R.S. 46:1051 et seq.], as well as the interpretation of those laws by the Louisiana First Circuit, to say that [the Terrebonne HSD] would not have a right of action in this particular case would contradict the very nature of

4.   We do not address whether the Terrebonne HSD would be precluded from seeking injunctive relief in the future under La. C.C.P. art. 1878(A).

5.   The bill of sale does not contain a description of the “Transferred Assets.”

6.   Mr. Stock stated in his affidavit that he became CEO of TRHS in 1990, which appears to be erroneous, since TRHS was incorporated in 2019. We do note, however, that Mr. Stock was CEO of the Lafourche HSD before TRHS was incorporated.

7.   “Capital expenditures,” as defined in these reports, are of two kinds. One kind is “associated with maintenance, upgrades, improvements or expansions to the Hospital Facilities,” and the other kind is “associated with the acquisition and construction of new facilities or offices related to the provision of heath care services.” According to the provisions of the lease agreement and the promissory note, these capital expenditures would qualify as credits against TRHS's payments of rent and/or principal on the promissory note.

LANIER, J.